By Henry Stewart
Iconic Canadian space company and well known American wannabe, Vancouver BC based Macdonald Dettwiler (MDA) surged 8.42% in a single trading session following the release of it's Q2 2017 results and seems poised to keep going.
But the results weren't all sweetness and light.
Iconic Canadian space company and well known American wannabe, Vancouver BC based Macdonald Dettwiler (MDA) surged 8.42% in a single trading session following the release of it's Q2 2017 results and seems poised to keep going.
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| As outlined in this July 31st, 2017 Globe and Mail post on "MacDonald Dettwiler and Associates Ltd," the company "closed up sharply Monday, rallying $1.82 or 2.64% to $70.71 and setting a new 50-day high. Over the last five days, shares have gained 9.20% and 5.71% year to date." Of course, the stock rise came hot on the heels of a mostly positive Q2 earnings call, which was held after the markets closed on Thursday, July 27th. It's good news for MDA, which has under-performed the S&P TSX by 21.28% during the last year. For a transcript of the Q2 call, check out the July 28th, 2017 Seeking Alpha post, "MacDonald, Dettwiler & Associates' (MDDWF) CEO Howard Lance on Q2 2017 Results - Earnings Call Transcript." Graphic c/o Globe & Mail. |
But the results weren't all sweetness and light.
As outlined in the July 28th, 2017 Space News post, "MDA slashes GEO order expectations," MDA CEO Howard Lance believes that "commercial satellite operators will probably order half as many geosynchronous satellites this year than usual, deepening a drought that has affected satellite manufacturers for the past two years."
According to Lance, "MDA counted just three commercially awarded satellite orders for the first half of this year, none of which went to Space Systems Loral (SSL), the satellite manufacturer MDA owns in Palo Alto, California." Lance forecasted ten to twelve large satellite orders he expected to be awarded in the second half of the year, but did not say how many he thinks his company will win.
“I don’t know that it will ever get back to 22 satellite (contracts being awarded) a year,” Lance said, “but … the question is less around numbers and, from our standpoint, more around dollars.”
Of course, as outlined in the July 27th, 2017 post, "SpaceX Dominates, MDA Builds Comms & Telesat Plans LEO Sats (But Hasn't Yet Committed)," the real problem with the current crop of large commercial satellites placed in geostationary equatorial orbit (GEO) which MDA's subsidiary SSL has traditionally preferred to build is that they are increasingly in competition with large numbers of smaller, lower cost satellites being place in low (LEO) or medium Earth orbits (MEO) which, because of those lower orbits, possess lower latency (the time between when a signal is sent and received) and are therefore better for two way communication.
Expect this to further reduce the pool of available, large GEO satellite contracts traditionally preferred by MDA/SSL for their high dollar value in the coming months. The SSL subsidiary laid off some of its workforce in June to compensate for the paucity of communications satellite orders.
“I don’t know that it will ever get back to 22 satellite (contracts being awarded) a year,” Lance said, “but … the question is less around numbers and, from our standpoint, more around dollars.”
Of course, as outlined in the July 27th, 2017 post, "SpaceX Dominates, MDA Builds Comms & Telesat Plans LEO Sats (But Hasn't Yet Committed)," the real problem with the current crop of large commercial satellites placed in geostationary equatorial orbit (GEO) which MDA's subsidiary SSL has traditionally preferred to build is that they are increasingly in competition with large numbers of smaller, lower cost satellites being place in low (LEO) or medium Earth orbits (MEO) which, because of those lower orbits, possess lower latency (the time between when a signal is sent and received) and are therefore better for two way communication.
Expect this to further reduce the pool of available, large GEO satellite contracts traditionally preferred by MDA/SSL for their high dollar value in the coming months. The SSL subsidiary laid off some of its workforce in June to compensate for the paucity of communications satellite orders.
Of course, Lance remained bullish on the impending purchase of Earth observation satellite operator DigitalGlobe, even while acknowledging (and then dismissing) concerns over MDA’s refiling of acquisition paperwork to the US government's Committee on Foreign Investment in the United States (CFIUS), a US Treasury Department agency which assesses the national security impact of foreign acquisitions.
As outlined most recently in the July 17th, 2017 post, "Orbital ATK, DARPA, MacDonald Dettwiler, DigitalGlobe & Unleashing the Lobbyists," MDA has promised that it will eventually control Digitalglobe through a US based holding company in order to satisfy CFIUS requirements.
Only time will tell if CFIUS buys that story. Lance said the re-filing of CFIUS documentation initiated a new 30-day review period, which will close on August 14th. The impending DigitalGlobe acquisition is likely the reason for MDA's stock surge which likely means that the market does buy that story.
As for DigitalGlobe, financial results for the three months ending June 30th show the effects of the addition of the WorldView-4 satellite, which entered service in February 2017 and those results, as outlined in the July 21st, 2017 Space Intel Report post, "DigitalGlobe: US government exercises option, WorldView-4 draws commercial customers," are good.
Also, as outlined in the conference call, MDA reported a $29Mln CDN drop in its communications segment for the three months ended June 30th, which generated $332.4Mln CDN in revenue. The company’s surveillance and intelligence segment balanced the loss from fewer geostationary satellite orders by pulling in $171.3Mln CDN for the quarter, up $30.1Mln CDN.
The total revenue for the quarter was $503.7Mln CDN, comparable to last year’s $502.5Mln CDN. Net MDA income was $25.8Mln CDN, slightly up from last years $28.3Mln CDN but the order backlog shrank to $2Bln CDN, down $500Mln CDN over last year.
As outlined most recently in the July 17th, 2017 post, "Orbital ATK, DARPA, MacDonald Dettwiler, DigitalGlobe & Unleashing the Lobbyists," MDA has promised that it will eventually control Digitalglobe through a US based holding company in order to satisfy CFIUS requirements.
Only time will tell if CFIUS buys that story. Lance said the re-filing of CFIUS documentation initiated a new 30-day review period, which will close on August 14th. The impending DigitalGlobe acquisition is likely the reason for MDA's stock surge which likely means that the market does buy that story.
As for DigitalGlobe, financial results for the three months ending June 30th show the effects of the addition of the WorldView-4 satellite, which entered service in February 2017 and those results, as outlined in the July 21st, 2017 Space Intel Report post, "DigitalGlobe: US government exercises option, WorldView-4 draws commercial customers," are good.
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| According to the Space Intel Report, "DigitalGlobe’s five-satellite fleet generated $225.7Mln US ($282Mln VDN) in revenue for the 3 months ending June 30. Two-thirds of it was from U.S. government contracts. The company is spending up to $600Mln US ($750Mln CDN) to replace the WorldView-1, WorldView-2 and GeoEye-1 satellites starting in 2020. A fleet of at least six smaller, lower-resolution satellites, being built with the government of Saudi Arabia, is scheduled to enter service in 2019." The “CE90” metric is a measure of geolocation accuracy. Graphic c/o DigitalGlobe. |
Also, as outlined in the conference call, MDA reported a $29Mln CDN drop in its communications segment for the three months ended June 30th, which generated $332.4Mln CDN in revenue. The company’s surveillance and intelligence segment balanced the loss from fewer geostationary satellite orders by pulling in $171.3Mln CDN for the quarter, up $30.1Mln CDN.
The total revenue for the quarter was $503.7Mln CDN, comparable to last year’s $502.5Mln CDN. Net MDA income was $25.8Mln CDN, slightly up from last years $28.3Mln CDN but the order backlog shrank to $2Bln CDN, down $500Mln CDN over last year.
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Henry Stewart is the pseudonym of a Toronto based aerospace writer.
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