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10 March 2014

Summary company financials (m)

Year end March FY2016 FY2013 FY2014E FY2015E
Price $70.20 Revenue 863.6 1,119.7 1,441.4 1,876.2
Market cap 3,184.7 7.7% 29.6% 28.7% 30.2%
Enterprise value 3,746.6 EBITDA 149.0 163.3 240.7 347.1
17.3% 14.6% 16.7% 18.5%
Free float 100% Net income 7.5 -41.2 -11.0 76.8
Daily val traded 9.20 Net debt (cash) 377.2 482.9 561.9 492.2
EV/Sales 2.43 2.89 2.60 1.96
EV/EBITDA 14.1 19.8 15.6 10.6
PE 229.5 -66.8 -143.3 20.8
ViaSat Inc.
Revenue growth
EBITDA margin
ViaSat Inc, led by 3.4% shareholder Mark Dankberg, is a satellite communication products company with a market capitalisation of $3.2
billion. The company developed ViaSat-1, a satellite launched in 2011 and which currently holds the world record for the highest-capacity
communication satellite. ViaSat-1 is in geostationary orbit above North America and at the time of launch possessed greater capacity than
all other satellites covering North America combined.

ViaSat-1 has provided and continues to provide significant opportunities for revenue growth at ViaSat. In 2012, ViaSat-1 enabled ViaSat to
launch Exede Internet, the world's first high-speed internet service delivered by satellite. Exede has now passed 620,000 broadband
customers, offers speeds of 20 Mpbs, and mainly focuses on opportunities in rural areas where terrestrial competition is lower.
Notwithstanding this, 13% of Exede's customers have switched to Exede from cable, suggesting a larger size opportunity for ViaSat as their
technology evolves. Exede broadband revenues have doubled in 3 years, and at $400m, comprise 28% of ViaSat group revenues today.

In 2013, ViaSat signed a $20m contract with JetBlue to offer in-flight Wi-Fi on its US domestic flights using the ViaSat-1 satellite. "Our
objective is to disrupt the inflight connectivity industry" said CEO Dankberg on the February 11th 2014 conference call, and with ViaSat's
service offering 20 Mbps versus extant in-flight Wi-Fi solutions offering just 2.5 Mbps, we see no reason to discount his confidence.
Engadget's review of the service said "The service far exceeded competing ground-to-air services from Gogo and the satellite-based
Panasonic WiFi on United's fleet". United Airlines sunsequently signed with ViaSat in February 2014 to provide its in-flight Wi-Fi. March 2014
saw El Al Israel Airlines also sign up, for Europe, by linking with ViaSat-enabled Eutelsat satellites. Assuming a sign up rate of one new airline
a month, at $20m a contract, ViaSat's in-flight Wi-Fi service can add $240m to group revenue in calendar 2014, and retain attractive growth
rates thereafter. As the only service currently offering high bandwidth Wi-Fi to airlines, profitability to ViaSat should also be attractive.
Other ancilliary opportunities from ViaSat-1 include enabling TV networks to broadcast live from locations with no cable linkage, and
military and government vehicle connectivity where ViaSat already has the leading market share.

In May 2013, ViaSat announced it had executed a contract with Boeing to build the ViaSat-2 satellite. To consider the economic impact of
ViaSat-2, let's first summarise ViaSat-1 which currently contributes c. $400m of consumer broadband revenue to ViaSat, a figure which may
ultimately double with new business wins in the in-flight Wi-Fi space. ViaSat-1 also enables services across ViaSat's other business divisions.
In summary we see ViaSat-1 as a c. $800m revenue producing satellite for ViaSat once in-flight Wi-Fi is running at full steam.

ViaSat guides that ViaSat-2 will offer double the bandwidth economics of ViaSat-1 while simultaneously increasing its geographic coverage
footprint seven-fold. Therefore, it is not hard to see that ViaSat-2 is potentially set to offer a magnitude higher than the estimated $800m
revenue achievable from ViaSat-1. One opportunity will be to expand the Exede broadband internet service to urban areas, and more
aggressively target existing cable customers. ViaSat-2 will offer broadband speeds of up to 40Mbps, at the higher end of the speeds
currently offered by cable companies such as Time Warner. Additionally, ViaSat and Boeing have entered into a strategic agreement to
jointly market and sell satellite systems based on ViaSat-2 technology, meaning ViaSat should find itself in a position to receive royalty
streams from satellite TV operators, such as DIRECTV, 21st Century Fox, and Asia Satellite Telecommunications, who wish to launch their
own satellites with ViaSat enabled internet services.

As well as Broadband Services (28% of current group revenue), ViaSat also has businesses in Commercial Networks (also 28% of group
revenue) - advanced end-to-end satellite and other wireless communication systems and ground networking equipment and products, and
in Government Systems (41% of group revenue) - satellite based fixed and mobile government communications systems. Since the 1996
IPO, ViaSat has grown this group of businesses by an average 26% a year. Looking back further - over 27 years - ViaSat has achieved 35%
average revenue growth. The large majority of the growth has been organic and speaks to founder and CEO Mark Dankberg's historic and
continuing leadership of the company.

Given the underlying growth rates, and the 12 month opportunity provided offering in-flight Wi-Fi services, we estimate ViaSat trades at
2.0x Enterprise Value to Sales to year end March 2015, versus a historic trading range of 1.5-2.9x EV/Sales. The PE rating of 20.8x,
meanwhile, is at a slight premium to the market average. However, these valuation metrics have little in them for the launch of ViaSat-2 in
2016, which we view as having the potential to uplift group revenue by a greater magnitude, as well as being a precursor to the
development of potential ViaSat-3/4/5 satellites in the future at a group spending 5% of its revenue on internal research and development.