UAE’s Yahsat to form new partnerships in 2022, sees 2% rise in annual dividends

Logo of Al Yah Satellite Communications Co.

Al Yah Satellite Communications Co. (Yahsat) will enter into new partnerships this year, to maintain the strong performance of its segments.

The company will continue growth trajectory to realize its strategic objectives, maximize value-added services to its clients, shareholders and the global space sector in 2022, Yahsat told Argaam in an interview on the sidelines of the World Defense Show, held in Riyadh.

The Abu Dhabi-listed company capitalized on the normalization of government projects in the fourth quarter of 2021. It entered into new agreements with many national firms, thanks to the state’s economic recovery. Yahsat also worked on diversifying its client base in the government and commercial sectors, and expanding in the major industrial sectors to maintain its success in 2022.

The establishment of next-generation Thuraya 4-NGS satellite is proceeding as scheduled. Thuraya 4-NGS operations are scheduled to commence in the second half of 2024. The satellite is expected to account for nearly 85% of the 2022 capital expenditure and investments, which are estimated at AED 698 million. These investments are to be fully financed by existing loans, the company added.

Meanwhile, Yahsat forecast a 2% rise at least in its annual dividends. Total dividend for the fiscal year 2022 is projected to reach 16.12 fils per share, to be paid in two equal installments in October 2022 and April 2023.

Here’s the full interview with Yahsat:

Q: Can you comment on Yahsat’s Q4 2021 net profit surge to AED 97 million, from AED 63 million a year earlier?

A: The year 2021 was a landmark year for Yahsat. The company was listed in July 2021 and fulfilled its promise for outstanding performance in the fourth quarter of the year. Momentum continued with new awards and a rise of over 35% in future revenue from these contracts. The company capitalized on the normalization of government projects in the fourth quarter of 2021. It entered into new agreements with many national firms, thanks to the state’s economic recovery. Yahsat also worked on diversifying its client base in the government and commercial sectors, and expanding in the major industrial sectors to maintain its success in 2022. The company secured almost 70% of the projected revenue this year.

The fourth-quarter revenue grew by 7.9% year-on-year (YoY) to AED 452.7 million, bringing up total revenue to nearly AED 1.50 billion ($408 million). EBITDA also increased by over 12% YoY to AED 254.9 million ($69.4 million). Net profit jumped more than 54% YoY to AED 97.2 million ($26.5 million).

Q: What is the size of contracts concluded in Q4? What is their impact on the company’s financials?

A: Contracted future revenue increased by 35% to more than AED 7.3 billion ($2.0 billion) in 2021, driven by the 15-year agreement signed by Yahsat in June 2021 to provide next-generation satellite services Thuraya 4. The deal generated revenue of more than AED 2.57 billion ($700 million), which are equivalent to additional annual revenue of AED 172.6 million ($47 million) as of mid-2024.

Yahsat also signed a large number of contracts in the data and mobile solutions segments, gaining a strong momentum in the fourth quarter of the year, as the total value of contracted future revenues in these two segments more than doubled. Seizing a large number of new business opportunities, the company is well positioned to grow in 2022, while contracting nearly 70% of the revenue projected as of Dec. 31, 2021.

Q: What are the latest developments about Thuraya 4? When will testing and trial operations start? How will Yahsat finance this project?

A: The construction of the next-generation satellite Thuraya 4 is underway. According to the set timelines, the new satellite will start commercial services in the second half of 2024. It will support a long-term managed capacity services agreement with the UAE government, and the new generation of mobile communication solutions services, with a main focus on the rapidly growing mobile data, maritime telecommunications and Internet of Things sectors. Thuraya 4 will likely account for about 85% of the capital expenditures and investments expected for 2022, which are estimated at about AED 698 million ($190 million). These investments will be fully financed through existing loans, in addition to an advance of AED 551 million ($150 million) that will be received in June 2022 from the end customer in a 15-year agreement for leasing the managed capacity services for the Thuraya 4.

Q: What about Yahsat plans in 2022?

A: Yahsat will maintain the culture of partnership, which helped it become the UAE’s flagship satellite solutions provider and the preferred partner of the government. Yahsat is well placed to grow its market share. The company will push ahead with the growth trajectory to realize its strategic objectives, maximize value-added services to its clients, shareholders and the global space sector in 2022.

Yahsat Government Solutions (YGS) and G42, the leading UAE-based artificial intelligence and cloud computing company, have signed a Memorandum of Understanding (MoU) to form a new collaboration focused on advancing remote sensing and geospatial capabilities in the country.

In the oil and gas sector, Yahsat signed a MoU with Mubadala Petroleum to explore the provision of satellite services to support connectivity across Mubadala Petroleum’s operated assets in Europe, the Middle East, Africa and Asia.

Yahsat will enter into new partnerships this year, to maintain the strong performance of its segments. We are initiating 2022 revenue guidance range of AED 1.52 billion to AED 1.62 billion, with approximately 70% of 2022 projected revenues contracted and implying revenue growth of up to 8% in 2022.

Q: How do you see Yahsat performance in the first quarter of the year?

A: In February 2022, Yahsat was awarded an AED 909.5 million ($247.5 million) mandate to provide enhanced managed services to the UAE government for its satellite communications capabilities. The agreement augments the previous operations and maintenance services provided, to include technology management support. The agreement, which is valid from January 2022 until the end of 2026, comes in line with Yahsat’s strategy to enhance the capacities of managed solutions through the value chain.

This mandate, as a percentage of the minimum guidance range for 2022, boosts contracted revenue by almost 84% from the 70% recorded as of Dec. 31, 2021.

Q: Yahsat announced plans for 2021 dividend payout, with some amendments to its dividend policy. Do you expect to maintain these dividends, and what is the expected impact on balance sheet?

A: In October 2021, Yahsat’s board approved a proposal from its senior management to update the dividend policy to allow the payment of dividends on a semi-annual basis. The proposal reflects management’s confidence in the financial strength of the business, a positive outlook on cash flow and Yahsat’s ability to fund future investments.

The proposed semi-annual dividend policy aligns with Yahsat’s commitment to maximizing shareholders’ returns, while recognizing the growing scale and enhanced financial profile following the Group's recent deals, and is underpinned by the Group's robust balance sheet and ability to pay consistent dividends.

Today, free cash flows are estimated at AED 659.2 million ($179.5 million), which exceed the 2021 dividend distributions by more than 1.7x.

Yahsat forecast a 2% rise, at least, in its annual dividends. Total dividend for the fiscal year 2022 is projected to reach 16.12 fils (4.39 cents) per share, to be paid in two equal installments in October 2022 and April 2023.