Avanti Communications Share Discussion Threads

[weatherman] 04/1/2016 14:00

Inmarsat is valued at 6 times sales. When they are spending hugely on new satellites . Why is AVN different ?

[dangersimpson2] 04/1/2016 11:18

Hi GaryMott,

I agree that quarterly revenue can be quite noisy but one of the reasons I don't think Avanti is a good investment is that it almost impossible to see through the management commentary to the true performance of the business. They say that utilisation is up, pricing is stable but revenue is down which doesn't really work without all sorts of recurring/non-reccurring adjustments.

But let's suppose that pricing really does remain stable at the $2k/Mhz/Month. At full capacity you have the current fleet revenue of $360m + $72m HYLAS 2-B + $96m HYLAS 3 + $672m HYLAS 4.

What matters to the investor today is the NPV of the cashflows. Assuming 10% utilisation ramp up per annum to full utilisation, 60% COS, $35m admin expenses then the NPV10 = $1.16b or $520m market cap or £2.30/share.

So if everything goes well under agressive assumptions like full utilisation & 10% discount factor when the debt is yielding 10% then you have a 35% upside from the current price. Under more realistic 15% discount factor then the equity is worthless. It would take quite a big reduction in COS% to see any NPV15 upside from the current share price.

Betting on a more rapid ramp up & lower COS than Avanti has acheived in the past combined with no pricing pressures and no increase in admin costs in order to generate a small gain doesn't seem a good risk reward ratio to me.

Danger

[nw99] 02/1/2016 20:08

He's been saying for that years

[michaelmouse] 02/1/2016 19:43

Here's a thought.

If share tipsters were any good then they would be making their fortunes investing instead of writing tripe day in and day out on their subscription websites. They'll be great at reminding you of their successes and conveniently forget to mention their losses.

They make their money by selling their subscriptions to mugs who are too stupid to conduct their own research and/or come up with any of their own ideas.

If you pay a subscription to any of these self proclaimed experts then you shouldn't be stock picking. You'd be better off giving your money to a fund manager with a proven track record.

Avanti Communications has long been a target for shareprophets because it is highly speculative with significant debts. However, it's probably worth noting that at least one of the writers on that particular site was urging investors to buy the shares at £7 before a single satellite had been launched.

I'm long Avanti because I believe that they could gain significant traction from here and eventually generate excellent returns for shareholders. You have to accept that this is a high risk investment, but it could eventually become high reward. We shall see.

Free share tip indeed. I'll bet they're not all free. LOL.

[maxk] 02/1/2016 18:20

Don't shoot Dave, I got the same email (no position)



Lucian Miers 2nd share tip of the year - sell Avanti Communications at 171p offer - target as low as 0p


On December 17 Avanti Communications (LSE:AVN) served up a quarterly update. From its bombastic CEO David Williams, a man who not only admits to, but boasts of, misleading early stage investors with a fake demonstration, there was the usual mix of bluster and misleading metrics. The only thing that commends Avanti is that it never fails to miss operating targets - it is, in this respect, the most consistent company on AIM.

[nw99] 02/1/2016 17:47

Sorry you are on the wrong board

[investment dave] 02/1/2016 17:37

Had a share tip to sell this. Target 0p

[nw99] 01/1/2016 16:31

Onwards and upwards

[undertaker] 01/1/2016 12:20

All that debt though!

[nugacity] 28/12/2015 09:06

Future progress is definitely not limited to historical progress. I still have hopes that Avanti Will become flavour of the month and never look back.

[garymott] 27/12/2015 22:28

dangersimpson2,

I’ve now had time to look at your article at hxxp://www.dangercapital.co.uk/2015/12/Avanti-Short-Thesis.html

I’m challenging the maximum theoretical revenue which can be generated at 100% capacity of the current fleet. Your assumption based on 23% utilisation and Q1 2016 revenue of $13.6m gives $238m a year. However, even you acknowledge that using quarterly revenue is ‘noisy’ (see post 1761).

So let’s use the annual data from your own article as follows:-

‘Avanti's Fleet Utilisation was within the 20% to 25% band at the end of 2015, having increased from the 10% to 15% range in the prior year.’ 2015 FY Results

From your first graph you have recurring revenue of:-

H1 2014 - $25m
H2 2014 – a little over $40m
H1 2015 – about $31m
H2 2015 – about £29m

This gives 2014 and 2015 recurring revenue of about $65m and $60m respectively (we know the $60m is correct from AVN’s 2015 Full Year Results and the Pre-Close Trading Update on 17/12/15).

For 2015 using $60m of recurring revenue and 20% - 25% utilisation, this gives a maximum theoretical revenue of $240m - $300m.

Similarly, for 2014, using $65m of recurring revenue and 10% - 15% utilisation, this gives a maximum theoretical revenue of $433m - $650m.

So we have a wide range from $240m - $650m per year.

There’s an alternative method of estimating the maximum theoretical revenue which is to use this metric from the 2015 Full Year Results:-

“Average yield remained above our target rate of $2,000 per MHz per month”.

And the capacity of the satellites which you correctly state as HYLAS 1 (3GHz), HYLAS 2 (11 GHz) and Artemis (1 GHz) giving 15GHz in total.

So $2,000 per MHz per month = $24,000 per MHz per year = $24,000,000 or $24m per GHz per year. For 15GHz, this gives $360m per year.

Also, HYLAS 2-B adds an additional 3GHz of incremental capacity which is “expected to be deployed in the middle of the current financial year”.

So the total capacity of the current fleet including HYLAS 2-B is 18GHz with a maximum theoretical revenue of $432m at $2,000 per MHz per month.

Artemis will only last another few years so let’s ignore this which results in a maximum theoretical revenue of $408m at $2,000 per MHz per month.

Let’s use your Cost of Sales at circa 60% of revenue which for $408m is $244.8m.

Let’s also use your figure of $35m per annum of Operating Expenses.

Therefore, instead of your figures of:-

“So at full utilisation the current satellites will generate OCF of $238m – $143m – $35m = $60m”

The OCF will be $408m - $244.8m - $35m = $128.2m.

And instead of a £60m - £64m (due to debt repayments) = £4m/year cash loss, there is cash generation of $128.2m - $64m = $64.2m/year.

[weatherman] 27/12/2015 18:27

It will be interesting to see if Avanti can develop a solution to this.

[yupawiese2010] 21/12/2015 09:14

Smart Rural - signs contract for rural Spain & Portugal.

[nw99] 21/12/2015 07:42

News just gets better and better

[garymott] 20/12/2015 21:18

Another mischievous example of shorters was to spread doubt over the validity of the orbital slots to try to undermine the company.

[aa29] 18/12/2015 16:09

When I spoke to DW at an AGM a few years ago, he did say that he was borrowing to buy shares so I think it is a bit of that and also well timed profit taking.

Up until now, his remuneration has been quite generous - every shareholder will hope these are signs he might be earning it.

[nugacity] 18/12/2015 15:47

Much has been made of director sells over the years.
I have always been open-minded as to whether this was straight-forward profit taking or whether the guy(s) in question was up to his eye-balls in debt having got this outfit on the road. In those days mortgages attracted interest and second mortgages more so - paying off high interest loans at the best opportunity is something we'd all have done perhaps?

[nw99] 18/12/2015 15:04

Getting some serious buys coming in now

[nugacity] 18/12/2015 10:23

A quick thought, if Avanti have sold the initial contracts too cheaply they are not going to be locked in at those prices forever.

I reckon customers will pay increases (within reason) because nobody who gets used to having broadband or other online facilities will want to give them up!

As proof, nobody here has given it up :O)

[sg31] 18/12/2015 09:40

I've been in from the start. They need to deliver or they need a management team who can.

DW might think this is his baby but if he can't make this work the NEDs need to move him out.

[garymott] 18/12/2015 09:22

Chriscallen,I don't feel sorry for the management because their mistakes have been of their own making. Selling a lot of shares at their peak at approximately £7 and stating in his post hylas 1 launch speech that he expected a share price of £20 plus was stupid.I am long here and want the company to succeed. The business and technology is great, but revenue is way behind all their previous predictions. This needs to accelerate strongly, I hope we are beginning to see this happening now.

[nw99] 18/12/2015 08:07

Really getting their act together with another good tie up

[nw99] 17/12/2015 21:18

At last the chart signals a big rise from here