Ovzon: Recent orders bode well for a strong Q4 - ABG

We see tailwinds from recent geopolitical events
Ovzon’s newsflow has been positive lately. Since September, it has announced four new orders, for ~USD 21m in total, all of which relate to its leased-capacity business. With '22e net sales of SEK 347m, up from SEK 172m in '21, progress for its leased-capacity business has been strong over the past 18 months, i.e. since the current CEO, Per Norén, was appointed. We believe that tailwinds from recent geopolitical events have so far been limited, but with a greater need both for companies and public entities to complement terrestrial networks with satellite communication services to ensure better connectivity resilience, we expect Ovzon to benefit more going forward. For Q4, we forecast net sales of SEK 91m, up 68% y-o-y (excl. compensation for divested production stock in Q4'21).

Estimate changes
While the launch of Ovzon-3 is looming (current guidance is Dec'22-Feb'23), we take a more conservative view regarding when we expect the company's proprietary satellite to start generate revenues. We now exclude Ovzon-3 revenues from our '23 estimates (previously, we had revenues in H2'23e and onwards), but we could see upside to this assumption, depending on when Ovzon-3 reaches orbit. As such, we cut '23e-'24e sales by 22-36%, while we lift '22e by 4% on recent orders. Our '23-'24 EBITDA estimates are down materially on the lower sales. In '24e, we expect 44% utilisation for Ovzon-3, contributing with sales of SEK 376m.

Most of Ovzon-3 related capex has been taken
Ovzon ended Q3 with cash of SEK 349m, and it still has untapped funds of USD 10m from its USD 55m loan facility. Furthermore, with Ovzon-3 capex totalling SEK 1.4bn in Q3 (vs. capex guidance of ~SEK 1.5bn), the lion's share of investment has been taken. The share is trading at 13x-5x EV/EBITDA on '24e-'25e.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/ovzon/equity-research/2023/1/ovzon---recent-orders-bode-well-for-a-strong-q4/