Avanti Capital Share Discussion Threads

[adam] 27/9/2006 10:57

It comes down to valuation not predelection though.
Interest is indeed real, but it is coming to Avanti, given that they are the creditor. I accept it is struggling, there's little doubt about that. It is clear that Barvest was only just keeping its head above water, and sometimes under water. There were clearly some poorer units - hence the controlled receivership, so I for one found the EBITDA figure of £2.35m (before head office costs) useful to know. We know that the interest will be 10% of £8.25m due to Avanti.. thus EBTDA is £1.5m. Tax will come after the D and A (not as ALS suggested), but I don't know what if any would be payable, say £200k. Head office costs... no idea.. but not that important as the value in Barclub would be as a bolt on acquisition and thus the acquirer would be looking to strip out most of the head office costs on merger with an existing operation... which is who the figure is intended for. I suspect that Avanti would sell Barclub in a snap for the figures A-L-S alluded to.

[jeffian] 26/9/2006 23:15

Just a word of caution about trying to value the Barclub business from EBITDA. This started with adam's post 234 using as a basis the statement:
"The EBITDA (before head office costs) made by the 18 bars and clubs being
acquired for the year ended 30 June 2005 was £2.35m and in the year ending 30
June 2006, is forecast to produce a EBITDA (before head office costs) not
materially different to this". This rang a bell with me so I went back to check the history of 'old' Barvest:-
August 2003 - when acquired, every one of the 28 sites 'cherry-picked' from Po Na Na was profitable at the operating level in the period up to 31/3/03, in total generating £4.3m before head office costs.
Period to 30/6/04 - in the first 45 weeks of AVA ownership, EBITDA £2m. Expected to maintain this level.
Period to 31/12/04 (interims) - EBITDA £0.598m
Full year to 30/6/05 - EBITDA £1.2m
Period to 31/12/05 (interims) - EBITDA £0.133m

I think you're going to have to wait and see how the actual figures pan out before you can jump to the conclusion that the business has stabilised. We have just had statements from Enterprise Inns, M&B, Ultimate Leisure and Regent Inns, among others and there is a clear pattern - traditional community pubs/'locals' are doing OK but late-night bars/'venues'/entertainment bars are still suffering. I wouldn't assume those EBITDA figures are set in stone.

A-L-S is also right, IMHO, to be jaundiced about the whole concept of EBITDA. Interest and tax are clearly 'real' (i.e. cash) costs, but it is wrong to assume that Depreciation and Amortisation are somehow not. The replacement of wasting assets (leaseholds, bar fittings etc.) can be accommodated in a structured way as a charge against profits over the life of the asset, but if things go a bit pear-shaped, write-offs and 'asset impairment' charges are just waving goodbye to hard cash which has been spent in a previous period and proved to be worthless. I think this is just one of the bullets the old Barvest failed to bite. Whether the new Barclub really has the NAV it claims remains to be seen.

Regards, Ian

[adam] 26/9/2006 17:33

Thanks

Let´s say for the sake of ease that the equity is worth 7m. Avanti´s 60% share would then be worth about 4m. Not that much really. I think my figures are also probably pretty generous in Barlocks favour.

I would say they are reasonably generous given AVA share price. If you are correct in the above quote then the upside is that AVA get their £8.25m back plus 47p/share. This would put AVA on nearly a 50% discount to NAV without any uplift for mBlox.

[arthur_lame_stocks] 26/9/2006 17:14

I don´t like EBITDA as a ratio. I think it´s pretty worthless. Interest and tax are cash costs and have to be paid, depreciation is an attempt to recognise that fixed assets have to be replaced at a cash cost periodically.

They´re using EBITDA to try to boost the apparant value of this investment.

I´ve tried to come up with a few figures as a guess at what AVA´s share of Barlocks equity might now be worth and why I believe they were wrong to support this investment instead of allowing it to fail at a small cost to the group.

Assuming EBITDA of 2.35m for the current year. I´ll ignore interest for the sake of the calculation to avoid double counting.

In the six months to Dec 05 they charged 498k depreciation and goodwill amortisation to Barvest. Barvests goodwill dropped from 4.826m to 4.477m a drop of 349k. so presumably the other 149k is fixed asset amortisation. Over a whole year this would mean 298k in fixed asset amortisation. But since this time the company has gone into receivership and now is around two thirds of the size it was when these figures were published. So i´ll suggest that fixed asset amortisation of 200k going forward is about right.

So that takes them down to 2.15m. Assuming that is pbt and a 30% tax charge would leave a net profit of about 1.5m. If the company is worth 10x this then it is worth 15m. Then of course you have to knock off 8.25m just for Avanti to get their cash back. Let´s say for the sake of ease that the equity is worth 7m. Avanti´s 60% share would then be worth about 4m. Not that much really. I think my figures are also probably pretty generous in Barlocks favour. This also ignores all of the other costs which Avanti have presumably had to pay in relation to Barlocks.

I just don´t see why it´s worth it given the likely low value of Barlocks equity to Avanti and the poor outlook for the business.

But that aside, It doesn´t mean there is no value in the shares at this price, but i´m not sure I would trust these guys with my cash again, I doubt their competence.

[pachandl] 26/9/2006 15:33

Oh well, we will just have to wait until the next set of results. Fair comment re. my extremely low valuation but if Barvest fails to cut costs and improve profitability I can see my valuation becoming generous.

[adam] 26/9/2006 13:48

Implied yield on a 10% coupon bond at 50% of face value is 20%.
EBITDA is claimed to be over £2m, so a £4m valuation would seem extreme.
However, markets over-compensate which is my point.
These results (November?) therefore critical in terms of valuation.
If Barclub holding up in dire market then after two re-organisations then equity must be worth something. Includes Hammersmith Palais and presumably some sort after spots/licenses.
The company were buying back shares right up till closed period, so if the shares are not good value they are discredited.

[pachandl] 26/9/2006 13:29

Basically agree with Adam's anaylsis of current underlying values, with the exception of the Barvest bond value which, in current market conditions, is probably worth a lot less (circa £4m?).

[arthur_lame_stocks] 26/9/2006 12:28

Adam

I thought the shares were cheap before but I just don´t like the management. They´re arrogant and incompetent. If they went i´d have another think about it.

As far as Barvest or whatever it´s called goes you´ve hit the nail on the head when you say that the value may be around the 8m owed to the group. I just can´t see there being any value in Barvests equity which is the whole point in investing in the first place. Otherwise they might just as well have left the 8m in the bank earning interest without all the risk.

They got it wrong and couldn´t admit their mistake and minimise losses.

[arthur_lame_stocks] 26/9/2006 11:03

They had a perfect opportunity to extricate themselves from Barvest at a small loss. Instead they have pumped in millions more in cash into it even though it´s now a much smaller business and they´ve given guarantees at the group level over some of the leases and other liabilities.

It´s been a total shambles.

[pachandl] 26/9/2006 10:54

Thanks for the updates Adam. Unfortunately the fact that we are placing so much emphasis (and hope) upon MBlox shows how poorly so many other holdings have performed. I just wish they could extricate themselves from Barvest.

[adam] 25/9/2006 20:30

Slightly more upbeat news from mblox

[adam] 25/9/2006 14:19

Ultimate Leisure's results seemed pretty dire


I think the Ultimate Leisure share price is supported now by the NAV which is not much below the market cap.
Doesn't bode well for "Barclub Trading Limited" (formerly Barvest)

[adam] 14/9/2006 11:08

September 12, 2006 11:30 AM Eastern Time
Telescope and mBlox Unveil Plans for $3 Billion US Participation TV Market; Companies Help Broadcasters Boost Revenues, Engage Audiences

htp://www.wirelessweek.com/article/CA6371694.html
By Wireless Week Staff
September 13, 2006
NEWS@2 DIRECT
mBlox unveiled that the World Wrestling Entertainment has selected its mobile message delivery platform to bring global interactive services direct to its consumer base, regardless of a fan's carrier affiliation or handset. These added interactive services are part of WWE's mobile initiative.t

[ecapital] 16/8/2006 08:46

no doubt the idiots sold it for 20p. Just like Amino and just like Business Serve.

[jeffian] 15/8/2006 22:30

Accepting that I know nothing about their other investments other than Barvest about which I've commented in the past, if Avanti is "Moving strongly forward" as per the thread title, why does the graph in the header look like that?

Regards, Ian

[pachandl] 15/8/2006 20:22

I'm assuming that the recent sale of Video Networks is irrelevant to Avanti - ie it sold its stake awhile back?

[growbag] 07/8/2006 18:38

Perhaps worth reminding us all about the Net Asset situation at the March 2006 interims (see below). Interestingly, Avanti have £9m cash left (not much below current market value). Total NAV estimated at £20m or so, about £2.20 per share. But yes, evidence of a turnaround at Barvest would help --



Investment Carrying value (pence per share)
mBlox 61
Barvest 64
Espresso 3
Medcenter 3
Wordmap 3
Others 1
Cash (net of liabilities) 78
Property 3
Total 216


* mBlox closes US$25 million fund-raising in February 2006. mBlox carrying
value rises from #1.83 million to #5.69 million, an increase of 310%,
including the further investment.

* Buy back of shares continued with purchases in July 2005 of 577,000
ordinary shares at 150 pence per ordinary share.

[adam] 05/8/2006 09:43

Splitting hairs, but it is 8,468,932. It is only cheap if they can get their money out of Barvest. Slightly encouraging that the management were still buying back own shares after the (2nd) Barvest restructure, but perhaps they are in denial? I'm not in a good position to judge, just hope.

[clint2006] 05/8/2006 09:22

Currently 8.595,000 shares still in issue,by my calculations (After share buy backs). @ £1.24/share mid price values Avanti at £10.66m only. Exceptionally cheap?

[clint2006] 28/7/2006 09:46

What do we think mblox book value to avanti really is? Was declared at £5.68m at last update for avanti's 7.9% stake. NAV to avanti of 61p per share. That would value the whole of mblox at £71.9m only. Given mblox profitable since 2002 and growing both organically and by aquisition, this seems a little cheap to me.

Is it a case of undervaluing an assest to depress avanti share price so share buy back costs minimised?

If thats the case then benefits will be magnified to NAV when mblox value truely realised, or am I being too optimistic?

[adam] 26/7/2006 14:28

mBlox Acquires LaNetro Zed's Operator Connectivity Business in Asia

[growbag] 24/7/2006 15:56

avanti has to be a strong tip for significant upside. share buyback in progress, mBlox looking to provide a hefty return on the investment. barvest is the only real thorn-in-the-side -- wasn't that given a 60p book value -- so without Barvest (where some return still possible), NAV could be around £2 per share, assuming re-evaluation of mBlox and possible mBlox flotation. worth a punt I would think against this backdrop.