Australia's only listed satellite company Newsat Limited (ASX:NWT) has reported a net profit of $10.4 million for the 2013 financial year.
However much of that is due to an accounting standard that requires foreign currency to be translated at the spot exchange rate at the end of the reporting period. Excluding the impact of the currency mark to market, net profit was a more modest $1.8 million.
Despite the fact the company has yet to launch its first satellite, Jabiru-1, Newsat has profitable teleports in Perth and Adelaide, which are used by customers for global communications, as well as satellite communications across the Indian and Pacific Oceans.
During the year, Newsat won 206 new contracts, with an average value of more than $78,000, and represents growth of more than 28% compared to the last year. Monthly recurring revenue for the teleport business is now running at more than $3 million per month.
But the main game for Newsat and investors is the launch of satellites. Each satellite has an estimated life span of 15 years, with Jabiru-1 forecast to generate in excess of $3 billion of revenue over its total life. A second satellite, Jabiru-2 is in the pipeline, along with plans for a fleet of five. Full funding for Jabiru-1 is in place, with more than US$615 million in binding pre-launch contracts in place, as well as US$454 million forward sales pipeline.
An overlooked valuable asset is the rights to eight premium orbital slots, with Newsat acquiring seven of the eight from Cyprus based Kypros Satellite back in February 2011. The slots cover all continents of the globe, and will be used to accommodate a fleet of Jabiru satellites.
Foolish takeaway
With the launch of Jabiru-1 expected in 2015, Newsat could be set to see its share price rocket, should the launch go successfully. With Newsat shares down 36% over the past year, compared to the S&P / ASX 200 Index's (Index:^AXJO) (ASX:XJO) rise of 17%, Newsat may be attractive for those willing to take on a high risk, high return play.
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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned.
