The shares of Al Yah Satellite Communications Company (Yahsat), one of the largest providers of multi-mission satellite communications services in the world, listed on ADX on July 14. They opened at Dh3 a share, 9 per cent above its IPO price of Dh2.75 and rose as much 13 per cent on the 1st day of trading before trimming gains to 1.8 per cent, closing Dh2.8.
The Abu Dhabi based company provides critical satellite infrastructure for government and enterprise networks, broadband services, mobility (voice and narrow-band data) and television broadcast, through five geostationary satellites covering Europe, Middle East and Africa, the Asia-Pacific and Brazil.
Yahsat reported revenues of $90.21 million for the first quarter of 2021, and for 2020 it was $407.5 million. One market that has particularly helped reach this level of turnover is the Asia-Pacific maritime market, with 46 per cent growth in gross revenues between 2018-20. This despite headwinds due to pandemic-related supply chain disruptions.
The Abu Dhabi entity has a stable balance-sheet structure. For the year ended December 31, 2020, the Group generated profit and an adjusted EBITDA of $61.4 million and $246.9 million. The leverage ratio for the year was 0.2x and is expected to be around 1.1x at the end of 2021. This is considered relatively low taking into consideration the capital expenditure required for a satellite company.
Yahsat's success has brought a lot of interest for other IPOs. The stock could reach levels of Dh3.35 in the near term
Government pull
Since inception, Yahsat has enjoyed a strong relationship with the UAE Government, providing highly secure and reliable satellite services. As of March 31, 2021, the ratio of the Group’s total backlog - the vast majority of which relates to government contracts - to its revenue for the 12 months ended December 31, 2020 was more than 5x. The relationship with the government has evolved from solely providing communications services to being a key partner across the full satellite solutions value chain, thus providing further support to the company’s long-term sustainability.
Magnet for foreign investors
Yahsat being a subsidiary of the prominent Abu Dhabi sovereign fund Mubadala could attract engagement from global institutional investors, in addition to high interest from local investors. On its trading debut, the company announced plans to launch a new satellite in two years, aimed at introducing advanced data services to clients by 2024. This indicates the company is already set to achieve major milestones to support UAE’s ambitious strategy in its space-based efforts.
The Group could potentially leverage its experience in the wider Middle East to serve other regional governments, government-related entities and a rapidly growing private sector. In the race to space, the company seems to be well positioned to exploit the growing demand for satellite communication.
