Avanti Communications Share Discussion Threads

[waterloo01] 09/9/2012 11:51

Why is this the first mention of this? Why has the company kept it quite? I guess it explains why we are not traiding much higher. If it is resolved in AVN favour........ Not happy though to read about it on a BB.

[philo124] 09/9/2012 10:46

Bloody Hell.

[blue forever] 09/9/2012 09:40

Well,I guess we had better brace ourselves for another "buying opportunity" on Monday morning !

[plasybryn] 09/9/2012 08:43

Overall sounds like sore grapes, but can't understand why AVN wouldn't have got this issue 100% resolved before going ahead with mega expensive launch. All a bit strange.

[plasybryn] 09/9/2012 08:40

Perhaps to Co. has to get this out of the way before it can announce new contracts/pipeline business and give an update on H2? Everything on hold till this annoyance is sorted. Surprised no one picked up on this sooner!

[plasybryn] 09/9/2012 07:31

Is this what is holding us back? Surprised nothing from Co.

[martincoops] 09/9/2012 00:39

Reading between the lines it looks as if this will go Avanti's way seeing as The ITU's Radiocommunication Bureau, a lower body that recommends courses of action to the board, has sided with the British position.

So this will be seen as a positive for Avanti.

[geheimnis2] 08/9/2012 14:48

This is the link

A storm in a teacup

Let's move on.

[lazyj] 08/9/2012 14:29

Fight at 31degrees E

From LSE board

A bolt from the blue!

[estienne] 07/9/2012 23:25

John,

you said that you wouldn't post on this site anymore.
So why don't you just give it a rest?
After all, your predictions are so often wrong.

[nugacity] 07/9/2012 14:02

Reminder of pages 8 to 10 in RHPS back in March 2012.
Cheers me up.
----------------------------------------------------------
AVANTI's second satellite could send it to 481%

This is an exciting time for Avanti. Its second satellite, the HYLAS 2, is scheduled for launch from the Guiana Space Centre in July of this year. This will radically improve Avanti's capacity to transmit data around the world.

Last year's 'Satellite Transponders – Global Strategic Business Report' spelled out the need for satellite capacity: 'The growing popularity of satellite TVs, the introduction of High Definition,direct radio, consumer broadband Internet services, data services and mobile telephony, government expenditure on positioning systems, military satellite navigation and space exploration... are all expected to contribute to the demand for satellite transponders.

'Developing regions including Latin America, Middle East, Africa and Asia-Pacific are cornering an increasingly large share of the global market. In the Middle East, transponder capacity is growing due to military requirements for effective communication, while in the Asia-Pacific region, DTH (Direct To Home) popularity is the main driving force. Despite enhanced compression technologies that allow for transmission of more content on each transponder... the broadband satellite market is likely to explode
during the next five years.'

In short, the satellite market is a play on the explosion of digital data and on the rapid growth of emerging economies. Avanti's HYLAS 2, which will cover North Africa and the Middle East, will provide some of the essential transmission capacity.

Avanti is now an established satellite player

Since I first wrote about Avanti in March 2008 the story has evolved. Inevitably there have been some hiccoughs, such as the delayed launch of the first satellite HYLAS 1, but the essential business case has not really changed. There is undoubtedly demand for satellite transmission.

Supply is limited by the number of orbital slots, the time, complexity and cost of launching new satellites, and the conservative approach of satellite operators that were previously in government ownership. Avanti has seized the opportunity and should, within a few years, be a major business with a high stock market value. This is reflected in the forecasts of independent City research analysts who, most recently, have argued for share price targets of £9.03 (Equity Development) and £20.52 based on current shares issued (Daniel Stewart) – both well above the current price.


...poor formats for graphs/tables so deleted here .... continues ...

Avanti launched HYLAS 1 in November 2010, it will launch HYLAS 2 in July, and it recently
announced that HYLAS 3 would be launched in 2015. The valuation of Avanti's shares depends upon a number of things: the cost of building, launching and running these satellites; the revenues that each satellite can deliver through sales of transmission capacity; the timing of costs and revenues; the method and terms of financing; and finally, the value that is placed today upon future profits.

Let me review the progress of the three satellites.

HYLAS 1 was launched in November 2010 and covers Europe. The launch was a success, HYLAS 1
has been performing well and Avanti is on track to sell out the 3GHz of capacity by April 2014, defying some critics who argued that it would not be able to compete effectively with the big incumbent satellite operator Eutelsat.

Eutelsat's Chief Executive believes that the European market is at least six times as large as the current combined capacity of both itself and Avanti. Eutelsat has the advantage of greater capacity,though Avanti's more advanced Ka-Band technology compensates somewhat for this. While attention has been focussed upon the delivery of broadband services to customers in remote locations, Avanti has also been developing other markets, for instance for corporate data, as an emergency backup to existing broadband networks, the mobile backhaul market and satellite distribution of films to cinemas.

New contracts and better contracts

The attractions of Avanti's services have been the subject of much debate, but we now have firm evidence. Avanti says that a full HYLAS 1 should generate approximately £50m in annual revenue when it reaches 'full saturation' at the end of the third year in service (i.e. by April 2014). This is in line with original budgets (when I first tipped Avanti in March 2008, I suggested that annual revenues would be £34m, based on prices being achieved at the time).

Thanks to contracts already in the bag, Avanti expects to achieve sales of £17m in its first full year of sales, to June 2012, with the possibility that this could be exceeded if other significant contracts are signed in time.

With £23m of new contract wins announced in the last two months for HYLAS 1 and HYLAS 2, sales momentum has been increasing and Avanti has reduced the length of time within which it expects to achieve full capacity utilization for HYLAS 2 from five years to four. Although the original five-year figure included some contingency, this is an expression of confidence.

With capacity of 8.3GHz, compared to the 3GHz of HYLAS 1, HYLAS 2 covers the Middle East
and North Africa although it could also be used as an overflow capacity for HYLAS 1. Its steerable antenna is attracting attention from the military while HYLAS 2's qualities of resilience, encryption,security and quality are enabling it to sell on the basis of quality and technology features and benefits rather than just merely on price. Accordingly, Avanti is 'confident that our capacity can be filled at the expected prices'.

Avanti's cracking deal on its next satellite

Clearly, the forthcoming July launch of HYLAS 2 carries some level of risk, but all being well Avanti should soon have two operating satellites. A third, HYLAS 3, is now scheduled for launch in 2015.
Originally Avanti had planned to launch a third large satellite financed by bank borrowings secured against advance sales. However, the tightening of lending criteria by the banks has made this option increasingly unattractive and so Avanti has jumped at the chance to pursue an alternative.

At the end of 2011, however, the opportunity arose for it to launch HYLAS 3 on board a new
European Space Agency (ESA) satellite scheduled for 2015. The 4GHz capacity of this third satellite is less than the capacity that Avanti had originally envisaged for HYLAS 3, the launch will be later, and to secure this arrangement Avanti has had to raise £75m of cash through a share issue.

The deal is nonetheless very attractive to Avanti though. The sharing of costs with the ESA means that for each additional GHz of capacity Avanti will pay just £18.8m on HYLAS 3, compared to £41.1m for HYLAS 1 and £33.7m for HYLAS2. Besides that, the ESA is responsible for any cost overruns. As with HYLAS 2, HYLAS 3 will be aimed at emerging markets with a fully steerable cluster of beams that can be deployed anywhere in Africa or the Middle East.

How to price a space-age company

Assuming they all go successfully into operation, how much money might Avanti make from these three satellites?

At full capacity, which should be achieved by mid-2014, HYLAS 1 should be producing annual
revenues of c.£50m. After deducting the operating and other costs, and the depreciation charge of c.£7.5m, HYLAS 1 should be generating a profit before interest and tax of c.£30m. This level of profitability is expected to stay fairly constant over HYLAS 1's expected life of 15 years and, discounting these future cash flows at a rate of 8.5% broker Daniel Stewart calculates a value today of £310m, which is worth c.278p per share.

On the same basis, Daniel Stewart values the larger HYLAS 2 at £684m, equivalent to 612p per share and HYLAS 3 at £551m, or 493p per share. That makes a total of £13.83p per share to which Daniel Stewart adds the discounted value of Avanti's projected 2031 cash balance of £784m – to arrive at a total of £20.17 per share.

Another calculation that we can make is of Avanti's net asset value, a figure that simply looks at Avanti's assets less liabilities today and ignores any future profits. At 30 September Avanti had net assets (excluding intangibles) of £195.2m, to which we can add the £75m raised in the recent share issue. Dividing the total of £270m by the 111.7m issued shares gives a number of c.242p per share,to which we can add the value of Avanti's orbital slots. That this space real estate has a value was demonstrated last October when Brazil held an auction of orbital slots and reportedly received a bid of $88.3m for a single slot.

So the share price looks very well supported by net assets while the future profit projections are, in my view, not especially risky. Satellites are built and launched under fixed price contracts, and operating costs thereafter are low and unlikely to be subject to significant change.

So the big swing factor is revenues. There is little risk that the sky will become oversupplied with satellites and despite some fantasies about other, wireless, means of transmitting data to remote locations there is unlikely to be a genuinely competing technology at least within the 15-year life of Avanti's satellites.

We also have some circumstantial evidence. HYLAS 2 was funded by the USA Export-Import Bank
and the French agency Coface, two government bodies that are notoriously rigorous and cautious.
Avanti's directors have been regular buyers of the shares and would hardly have done so if they had any serious doubts about the business. Paul Walsh, the Chief Executive of Diageo, has joined the Avanti Board. Avanti has stated its intention of moving from AIM to the Main List of the Stock Exchange. And in October Avanti's Chairman John Brackenbury, alluding to 'some short-term speculators who have attacked the share price' said:

"It is clear that Avanti owns scarce and valuable resources in one of the few lightly competed sub-sectors of the global telecoms industry which should see us create very significant value. I see great opportunity in emerging markets telecoms and our advantages in these markets are significant. I am grateful for the resolute support of our core long-term investors. Patience and confidence in the quite exceptional and unique advantages Avanti has will be rewarded. Our pipeline of new business gives us
confidence in our ability to meet expectations."

RHPS Verdict: None of these statements and actions are consistent with a business that is failing to deliver. In my view, the case for Avanti is as strong as ever. I am looking forward to the launch of HYLAS 2 in July and to this time next year when Avanti should be earning good money from two operating satellites. My share price target remains £15, so BUY UP TO 750p.
------------------------------
N.B. That was from March 2012 RHPS release!

[jonnyno1] 07/9/2012 13:22

they stated 3 months testing, ive no reason to believe any different.

[nugacity] 07/9/2012 13:11

And long life?

[sg31] 07/9/2012 12:24

We don't need rampers just patience.

[nugacity] 07/9/2012 12:07

I am not keen on rampers who post unsupported claims that the share price is going north .... but the share price is so low that I wonder if they are what is needed on a share that has everything going for it bar its price.

Cannot believe we can top up below £4 after putting two satellites in place.
H#1 had an extended shelf life because they used less fuel than expected to go operational. H#2 seems to have gone equally well - so hopefully we'll soon get similar news? Most of my portfolio is down this week - perhaps there is not enough wind ... which is where I came in :O)

[yorgi] 07/9/2012 10:41

New Tech

They confirmed Hylas 1 was fully operational after approx 2 weeks although it was some time after that all commissioning was completed. So far to best of our knowledge it is going to plan. Have a look at the website.

As someone pointed out the other day if it was not going to plan and all was not well they would have duty to report this via RNS as this would/could have an impact on AVN's share price So I take it that no news is good news.

[new tech] 07/9/2012 10:28

Anyone know when they expect to confirm Hylas 2 is working OK?

[yorgi] 07/9/2012 09:25

All worth bearing in mind good point Colva :-)

[colva] 07/9/2012 09:22

Also worth bearing in mind is that capacity is sold to the military at a significant premium to the normal civilian rate .

[yorgi] 07/9/2012 09:13

What Volvo comments is all quite possible and worth bearing in mind :-)

I would add that David Williams won't let AVN go cheaply that I'm quite sure of.

[volvo] 07/9/2012 09:02

FWIW, the middle east situation will gently simmer until after the US election, then the Nato (US) forces will enter the Syria conflict, moving onto the next strategic aim of Iran during 2013/14.

Hylas 2 will be used extensively by Nato for the next 5/10 years at least, as will Hylas 3.

Do you remember the financing of Hylas 3? Neither does the city!

Thats because it was fully underwritten at a national level imo.

These satellites will be esential for military life in middle east for the next 20 years.

Fully expect a buy out here in time. dyor.

[yorgi] 07/9/2012 08:58

LOL I hope that does not turn out to be the case Colva :-)

The difference this time in my opinion is Hylas 1 has been up and in service over a year so we should start to see how much revenue it has brought in at the next results and how well sales have gone. Providing that is good and all is well with Hylas 2 I'm quite sure that will have an impact on the share price

Kaos

Bear in mind that AVN was subject to a considerable shorting attach through 2011 with EK playing his part and there was a lot of false information being banded around.