Avanti Communications Share Discussion Threads

[garymott] 18/4/2011 17:32

Back to the issue of AVN (I promised I would not bother replying but have clearly failed here!)

Simon, below are 3 recent posts from you from your informant going back a whole 7 days! It is your informant's projected annual revenues I refer to:-

(11 Apr'11 - 10:55 - 5058 of 5237)
"If we take Avanti's word for it that Hylas 1 and 2 combined can serve at most 1m broadband customers with a 2mb service (see, for example, p.13 of their 2009 annual report) and assume that they price the service competitively (how else will they get customers?) this implies the two satellites could generate revenue of about GBP 60m p.a., less than half the level of management guidance."

(11 Apr'11 - 11:58 - 5063 of 5237)
"On pricing, I was only noting how aggressive Eutelsat resellers are being at the moment which will make it hard for Avanti resellers to acquire customers. Even at the post promotion rate of EUR 49.90 a month retail for a 10mb service the numbers do not look good for Avanti – they are close to what I originally estimated (it works out at about GBP 17.50 a month wholesale). Given Avanti state they can serve at most 1m customers at 2mb, it is unlikely they can serve many more than 200,000 at 10mb. The implied revenue level would then be GBP 42m i.e. even worse, because a five times faster service doesn't sell for five times the price."

(18 Apr'11 - 14:25 - 5222 of 5237)
"Pricing, which is the key issue when valuing this asset, remains opaque (it is not mentioned at all in today's press release) but some indication is given in the 15th March contract announcement. This was for EUR 7.1m over 7 years and related to 80mb of capacity p.a., about 2.5% of Hylas 1's capacity of c.3.2gb (as stated in Avanti's 10th March 2010 press release). Given that this customer has existing end users on ku-band that it will migrate over to Hylas 1, volumes ought to be significant from year one. Allowing 2-3 years for volumes to reach the maximum contract level implies annual revenues, at maturity, of about EUR 1.1m p.a. for Avanti. If this is the going rate for 2.5% of capacity then, were Avanti able to sell 100% of Hylas 1 capacity, annual revenues would be about EUR 45m (or about GBP 38m).

In reality peak utilisation is likely to be some way below 100%. On 1st June 2010 house broker Jefferies initiated coverage with a model of Hylas 1 forecasting revenue of £53.5m in 2013/14 at peak utilisation of 85% (i.e. £63m implied at 100% utilisation). Following the placing to fund Hylas 2 in January 2010 house broker Cenkos had issued a note foreasting GBP 58.3m at 90% peak utilisation in the same year. Based on the contract announced on 15th March 2011, and very similar price levels implied in the only other contract announcements that detail both voume and value (one on 10th March 2010 and one on 6th June 2010), it maybe more realistic to expect Hylas 1 to generate peak revenue p.a. of around £33m p.a., assuming 85-90% utilisation in line with broker forecasts."

In summary:-

11 April - "the two satellites could generate revenue of about GBP 60m p.a., less than half the level of management guidance."

11 April - "implied revenue level would then be GBP 42m" (for Hylas 1 + 2)

18 April - "100% of Hylas 1 capacity, annual revenues would be about EUR 45m (or about GBP 38m)."

18 April - "it maybe more realistic to expect Hylas 1 to generate peak revenue p.a. of around £33m p.a"

These forecasts vary massively over just one week. Bearing in mind Hylas 2 will have 3 times the capacity of Hylas 1, what does your informant now expect the realistic revenue for both Hylas 1 and 2?

P.S. £33m x 4 = £132m which is more than twice the forecast of £60m on 11 April which was commented to be "less than half the level of management guidance."

[mjames20] 18/4/2011 17:10

Yorgi,

Well done with your efforts to keep things civil. The more we concentrate on Simon's arguments rather than his personality the more we will learn from the debate.

[sg31] 18/4/2011 16:44

I do understand that it isn't easy keeping things civil.

[blackberrydrop] 18/4/2011 16:40

Yorgi - I didn't think I was being uncivil (he is fat), but have edited so as not to offend ;-)

[meljohn] 18/4/2011 16:27

SC may well be wrong. But he's still made a fair bit of money out of this short. Most of us are hard pressed to make this kind of money even when we're right ...

This is the stock market - and the name of the game is making money, not being technically correct as your investment dwindles. We can all learn from SC's antics - the market can be irrational; and it's no good telling it it's wrong while the share price is dropping ...

[billytkid2] 18/4/2011 15:57

From Cenkos today:

Today's announcement is significant for several reasons. Commercial service has
commenced with over 10% of Avanti customers already migrated. Avanti has
exceeded the pre commercial service capacity utilisation target. Avanti has also
increased an already healthy contract backlog and pipeline following service launch.
Avanti's arbritation with Spacex has been concluded in its favour. These
developments give us further confidence in our projected fill rates of Avanti's fleet, in
addition to our optimism in the overall market and Avanti's competitive position. With
further expected newsflow we expect the shares to hit our target price of 2300p within
two years. BUY
 Commercial service commenced – Avanti has begun the process of migrating its
existing end users and customer end users of from leased Ku band capacity to HYLAS
1. Thus far approximately 500 of the 25k end user customers have been successfully
migrated with the process in line with expectations. Now that the satellite has been
launched and therefore the pre-sales contracts have become legally binding Avanti has
finished the process of confirming them all. This has actually resulted in a higher
commitment from customers than originally announced which has improved the pipeline
volume and quality.
 Utilisation ahead of schedule – Management has stated that the peak utilisation on
HYLAS 1 aggregate contracts is 35.1%. This exceeds the 25% target set pre-launch.
Avanti has taken the opportunity to move towards the industry standard backlog and
pipeline KPIs from this point on as it is a more relevant measure of the economics of the
satellite. This metric simply displayed managements' confidence in its ability to pre-sell
the service – backlog and pipeline gives a far fuller picture in terms of pricing, revenues
and contract duration.
 Spacex settlement – It has been announced that Avanti's legal dispute with Spacex
has been concluded. Avanti has been awarded the $7.5m already owed plus damages.
The legal costs have already been incurred and written off meaning this is pure upside
for Avanti.
 Backlog strong and growing – The backlog, which is the aggregate value of legally
binding purchase commitments from customers, is now £139m for HYLAS 1, £28.4m for
HYLAS 2. Avanti also notes a £113.4m option for specialist capacity on HYLAS 2.
Backlog is defined as the minimum amount of legally contracted revenues from
customers. The split within the backlog is c.58% broadband with the balance being
made up of enterprise and military (not including the HYLAS 2 option) business. Looking
forward we expect cellular backhaul to become a significant percentage of backlog as
the sales process has progressed since the launch of commercial service.
 Pipeline enhanced since launch – Increased credibility as a result of the successful
service launch has resulted in a growing pipeline. It is defined as the aggregate value of
potential new customer contracts for HYLAS 1 and 2 services for which Avanti has
already submitted technical proposals and commercial negotiation is underway. The
pipeline currently stands at £427m.

[greengiant] 18/4/2011 15:53

Here is a conundrum for you Simon:

Todays announcement say's that capacity sold is above where they thought it would be

A month ago the company announced (as well as announcing in the Interims) that pricing was above market expectations.

What does that tell you?

gg

[kirkuk] 18/4/2011 15:46

Simon give it a break you're way out on this one. In fact you are becoming a bore.

Your illiterate informant is desperately trying to inflate a greatly deflated ego.

[chrissey] 18/4/2011 15:05

Seems to me that SC is skating a very precarious line on very thin ice, close to manipulation given the incredibly tenuous nature of the analysis presented.

He states his own opinion which is fine, it is the misdirection that might attract the attention of some.

these bb's are rarely a level playing field and it is interesting to see how some posters are targeted for misinforming while others, like SC, get away with a lot more.

its probably the difference between walking on water and walking on egg shells.

IMHO of course, I hold the shares and am happy to do so, still 30% above my average buy price.

[geheimnis2] 18/4/2011 14:49

"The significant numbers in Avanti's press release today relate to the Hylas 1 backlog. This has increased from about £87m on 14th February to £139m today. The increase in the backlog is much larger than the contracts they have announced in the interim period (only c.£6m on 15th March and 4 small resellers on 28th March). "


Yes indeed - very significant - capacity in hylas 1 is selling like hot cakes - and it appears to be at prices above market expectations!

[geheimnis2] 18/4/2011 14:42

cawky

lots of assumptions in that pricing calculation!

i have performed a similar quick calculation on sensible assumptions which gives 40% higher pricing than your informant calculates - in line with jefferies

also this is a residential contract for which pricing is a bit weaker (and quite a large volume one)

in the same statement on the 15th the company states that pricing is above market expectations

all in all - a complete load of hogwash from you again

i see your informant was shocked by the rapid backlog build though!

:-)

[qs9] 18/4/2011 13:05

And all those directors buying in size....makes a lot of sense now following that upbeat RNS IMO...lots more to come...

[yorgi] 18/4/2011 12:41

I think you will find he was joking Smarm as all AVN has done is fall over the last four months despite the flow of good news.

[smarm] 18/4/2011 12:37

blue forever - why would it go down on good news?

S

[mh100] 18/4/2011 12:05

Well, you can see now why the directors were buying into the share price weakness.