Avanti Communications Share Discussion Threads

[elrico] 04/2/2016 23:04

mickmouse - You say; It's worth noting that the report correctly points out that the value of Avanti's orbital slots are not reflected in the balance sheet. They are worth around $180m not that far shy of Avanti's current market cap.

Well thats fine in a fire sale, but needed to generate revenues in the wild hope it meets its target, which is a reasonable assumption they will miss them AGAIN!

[elrico] 04/2/2016 22:22

Sorry, Gary, I missed your post.

You say - Cash at year end was $162.6m (with agreed credit of a further $71m). A clear statement is made that no further raising of finance is needed prior to launch of H3 and H4 in early-mid 2017 on the basis that total capex is expected to be $100m -$110m in 2016.

I am happy with the cash figure of $162.6m, but the agreed credit of $71m is all it is right now, there has not been any agreement as to the percentage of the funds yet to be drawn. As I have stated before, current loan notes are at 10% off the top of my head, and bond yeilds are currently 21%, which tell me the shares are worth zip.

You say - Firstly, you are factually incorrect by stating cash is less than £100m. Secondly, it directly contradicts your posts 1937 and 1940 in which you state quite clearly than further funds will need to be raised this summer. Why should I think you know better?

You can argue on the differenceif you want on the conversion from £ to $ but given the level of cash apparently left, AVNTI will need to hit all its new targets to avoid refinancing and given its history of missing its own targets I would assume history is likely to repeat itself. Harsh as that assumption may sound, its very likely.

[hpcg] 04/2/2016 21:32

I'm now flat again, very nice day trade. From a tactical point of view William's bullish words tend to attract new investors at each lower price point. These are the only ones who can see the potential for gains. For a person to be holding Avanti share and be in profit these are the days they have to have made their share purchase(s):

12 July - 30 August 2004

20 Jan 2016
21 Jan 2016
22 Jan 2016 (part of the day)
25 Jan 2016 (part of the day)
26 Jan 2016
27 Jan 2016 (part of the day)
28 Jan 2016
29 Jan 2016
1 Feb 2016 (part of day)

I don't go back that far, but I think that was before Avanti had anything to do with satellites? Also note, anyone who bought shares at the depths of the 2008 financial crisis is out of the money.

[garymott] 04/2/2016 19:08

Elrico,Have you ignored my post 1962?

[bwakem] 04/2/2016 19:01

Nobody will bid while its debts are increasing and it will need to raise money in the future. They will just let it fall apart and pick it up for peanuts by buying the debt at a large discount, waiting for it to default and then offering shareholder a token gesture.

That's assuming anybody wants AVN, which I doubt.

[michaelmouse] 04/2/2016 17:57

"Avanti and Edison make a lot of assumptions". LOL. Of course the shorters haven't made any assumptions. ;)

It's worth noting that the report correctly points out that the value of Avanti's orbital slots are not reflected in the balance sheet. They are worth around $180m not that far shy of Avanti's current market cap.

"At present, Avanti’s debt is composed exclusively of the $645m of high-yield bonds. Although highly geared, one of the features of the model is that Avanti has a strong fixed asset content in the form of the satellites themselves. Being fully operational, in position and fully insured provides an intrinsic value in the fixed assets. The $180m value of the perpetuity rights to orbital positions is not reflected in the balance sheet."

Also worth noting that:-

"Avanti is successfully pursuing a pioneering Ka-band strategy that appears increasingly vindicated.In October 2015 Eutelsat, a major competitor, ordered a new Ka-band, high-throughput satellite from Thales Alenia Space to be launched in 2019, to service additional broadband demand in sub-Saharan Africa, fully aware of Avanti’s growing Ka-band offering. Where Avanti led, other industry
players are now following."

"Avanti has a very low valuation relative to the majors."

Now if you put those facts together, you might just wonder if a bid is likely at these levels?

Imagine being short and waking up to that kind of announcement? Anyway, sleep well!

[elrico] 04/2/2016 17:12

Edison Paid research note! It hardly covers the net debt $560m? and the undrawn loan facility of $71m, at what cost? It will certainly be higher than the existing bonds at 10% and will the bonds are at almost junk levels of 21% you can bet new debt is going to be costly. AVNTI and EDISON make a lot of assumptions, which quite frankly can not be justified on a historical basis.

[michaelmouse] 04/2/2016 16:39

Edison research initiated coverage today. Valuation of £4.27:-

Financial Times Limited&email=[e-mail]

[dangersimpson2] 04/2/2016 14:45

I suppose the real issue is do you think that the BoD as currently constituted would put their names and reputations at risk in the current H1 Report?

I guess I don't see they have a particularly good reputation to risk given that most ramp up targets have been missed (or hit with revenue that I consider to be low quality e.g. swap agreements.)

They are forecasting 50% growth in their core customers, positive EBITDA from H2 2016 onwards and a reduction in the %age of costs to revenue as compared with past years.

They are still forecasting 50% growth for the full year which would be $90m. So they would still need to generate $59m in H2. If they do generate that without swap agreements etc, manage to collect the outstanding Q2 cash to normalise trade receivables and improve pricing then their reputations will start to recover. It just seems too big an ask to me, but guess we'll find out either way in the next 6 months.

Thrown in is the refinancing of the 10% bonds at a lower coupon when they are redeemed... that could halve interest costs.

This seems to be wishful thinking on their part to me. They only last issued debt 6 months ago and today's accounts show that the nominal $125m of 10% notes netted them $115m which means that they are currently paying 10.9% interest. How are they going to issue debt cheaper than today. Base rates can't fall much further, they will have more debt. IMO they could struggle to get them away at 10% without a big equity kicker.

[chriscallen] 04/2/2016 12:59

Yes, of course, I'm concerned not just about the income but it's quality too. In the past I've had suspicions that Avanti were taking on customers who contracted for the headline rate but then some of those failed to pay. That's what small companies do; would I rather that they didn't take on small companies and get some income in the start up phase? No, because some small companies become giants e.g. Vodafone was originally a division of Racal and who remembers that now and cash now is cash now? But the client base of AVN is becoming different to the past... it's blue chip in African terms + BT and Vodafone.

I suppose the real issue is do you think that the BoD as currently constituted would put their names and reputations at risk in the current H1 Report? They are forecasting 50% growth in their core customers, positive EBITDA from H2 2016 onwards and a reduction in the %age of costs to revenue as compared with past years. Thrown in is the refinancing of the 10% bonds at a lower coupon when they are redeemed... that could halve interest costs. Hylas 2B gets a passing mention... after all its only focused on Nigeria but it's 2 years earlier than planned and cost nothing in cash terms.

All this is speculative BUT if it happens and the signs now are that this is the pivot point and the shares will be re-rated. Nobody else has their penetration of the African market which is growing very fast and given who their customers are there are enormous barriers to market entry for their competitors.

If I want to be in Africa (and I do) anybody else is a reckless gamble for HEO satellite coverage.

I suppose it all depends on whether you want to make a fast buck, give a good service and be there long term. But I won't feel any sympathy for shorters who get burnt when the market turns because it's a moral issue for me too. Should I be allowed to sell what I don't own? No. Perhaps a starting point would be to make it a criminal offence to default on short contracts with the sentence geared to the sums involved say 5 years for every £100K

[dangersimpson2] 04/2/2016 11:43

I'm short.

Because my analysis in the past has shown that in order for the equity to have value then the company needs rapid real revenue growth and improved gross margins and refinance a large debt at much better terms. I think the company may generate the first but will struggle with the others - if you hold the shares you obviously feel all three are attainable - that's simply a difference of opinion.

The other thing that my analysis has revealed is that the type of revenue that AVN have booked in the past has been quite variable. Hence an analysis of revenue quality could be key to understanding if they can really generate rapid revenue growth paid on normal commercial terms.

I post when my analysis finds something interesting that may or may not have an impact on this. Since accounts have many interpretations posting gives me feedback on things that I may have missed. As a holder are you concerned with the Q2 revenue quality given the apparent level of accrual? If not, why not?

[cocker] 04/2/2016 11:28

I guess no reason now for directors not to buy more to help steady the ship.

[chriscallen] 04/2/2016 11:09

dangersimpson2
If you're right why are you invested... but the perhaps you are not and you are shorting. If so, how do we know that your post is not intended to drive the price down?

PS I hold 50,000 shares so lets be transparent

[dangersimpson2] 04/2/2016 10:48

Trade and other receivables increased to $44.2m (FY 2015: $35.5m) as a result of milestones invoiced at the end of Q2 which should be settled in Q3.

Without those additional $8.7m sales invoiced in Q2 but due to be paid in Q3 then Q2 revenue would only have been $8.6m vs $13.7m for Q1.

How confident are we that these will be paid in Q3? DSO is typically more like 6 months to 1 year for AVN:


H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016Recurring Revenue ($m) 8.6 12.0 25.0 40.6 31.1 29.0 31.0Trade Receivables 22.0 20.7 28.6 38.6 39.9 35.5 44.2DSO 467 315 209 174 234 223 260



They say that H1 2016 'improved year-on-year quality of revenue' but with 50% of Q2 revenue accrued and a historically long cash conversion cycle I personally wouldn't consider this as particularly good quality revenue.

[humanoid] 04/2/2016 10:35

On the basis of our expectation of 50% annual continuing business revenue growth and Avanti's strong liquidity position, the Group's business plan is fully funded through to the launches of HYLAS 3 and 4 in 2017, with positive EBITDA expected from the second half of the financial year ending 30 June 2016.

[humanoid] 04/2/2016 10:34

Avanti's expectations for 50% growth in continuing revenue on a constant currency basis in the full 2016 financial year are supported by the substantial recent order wins, which will make a material contribution to revenue in the current half year and a very strong pipeline of opportunities that are in advanced stages of negotiation. As revenue builds, Avanti is expected to become significantly cash generative, due to a combination of the revenue growth and a largely fixed cash cost base.

[hpcg] 04/2/2016 09:52

Can anyone explain why no revenue growth YoY is anything but a large negative? My conclusion from the lack of revenue growth is that there is a demand problem - there simply aren't more customers who want the service. I have to say this does surprise me, but the figures are what they are.

Set aside for one minute the operational cash burn and the interest burden as circumstances like that can be ignored by investors in high growth companies. For no growth companies though?

Liam1om - yes this is heading to bond holder ownership or a large discounted placing. The stock market discounts the future. It will extrapolate the following:

cash absorbed by operations H1 (cash flow statement)

Jan 2013 interim = -13.5 mm USD
Jan 2014 interim = -14.9 mm USD
Jan 2015 interim = -18.9 mm USD

So the cash burn in operations is deteriorating. Add in the interest payments and there are significant hurdles just to get cash positive at a holding company level.

[liam1om] 04/2/2016 08:57

Which ever way you look at it the results are poor. There is no hiding that. Wouldn't surprise me to see this under 100 soon.

[cocker] 04/2/2016 08:35

The shortest will pick through the results & try to find any negative to keep their punt on track. All in all better than most expected

[dangersimpson2] 04/2/2016 08:33

- Revenue Flat HY on HY.
- inferred pricing pressure as utilisation goes up but revenue stays flat.

And after 29 paragraphs we find out:

- $45m loss
- £81m cash outflow
- payables up
- admin expenses up
- provision for doubtful debtors up

[garymott] 04/2/2016 08:26

Elrico,Cash at year end was $162.6m (with agreed credit of a further $71m). A clear statement is made that no further raising of finance is needed prior to launch of H3 and H4 in early-mid 2017 on the basis that total capex is expected to be $100m -$110m in 2016.Firstly, you are factually incorrect by stating cash is less than £100m. Secondly, it directly contradicts your posts 1937 and 1940 in which you state quite clearly than further funds will need to be raised this summer. Why should I think you know better?

[bwakem] 04/2/2016 07:34

As expected a load of PR spin at the top of the results. Further down it is a very different story. A half-year loss of $45.5m and debt up to $643m.