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Numis knocks Inmarsat down to ‘sell’ as it sees few catalysts for meaningful share movement

In a note to clients, Numis said it was “unlikely” to make any changes to its estimates despite having yet to work through the detail of the telecoms group’s half-year results
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Numis' analysts also questioned the stability of Inmarsat’s L-band business, which comprises over 80% of its total business unit sales

Analysts at City broker Numis have downgraded Inmarsat PLC (LON:ISAT) to ‘sell’ from ‘hold’ as they saw little that could galvanise any changes in its target price.

In a note to clients, the broker said it was “unlikely” to make any meaningful changes to its estimates despite having yet to work through the detail of the FTSE 250 telecoms group’s half-year results.

READ: Inmarsat shares rise as investors await next move after Echostar says won't make an offer

They added that despite the company’s chief executive, Rupert Pearce, saying the offer for the company from US satellite communications company EchoStar Corp “significantly undervalued the company’s prospects”, he did not say anything beyond “what he has highlighted several times before Echostar's approach. Therefore we cannot increase our estimate of ISAT’s NPV [net present value] (which, in turn, determines our Target Price for the stock)”.

Analysts also said that it was “too bullish” to expect Inmarsat’s L-band business, which comprises over 80% of its total business unit sales, to “remain stable, let alone grow”.

In its half-year results on Thursday, Inmarsat swung to a pre-tax loss of US$119.1mln from a US$63.4mln profit in the same period last year despite revenues rising to US$717.2mln from US$683.7mln.

The swing was attributed to a jump in net financing costs, which more than doubled to US$259.8mln from US$121.8mln in the first half of 2017, due to a “significant” increase in the unrealised conversion liability on the 2023 convertible bond following EchoStar's takeover attempt in June.

In lunchtime trading Friday, Inmarsat’s shares were up 4.4% at 561.8p.

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