Ten attractive companies to watch in 2025. Part II

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Before the New Year, we decided to select ten companies that look attractive at current levels and at the same time have clear growth drivers in 2025. Here we talked about the first five, in this text we analyze the second.

MDA Space

Canadian-based government and commercial space technology developer MDA Space is an important player in the "space economy" market. The market itself is expected to triple by 2035 to $1.8 trillion. The main growth factors are lower rocket launch costs and growing interest in space exploration. The main directions are space tourism, the deployment of satellite services for communications, as well as potential resource extraction.

Space industry consultancy EuroConsult estimates there will be more than 750 space exploration missions over the next decade. By comparison, there have been 236 missions over the past ten years.

NASA estimates that the cost of launching spacecraft has dropped at least tenfold over the past decade thanks to innovation. This is especially important since, as of 2023, only 15% of the total global space market was government spending, while private companies accounted for the remaining 85%.

Space technologies (satellites, navigation, monitoring) also help increase revenues for companies in various industries. Giants such as Amazon, Apple and Google will deploy tens of thousands of satellites in the next 10 years. These satellites will play a key role in the future of telecommunications, providing global internet connectivity and supporting IoT (Internet of Things) and 5G technologies.

MDA Space is ready to meet the growing demand. The company has a strong presence in the satellite systems segment (44% of revenue), as well as in robotics (32% of revenue) and geological exploration (the remaining 24%). For example, the first private space station, contracted with spaceflight provider Axiom Space , will be built and maintained using MDA Space robotics technology.

Already, the demand for the company’s services is so great that according to the results of the last (third) quarter, its order book (backlog) grew year-on-year by 49%. The ratio of orders to revenue for the last 12 months (LTM Book-to-Bill Ratio) is 2.6, which indicates the stability of orders in the future. Over the last 12 months (LTM), the company received $2.4 billion in new orders, with the largest being a billion-dollar contract from the Canadian Space Agency (CSA) for the next stages of the Canadarm3 program, an advanced space robotics system.

Next year will be a turning point for MDA Space. Its largest division, satellite, which is also the fastest growing, generated 77.5% more revenue year-on-year in the third quarter of 2024, driving the consolidated figure up 38% to $282.4 million. In response to the booming demand, a new production line was launched in the Canadian province of Quebec. The facility will be the largest in the world in its class and will double the company's satellite manufacturing capacity, delivering up to two MDA AURORA digital satellites per day. The company already has an order for 198 satellites for Canada's largest telecommunications company Telesat worth $2.1 billion. Commissioning of the new line is scheduled for the second half of the year and, according to our estimates, could double the annual revenue of MDA Space's satellite segment.

Although MDA is a 55-year-old company, it is currently in a growth phase and is aggressively expanding its production capacity and backlog. Capital expenditures have been high recently but should fall significantly in 2025 once the new line comes online. In Outlook, management clarified that with expected capital expenditures of $200–220 million at the end of this year, further annual maintenance costs will amount to about $25–35 million. Management also promises to achieve positive free cash flow by the end of 2024 against several years with negative dynamics. At the same time, since the beginning of 2024 (the peak of debt), the company has significantly reduced its debt burden (net debt/EBITDA) - from 2.6 to 0.8. MDA Space is well positioned for further growth and its shares look attractive.