Q3 sales of SEK 57m, EBIT of SEK 2.1m

Reduced short-term IS-39 related capacity assumptions

We expect Ovzon-3 to reach orbit in H2’21

Q3 sales in line with expectations, but slightly higher costs
Ovzon reported sales of SEK 57m and EBIT of SEK 2.1m in Q3. Sales came in 4% above our expectation, but increased higher opex (both relating to other external costs and personnel costs) led to an EBIT shortfall of SEK 1.7m. However, we wish to highlight that the EBIT miss is modest in relation to Ovzon’s future earnings profile (in conjunction with its anticipated proprietary satellite launch; Ovzon-3). Cash flow from investments amounted to SEK 236m, which is up substantially compared with preceding quarters as a reflection of the initiated Ovzon-3 project. End-of-Q3 cash amounted to SEK 457m, which, in combination with a loan facility of USD 60m + SEK 200m will fund further project costs.

Reduced estimates on new leased capacity assumptions
We continue to estimate that Ovzon will be able to lease more capacity in 2020. However, exactly when Ovzon can lease capacity from the recently launched IS-39 satellite remains uncertain. We have previously assumed revenues in Q4’19, but we have now changed our assessment to Q1’20e. This, in combination with slightly reduced lease capacity sales from Hispasat, leads us to cut ’19e-‘21e sales by 3-13%. In addition, we have adjusted our capex plan for Ovzon-3, entailing increased D&A assumptions. As such, our ‘20e-‘21e EBIT is cut by 25-50%.

We continue to forecast SEK 700m in sales p.a. from Ovzon-3
In conjunction with a successful launch of Ovzon-3, we estimate that Ovzon will increase current sales from ~SEK 200m to ~SEK 900m (excl. any new leased capacity). We argue that the technological risk is fairly modest (in terms of developing and launching the satellite), which means that risks primarily relate to operations – i.e. filling up the satellite with orders. Today, a partner has signed for ~25% of the Ovzon-3 capacity through a pre-capac
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