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Jefferies lifts Inmarsat target to 1,000p

By Oliver Haill

Date: Monday 18 Feb 2019

Jefferies lifts Inmarsat target to 1,000p

(Sharecast News) - Inmarsat's shares are being valued all wrong, Jefferies argued on Monday, setting a price target almost three times higher.
The satellite company's shares, closing last week at just over 360p, are now roughly equal to "no more than the PV of the Ligado lease", referring to the contract with the US telecoms network formerly known as LightSquared.

There has been a lack of visibility over the future of payments from Ligado, which is trying to develop a 5G mobile network. Payments from Ligado, under the deal agreed when it exited bankruptcy in 2016 and submitted a new license application with US regulators, are due to pause in 2019 and resume in 2020 at around $163m a year and grow at a 3% compound rate for 99 years.

Last August the regulatory advisory board director David Redl issued a resounding rejection of the Ligado proposal in its current form, sending shares in both the US company and Inmarsat tumbling.

Said Jefferies: "Were Ligado a going concern, you'd be actually getting the [Mobile Satellite Services] business for free. Quite a reversal from the days when it was Ligado that was considered the 'option value' of this equity."

Noting that Ligado bonds have rallied in the recent weeks, the Jefferies analysts said the "the binary outlook for Ligado rewards the investor with a finger on the pulse of power in Washington DC" and suspected one or more investor has been advised that pragmatism will win over principle and that FCC will be recommended to accept the Ligado proposal.

"In this seemingly interminable endgame, we might finally reach a decisive conclusion. A pro-Ligado stance would be very positive for Inmarsat, but there is a bigger game afoot now."

The analysts are "more certain" of former Inmarsat suitor EchoStar's vision that the MSS spectrum bands are "strategic" to future integrated cellular / terrestrial Internet of Things networks.

EchoStar is reckoned to be still interested in Inmarsat and the price is lower.

"In the event of a Redl letter, Inmarsat may want to keep taking the Ligado cash, but it may feel coerced into taking Ligado equity."

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