Telesat, TSAT:US, TSAT:CA

 Telesat, TSAT:US, TSAT:CA

BMO Investorline: “Telesat Corp is a global satellite operator, that provides its customers with mission-critical communications services. It operates in a single operating segment, in which it provides satellite-based services to its broadcast, enterprise, and consulting customers around the world. Geographically, it derives a majority of its revenue from Canada. It derives revenue from Broadcast, Enterprise, Consulting, and others.”

Yahoo Finance: “Telesat Corporation, a satellite operator, offers mission-critical communications services to broadcast, enterprise, and consulting customers worldwide. The company's satellite-based services allow direct-to-home (DTH) service providers to deliver television programming, audio, and information channels directly to customers' homes; and allows broadcasters, cable networks, and DTH service providers to transmit television programming services. It offers value-added services, such as satellite capacity, digital encoding of video channels, and up linking and down linking services; and occasional use services. The company also offers telecommunication carrier and integrator services that provides satellite capacity and end-to-end services, including space segment services and terrestrial facilities for enterprise connectivity, and internet and cellular backhaul; and rural telephony to telecommunications carriers and network services integrators. In addition, it offers satellite capacity to maritime and aeronautical markets comprising commercial airplanes and vessels; services to the U.S. government through government service integrators, and satellite services to the Canadian government; and direct-to-consumer broadband services. Further, the company operates satellite and terrestrial networks; and communications services for the oil and gas and mining industries. Additionally, it provides satellite operator services; and consulting services related to space and earth segments, government studies, satellite control services, and research and development. The company offers its services primarily through a direct sales force. Telesat Corporation was founded in 1969 and is headquartered in Ottawa, Canada.”

1.    Statistics from various sources as of 2024-12-03:

Current price: $13.41 USD

PE: 5.85

EPS: $2.38

Forward PE: -1.18

52 Week Range: $6.93 USD - $15.02 USD

Price to Book (TTM): 0.37

Profit margin: 4.66%

Return on Equity (ttm): 4.53%

Total Cash (mrq): 1.43B USD

Total Debt (mrq): 3.03B USD

Current Ratio (mrq): 6.13

Book Value Per Share (mrq): $48.63 USD

Operating Cash Flow (ttm): $133.14M USD

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2.       Share price estimates as of 2024-12-03:

 

Yahoo’s 1-yr target: N/A

Morningstar’s fair value: $14.74 USD

Refinitiv Ratings: $19.42 USD (H $28.63 USD – M $19.42 USD – L $10.23 USD) with consensus rating HOLD.

 

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3.    Quarterly in TSAT from Refinitiv as of 2024-12-03:

 

Revenue: $101.56M USD

Gross Profit: $97M USD

Operating income: $59.5M USD

Net income bf tax: $53.55M USD

Net income after tax: $49.77M USD

Net income available to common share: $13.13M USD

Diluted EPS: 0.9

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4.      Valuation measures and statistics from Yahoo Finance

Valuation Measures

	Current	9/30/2024	6/30/2024	3/31/2024	12/31/2023	9/30/2023
Market Cap	193.33M	187.03M	125.49M	115.70M	142.03M	196.12M
Enterprise Value	1.51B	1.35B	1.23B	1.27B	1.30B	1.63B
Trailing P/E	5.79	9.18	1.30	1.03	1.10	2.42
Forward P/E	--	--	--	--	--	--
PEG Ratio (5yr expected)	--	--	--	--	--	--
Price/Sales	0.51	0.43	0.28	0.25	0.27	0.33
Price/Book	0.37	0.34	0.26	0.24	0.28	0.41
Enterprise Value/Revenue	3.48	2.83	2.50	2.44	2.32	2.94
Enterprise Value/EBITDA	3.42	3.12	1.62	1.51	1.42	2.29

 

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5.    Personal notes as of 2024-12-03

5.1 Overview

Telesat has received investment from federal government and Quebec government for its Low Earth Orbit (LEO) satellites. They have completed funding for LEO constellation, which would provide high speed communications similar to fiber optical network for Internet.

The satellites are currently developed by MDA of Ontario. There are several developers for the on-earth terminals, which provide communications between a satellite and a network on earth.

We could view the LEO network as a fiber Internet network in the sky. There are many terminals as high-capacity routers on earth communicating to the LEO as the backbone of the Internet network.

In my opinions, the terminals could communicate with cellular telephony networks or on the ground Internet networks. Our telephone or Internet communications would be relayed to its remote locations using LEO networks as an extension of the existing mobile telephony network or Internet networks.

Telesat targets enterprise customers while Starlink target residential clients.

Enterprise customers could be passenger ships, navy ships, passenger airplanes, cross country’s passenger trains, remote village’s Internet service provider or Telco, remote mining areas, remote or rural areas. They have awarded contracts by military too.

If you read the documents Military base model for communications (Part 1/2) and Telecom features in military telecom model (Part 2/2), you would be able to understand my notes.

5.2  Notes

LEO would be launched and in service in 2026, thus its significant earnings or revenues would be in 2026 onward. Currently it is traded significantly lower than its book value as shown in the section 4.  

Its shares are exchanged with thin volume. It is volatile as few hundreds of shares bid/ask at a time.

In my opinions, it is a good “bet” to collect shares at this low-price level or before the year 2026. Telesat is kind of backup by governments for its “required” reliable services, so it could not go bankrupt.

You should not put all of your money in TSAT or any stock, btw. Perhaps less than 5% of your portfolio would be a safe bet or tolerable.

6.    From Morningstar report

Valuation as of 3 Dec 2024

Telesat Corp Class A earns a 4-star quantitative star rating, reflecting our opinion that this share class offers a somewhat attractive opportunity for investors. The stock currently trades at a 36% discount to our quantitative fair value estimate of 21.90 USD per share; however, caution is warranted due to this estimate's high uncertainty rating. The firm's valuation metrics strengthen our estimated fair value. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. Reflecting the firm's valuation is its book value yield of 292.1%, which falls in the top 10% compared with peers globally. The market price is low relative to the book (accounting) value of the company's equity, which contributes to our view that shares are undervalued.

Conversely, the company's unfavorable dividend structure is potentially concerning. Dividends represent a stable form of future cash flows returned to shareholders, and low dividend payments can increase the perceived risk of a business. The firm's forward dividend yield of 0%, for example, lies in the bottom 30% globally. This could imply a

planned dividend cut or relatively high share price, which, despite our favorable price/fair value ratio, is a negative attribute.