Yahsat bullish on revenue growth as it presses ahead with new satellite launch

Exclusive: A strong pipeline of future contracted sales is supporting the Abu Dhabi company's outlook, its CFO says

Yahsat's Y1B satellite's launch in Kazakhstan. Photo: Mubadala

Al Yah Satellite Communications, or Yahsat, expects to record strong growth in revenue this year on the back of contracted future sales as the Abu Dhabi company prepares to launch its next satellite in 2023.

The company, which listed on the Abu Dhabi Securities Exchange last year, anticipates revenue will reach between Dh1.52 billion ($415 million) and Dh1.62bn in 2022. That would mean an increase of between 2.3 per cent and 8.4 per cent from 2021.

“You have got to put that in context. Some of the largest satellite providers in the world are not projecting any growth at all this year, particularly those in Europe. Some [expect] no growth until 2023. So we are in quite a unique position,” Andrew Cole, chief financial officer of Yahsat, told The National.

Approximately 70 per cent of the company's 2022 projected revenue is contracted, with future sales “more than five times our annual revenue”, he said.

That figure does not include a contract worth Dh909.5m, which Yahsat signed last month to provide managed services to the UAE government for its satellite communications capabilities.

“Most of that [future contracted sales] is really quite high margin as well … and a lot of it is backed by the UAE and Abu Dhabi governments,” Mr Cole said.

One of the major projects that Yahsat is working on is the Thuraya 4 Next Generation satellite [T4-NGS], which is scheduled for launch next year and to commence commercial services in the second half of 2024.

The satellite is aimed at supporting both the long-term managed capacity services agreement with the UAE government and the next generation of mobility solutions services with a focus on the mobile data, maritime and IoT segments, according to the company.

“The project is very much on track. It's a major programme, if you add up how much it's going to cost, all included, not just the satellite, but the ground segment, insurance, the launcher, it's $580m ─ that's quite a lot,” said Mr Cole.

“And as of the end of 2021, we're about … 38 per cent of the way through. 2022 will be a big year; by the end of this year, in terms of capex [capital expenditure] spend, we will be about 70 per cent of the way through. We are on track and the satellite is due to launch sometime in 2023 and then come into service in 2024, about June.”

Overall, approximately 85 per cent of Yahsat's 2022 projected capex and investments, at Dh698m, is expected to relate to the T4-NGS programme. This will be fully funded by existing debt facilities and an advance payment of Dh551m in June 2022 by the customer, the company said.

In October last year, Yahsat was also appointed by the UAE government to conduct a detailed assessment and recommendation for two new satellites, Al Yah 4 and Al Yah 5, targeted for launch in 2026.

“We've sent out the request for proposal (RFP) to various satellite manufacturers. We expect to get those responses back in the short-term, but [we] can't [share a] very precise time frame. And then we have to evaluate those RFPs, look at the commercials and the technical feasibility. Hopefully, towards the end of this year, we will be in a position to go firm on that and secure the contract,” Mr Cole said.

The anticipated new missions will add capacity, coverage and capabilities to enable next-generation applications. They will also present a “significant growth opportunity” for Yahsat and will further “bolster its contracted future revenue”, the company said.

Yahsat may also look at raising funds if the contracts for the satellites are signed. “There would need to be some level of financing associated with that, so we will be looking at a financing solution [although] we haven't really come to any decision on that yet,” said Mr Cole.

“If you look at what we did for T4, we actually used an export credit arrangement through Bpifrance. [Such facilities] are very good because you can draw down the funding as the milestones on the construction of the satellite are completed. And of course, you repay the debt over the duration of the asset. So that's actually quite an attractive option, but it's a bit too early to say that we've come to any decision on that,” he added.

Overall, the company, which posted a 54 per cent rise in fourth-quarter profit for 2021, and is currently present in 150 markets, is extremely bullish about further growth and expansion.

“We continue to look for other opportunities, organic or inorganic, that may arise that we could take advantage of that would expand our reach further,” Mr Cole said.

Updated: March 03, 2022, 7:24 AM
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