NewSat Awaits Debt Financing for Jaburi-1 Communications Satellite
Mr Brendon Lau, a NewSat investor, said that what will happen this month will either send stock price soaring or spiralling down given the huge amount of loans at stake.
- (1888PressRelease) May 25, 2012 - The following weeks will mark a major turning point for NewSat Jabiru SATCOM program as two large export banks decide whether or not to extend loans to finance the Jabiru-1 satellite. Mr Brendon Lau, a NewSat investor, said that what will happen this month will either send stock price soaring or spiralling down given the huge amount of loans at stake.
According to Mr Lau, the $230 million credit package being sought by NewSat from Export-Import Bank (Ex-Im Bank) of the US and French export agency Compagnie Française d'Assurance pour le Commerce Extérieur is likely to be decided this month of May. The bank loans are expected to spur positive stock appraisal as the money will cover two-thirds of the cost of the Jabiru-1 satellite communications project. The Ka-band satellite is being developed by Lockheed Martin and will be launched by Arianespace sometime in the fourth quarter of 2014.
Speculators are hoping that NewSat stock will gain as much as Avanti Communications Group did in 2009 after Ex-Im Bank approved funds for the HYLAS 2 spacecraft. The news sent the Avanti stock up by 60% on annual basis, on top of 180% gain in Avanti's share price in the preceding year. NewSat stock value has almost doubled over the past year, thanks to the bright prospect of satellite financing. And in addition to excellent stock market performance, pre-launch satellite contracts keep on coming, totalling $US 571 million in sales value.
With only $150 million in market capitalization, NewSat seems too small to compete with more established SATCOM operators with billions of dollars in market cap. Adding up to this risk is the possible share dilution with the launching of a large capital fundraising campaign in June to fund the company's share of Jabiru-1 satellite. If successful, the capital raising is expected to double the market cap of the satellite communication carrier.
With 4 more satellites under the company's medium-term plan, analysts welcome the possibility of more capital raising to follow. Thus, investors may need buy more shares or take the risk of being diluted out. Since NewSat is set to become the first locally owned, independent commercial satellite operator in Australia, there has been no local precedent when it comes to satellite fund-raising in the capital market. Some perceive that there is a general lack of know how in valuing such business opportunities, with some investors tending to act like followers than leaders.
The biggest risk is unsuccessful satellite launch, but this is unlikely given the expertise of Jabiru's manufacturer, Lockheed Martin, and launch provider, Arianespace. Moreover, NewSat has insured the satellite to further minimize cost of possible failure. Mr Lau estimates such risk at only 1 percent.