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Inmarsat Plc (ISA.L) Buy: Secular growth
deserves re-rating; reiterate Buy
Company Name:  Inmarsat Plc                                Ticker:
ISA.LPrice: 459                            52-Week Price Range (£): 585-330
Year             Net         EPS          .           .         Gross
To            Income      Diluted    Dividend       P/E        Yield
December         US$         US$         US$          X           .
2007            96.60        0.21        0.29       30.18        4.58
2008            143.50       0.78        0.30        8.17        4.73
2009E           180.46       0.39        0.35       16.12        5.52
2010E           230.81       0.50        0.37       12.61        5.84
2011E           264.15       0.58        0.38       11.01        6.00
Price Performance (absolute):    1m: +13%   3m: +2%    12m: -1%
Price Performance (relative):    1m: +22%   3m: +15%    12m: +34%
Stock Rating:      B
Source of opportunity
We reiterate our Buy rating on Inmarsat. The stock has de-rated materially on an absolute
and relative basis and we see scope for this to reverse in light of robust, cash generative
growth. We think secular drivers will continue to prove stronger than potential cyclical
drag in 2009 as customers migrate onto higher bandwidth services and believe this
support will continue into the medium term. The company is still experiencing material
ARPU uplift (c.40%) and good customer acceptance of higher bandwidth services across
all segments, backed up by high (>50%) annual compound growth rates in data traffic.
Catalyst
We believe the integration of Stratos, the continued development of the in-flight market
and full entry into the handheld market all present potential upside to stock returns. We
see strategic merit and ‘portfolio’ synergies for Harbinger in its prospective offer for
Inmarsat (as reiterated by the fund via RNS on March 5).  We maintain our view that
while much of the customer base is being negatively impacted by the macro environment,
end market demand is not set to weaken significantly given the relatively low cost and
high utility the service has to users.
Valuation
Following 4Q08 results we slightly increase our expectations for medium-term revenues
and cash flow on the back of strong performance in all segments of the business. As a
result, our 12-month, DCF-based price target increases to 721p (from 711p).
Key risks
Economic sensitivity may be higher than we anticipate; potential placement risk.
The Goldman Sachs Group Inc. does and seeks to do business with companies covered in
its research reports. As a result, investors should be aware that the firm may have a
conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment
decision.
March 13, 2009 Analyst Comment
2 Goldman Sachs Global Investment Research