EchoStar(ECHO.O)重新覆盖给予买入高风险评级

EchoStar Corporation (ECHO.O) Renewing Coverage on ECHO with a Buy/High Risk Rating CITI'S TAKE We have renewed our rating on ECHO after a period of Rating Suspendedwith a Buy/High Risk rating and a $126 per share price target. Our thesis isthatwe still see significant value creation from ongoing spectrummonetization, potential asset monetization of its video and other assets,and the after-tax value of expected SPCX investment based on Citi’s targetfor SPCX at $200 per share, as detailed in our recent note (link). Our revisedtarget of $126 incorporates Citi’s 12-month target for expected SCPXshares, lower values for its operating assets, similar values for remainingmobile spectrum monetization, significant ongoing after-tax liabilitiesrelated to vendor litigation, and a conglomerate/NAV discount of 25%. Therecent AWS-3 reauction results do not materially dilute our value outlookfor EchoStar at roughly cost for its remaining paired AWS-3 and CBRSspectrum, even though EchoStar likely influenced the auction values higher. Background—EchoStar is in the process of reshaping the company aftermonetizing a portion of its spectrum, expectation to receive 262 million shares ofSpaceX stock with its pending spectrum sales (expected to close in 2027), andopportunities to further monetize remaining spectrum and operating assets. Thepre-tax value of its investment in SpaceX has expanded from $11.1B to $42.0B atcurrent market prices. Meanwhile, ECHO is in the process of addressing some of itsdebt with a pre-packaged bankruptcy filed for DISH DBS (link, WSJ 6/30), whilerecent press reports have cited that it may also address upcoming Hughes debtmaturities (link, WSJ 7/6).Valuation Discount—We estimate ECHO is currently trading at an NAV discount of 34% based on the market price of SPCX & a 42% discount based on Citi’s 12-monthtarget for SPCX. We see opportunities for ECHO to benefit from a potentially higherSPCX share price over the next year & a lesser conglomerate/NAV discount. Wemaintain a High-Risk rating on ECHO given the event uncertainties that caninfluence its price & potential price volatility from its exposure to SPCX value & risks.Implications—We believe ECHO has become primarily an event-driven story, withinvestors focused on the value of its SpaceX ownership, potential future asset sales,and further optimization of its balance sheet. We believe investors would like to seesignificant future returns of capital, while we recognize the conglomeration discountcould widen if ECHO invests in long duration investments with uncertain returnprospects. Risks also include underperformance of asset values, including itsoperating assets, spectrum holdings, and SPCX investment stake. Michael Rollins, CFAAC+1-212-816-1116michael.rollins@citi.com Roberta Versiani+1-212-816-5071roberta.versiani@citi.com Caitlyn Walsh+1-212-816-6692caitlyn.walsh@citi.com Model Update ($ per share, population in million, except spectrum values and as-noted) ($ in millions, except per-share and subscriber data) Bull/Bear: EchoStar Corporation (ECHO.O) EchoStar Corporation Company description EchoStar, through its Hughes segment, is a global provider of broadbandsatellite technologies and broadband internet services to home and smalloffice customers and broadband network technologies, managed services,equipment, hardware, satellite services, and communications solutions toconsumers, aeronautical, enterprise, and government customers. The Hughessegment also designs, provides, and installs gateway and terminal equipmentto customers for other satellite systems Investment strategy We have a Buy/High-Risk rating on ECHO. We believe EchoStar hasadditional strategic and financial options to better monetize its remainingassets over time that could be accretive, although the timing and outcomesremain uncertain at this point. We maintain a High-Risk rating on ECHO giventhe event uncertainties that can influence its price & potential price volatilityfrom its exposure to SPCX value & risks. Valuation Our $126 target price for EchoStar shares is based on the average of 1) thecompany's equity value calculation from its announced asset sales andpossible future divestitures and 2) our discounted cash flow calculation. We estimate total spectrum monetization proceeds (pre-tax) of $43.1 billion,that includes the already-announced sale of the 600 MHz and 3.45 GHzspectrum bands for $23 billion, the sale of AWS-4 and PCS H-Block for $7.9billion and the sale of the AWS-3 spectrum (uplink) for $2.6 billion. To that weadd $7.9 billion for the AWS-3 estimated monetization value (paired), $0.8billion for the 700 Mhz and $0.9 billion for a CBRS sale. From the $43.1 billionspectrum value we subtract cost basis of $13.5 billion and Tax NOLs of $4.2billion and arrive at a taxable gain of $25.3 billion. We apply a 25% tax rate netting an after-tax spectrum gain of $25.3 billion,to which we add back the Tax NOLs and cost basis, arriving at an after-taxspectrum