Avanti Communications Share Discussion Threads

[malcolmmm] 27/10/2011 10:03

BT- such a big name this could be the catalyst to jump start the stock

[blackberrydrop] 27/10/2011 09:47

This must be what they were talking about earlier this month. As well as the satellite connection they have patented software that re-connects a company's comms lines if there's a disaster (or a builder digs the line up!) and re-establishes IP addresses instantly rather than in the 24-48 hours that it normally takes. It sounds like a great product if it is!

[restassured] 27/10/2011 09:06

Sentiment is a funny old thing.It works like an overwhelming force.


One minute,you can be a dog.Another,the hottest stock of the year.


I have seen it so many times.

[backmarker] 27/10/2011 08:55

another good rns, underlining the points that AVN is (1) successfully targetting the high-value business market sectors and (2) is enjoying limited competition.

hopefully we will now see steady progress in the share price through to early next year when we should get the first inkling of Hylas-1 revenues. then, assuming they are on track, and we get a successful launch of Hylas-2, there is every reason to believe that £10 is achievable by mid-2012.

once we actually get some hard numbers under our belt and proof of delivery against plan then it is going to be very difficult for shorters to hit this company again.

[restassured] 27/10/2011 08:54

One day it is going to pop and surprise everyone.

[garymott] 27/10/2011 08:45

restassured, I agree. Just waiting patiently for the share price to reflect the potential.

[restassured] 27/10/2011 08:04

Excellent news

[restassured] 27/10/2011 08:01

27 October 2011

Date: 27th October 2011
On behalf of: Avanti Communications Group plc ("Avanti" or "the Company")
Embargoed until: 0800hrs
Avanti Communications Group plc

Avanti to make its Business Internet Continuity Service available to Bt

Avanti today announced a framework agreement with BT around the provision of its Business Internet Continuity ("BIC") product.

BIC uses a satellite broadband system to provide back up to terrestrial telecoms circuits, providing a highly diverse alternative routing for data and giving businesses greater resilience for their IP based operations.

Avanti's BIC offers cost effective, true physical diversity for IP communications traffic.

[bubbleandleek] 26/10/2011 09:32

VMH. SNAP! Although i feel we will hold above 3 quid long term.

[verymaryhinge] 25/10/2011 15:12

CR.. fwiw.. i'd tracked that too.. perhaps prematurely I bought in (averaging) this am..

[yorgi] 25/10/2011 14:05

Yesterdays gains slipping away :-(

[restassured] 24/10/2011 21:01

450p would represent the head of the last head and shoulders pattern.

[cockneyrebel] 24/10/2011 19:03

Dunno but I noticed this starting to happen last week.



A breakout and the stock is likely to test 440p on a leg up at least imo, if it doesn't carry on and go higher.

All imo.

CR

[restassured] 24/10/2011 15:50

Where does that take the price?

450p?

[cockneyrebel] 24/10/2011 14:34

If you ask me the chart looks like it's going to make a turn here - nice reverse head and shoulders imo.

CR

[restassured] 24/10/2011 14:20

As one of the most heavily shorted stocks of the year,the bounce, when it comes, will be just as spectacular.


We are just waiting for the "A-HA" moment.

[billytkid2] 24/10/2011 13:58

Charles Stanley October 19th:

Reality Beckons!
We have had a Strong Buy opinion on AVN since we initiated full coverage at 480p
in April 2010. Since that date the performance of the shares has been volatile and
also disappointing in that the current share price is well below that level despite
considerable progress in building a satellite fleet. However, we consider that the
potential value of the company is still substantially higher than the current market
capitalisation and we reiterate our Strong Buy opinion.
But before discussing the future, we want to mention a few reality checks. It is self evident
that, as satellites have a commercial life of about 15 years and can only generate
revenues in that period, the appraised value of a satellite operator must have some
relationship to the value of its satellites. It should also be self evident that a successfully
launch satellite should have a value greater than the build and launch cost, otherwise no
commercial operator could countenance a new launch as it would destroy value. In the
case of Avanti, our DCF models, allowing for the repayment of debt, calculate that the
average value of HYL 1 and HYL 2 (on launch) will be almost 2.4 times their net book
value. As that multiple includes the repayment of debt, the value attributable to the equity
is a much higher multiple. We consider that it is also becoming evident that the days of
free orbital positions and bandwidth are coming to an end. This can be demonstrated by
the recent purchase by Hughes of bandwidth covering Brazil for $96m. Of the three
operators, traded or listed, on the London Stock Exchange, only one has any value
attributed to orbital positions and that is very small at £2m, but orbital ownership is, in our
view, a 'hidden asset' for most operators.
In the following table, we give some ratios for Avanti and the two other London traded
satellite operators – Eutelsat (EUSAT) and Inmarsat (ISAT.L). Both EUSAT and ISAT
have significant goodwill in their balance sheets and in both cases substantial values for
customer relationships as both companies have made acquisitions. However, we have
not adjusted the NAV figures for customer relationship values.
Market Capitalisation ratios. In 000m's except multiples.
Company
Mark.
Cap.
NAV Multiple
NAV x
Goodwill
Multiple Satellite Multiple
EUSAT € 6,589 € 1,729 3.81 € 922 7.15 € 1,827 3.61
ISAT £2,078 £1,189 1.73 £494 4.36 £1,119 1.84
AVN* £258 £207 1.25 NA 1.25 £368 0.70
Source: Company data and Charles Stanley Research, Market cap based on closing prices 18 Oct.
* Satellite book value projected after HYL 2 launch
It must be realised that EUSAT and ISAT are established larger companies which are
profitable and pay dividends. Their NAVs are projected to increase whilst AVN's is
projected to decline marginally this year and will not rise until the company starts to
generate retained profits, which we project for next year to June 2013. However, we
consider that the discrepancies in the various ratios are too large and that, assuming a
successful launch of HYL 2 and the possible go ahead for HYL 3, there will be a significant
narrowing of the discount applied to the shares in relation to their peer group. We give our
current estimates in the table below.

Year to June 2011A 2012E 2013E 2014E
Revenues £000
5,462
23,000
77,400
117,000
EBITDA (loss) £000
(10,556)
5,500
58,625
97,945
PBT (Loss) £000
(12,727)
(2,750)
19,997
61,197
EPS p (loss)
(12.1)
(3.2)
20.2
58.9
PER
15.0
5.1
Source: Charles Stanley Research Estimates
Comment on results and our estimates
The results for the year ended June 2011 are relatively meaningless as the company's first satellite was only revenue generating for two months of the year. Earlier revenues were generated by using rented and high cost capacity. The cost of sales was, therefore, very high and in addition included depreciation on HYL 1. We understand that HYL 1 revenues were approximately £2m in the period or £12m annualised. Central costs were in line with our expectations and should continue at around £11m. The company reported a pre tax loss of £12.7m and negative EPS of 12.1p.
For the current year, our estimate of revenues is £23m which appears to be marginally lower than consensus. However, we have assumed neither revenues from HYL 2 nor any cost for that satellite. We project that AVN will be EBITDA positive in the current year, but will report a small loss. However, to reach our revenues projection, the company will need to increase revenues significantly. This will not be on a straight line basis as there are expected to be large contracts, but, if it were monthly, it would imply a 10% per month compound growth rate. That would lead to annualised revenues of £36m in June 2012 and would also imply that the revenues projections used in our DCF calculation of the value of HYL 1 were too low. However, we have not as yet increased our projected value of that satellite.
For the year to June 2014, we have projected revenues of £31m for HYL and almost £47m for the much larger HYL 2. We have assumed that HYL 3, even if it were to get the go ahead this year, will not generate any revenues before June 2014.
Our DCF values
Despite the possibility of higher revenues than we had projected, we have not changed projections from those last published in April 2011. We continue to value each satellite separately, but charge all central costs against HYL 1. We now have the following projected values. As the HYL launch was so successful, we have assumed a life of 15 years from June 2011.
Projected DCF values per share Satellite Cash Total
June 2011
220p
80p
300p
HYL 1
June 2012
950p
0p
950p
HYL 1 & 2
June 2013
1380p
20p
1400p
HYL 1,2 & 3
Source: Charles Stanley research projections
Although we expect a positive decision on the launch of HYL 3 to be made on a timely basis, we have excluded any value attribute to that until June 2013. At that time, we have used a worst case basis assuming that the Group will need a partner to help fund the launch. We have, therefore, accorded HYL 3 a value of 350p per share. That would be over 700p, if the Group could finance that without a partner. Because of the cash flow models, HYL 2 could have a 70p per share higher value as at June 2014 than 2013.
Summary
We still consider that Avanti will develop into a significant satellite operator. Although the shares are likely to stand at a discount to theoretical values, there appears significant upside for the shares on a one year view. In addition, the valuation ratios look low in comparison with their peer group in terms of the NAV and Satellite multiples and the projected PERs when the AVN satellites are more mature. We reiterate our Strong Buy opinion. The analyst who follows AVN now only works part time and, unless another analyst assumes coverage, we may cease coverage in March 2012.
The author of this comment, namely Robert Corden, has a personal account position in the shares of AVN.

[restassured] 24/10/2011 13:49

"It's only when the tide goes out that you learn who's been swimming naked."

Warren Buffett

[colva] 24/10/2011 13:42

Brokers use 85% as the peak utilization rate , though it is technically possible to operate a satellite at 99% capacity , so the big revenue and earnings numbers will come in when they still have 14% of spare capacity.


EDIT

I should add that i haven't become a satellite expert overnight , its from a Jefferies report that came out last year.

[restassured] 24/10/2011 10:26

Will be interesting to see whether the share price repeats it's history and steadily climbs towards the launch,this time of Hylas 2.

If so, I expect the shares to be well over 1000p by spring 2012.

Should also be plenty of positive newsflow regarding contract wins, leading up to that event.

[yorgi] 24/10/2011 09:44

Zooshare, AVN has had more good press than bad, more strong broker notes than week but I'm afraid for the time being the share price is not reflecting the prospects for us.

[zooshare] 24/10/2011 09:40

had a good write up in Money week mag of Friday. BUY recomm at 310p

[gorvachof] 21/10/2011 15:35

Superg no problem, I agree those Cenko figures do seem "hot".
Garrymott I think your forgetting Avantis YE2013 starts 01 July 2012, and regardless of whether Hylas 2 is launched in April or June, service launch for Hylas 2 is unlikely to be much before this.

Assume they hit 25% at service Launch, July 2012 (give or take a month)
They have 75% remaining to fill over 5 Years to reach peak utilization.
75%/5= 15% capacity increase Yr on Yr.
Yr beginning July 2012 = 25% full
YE2013 25%+15% = 40%
So Average for YE13 = 32.5%
Yr beginning July2013 = 40%
YE2014 40+15 = 55%

Average for YE2014 = 47.5%.

Or a much more bullish calculation.
Assume Avanti hit 35% at service launch and not 25%, also assume that they reach peak utilization in 4 years not 5.
65%/4=16.25% capacity increase YR on YR.
YR Starting July2012 = 35% full
YE2013 35%+16.25% = 51.25%
Average for the YE2013 = 43.13%
YR starting July2013 = 51.25%
YE2014 51.25%+16.25% = 67.25%

So average for YE14 = 59.25%

In this respect perhaps my revenue/margin assumptions for Hylas 1 and 2 are low(possibly too low?) compared to Cenko? However I thought I was being rather bullish when you consider their main competitor is only expecting revenues of EUR100m through to 2013 from KA-SAT. IMO Cenkos £111.17m pre tax profit for YE2014 is too high.
However as Geh mentioned recently even hitting half Cenko figures, Avanti would certainly be worth a lot more than today.