Avanti Communications Share Discussion Threads

[restassured] 23/2/2011 09:53

Here go again another anonymous dossier from Mr.Cawkwell.

Now we know who has been shorting the stock.

Well done superg I hope you got a big cut.As you have clearly been posting on behalf of others for several months.

[simon cawkwell] 23/2/2011 09:44

Gentlemen,

I have received the following commentary on Avanti (AVN) and sold it short:



"Avanti's business plan when they were raising equity to fund the satellite they have launched (Hylas 1) was that it would provide broadband to up to 300,000 end customers, with a 2mb service (e.g. see their 2008/09 results). On a per customer basis the business model was to earn about £13 a month for wholesale. So, at 100% utilization, Hylas 1 revenue would be £46.8m p.a.. Avanti will only sell wholesale to telcos who will then have to incur the expense of acquiring end customers. Roughly speaking, the retail price is twice the wholesale price plus VAT, so consumers would be paying about £30 a month for a 2mb service (they also need to buy the hardware to receive the signal).



Eutelsat offer a 3.6mb service from existing capacity (on satellites that primarily provide TV signals). The wholesale price for this is EUR 17 a month (i.e. roughly the same as Avanti's business plan for a 2mb service). Eutelsat's business plan, having launched ka-sat at the end of last year, is to offer a 10mb service at the same price point. They are targeting EUR 100m revenue from this satellite by 2013/14 with about 30% utilisation.



So Avanti has two options. Either serve 300,000 customers with a 2mb service but at a significantly lower price point than planned. Or match Eutelsat's speed and price – in which case they could only serve about 60,000 customers. Either way revenues ought to be significantly lower than the £45-50m range guided by management.



How is this possible? Hylas 1 has capacity of about 3.2gbs (they will not disclose the actual number but did state in a contract announcement that 320mb was about 10% of satellite capacity). Eutelsat's ka-sat has capacity of 70 gbs i.e. it is maybe 20 times larger. Hylas 1 will have cost about £100m to put into space. Ka-sat cost about EUR 290m. So, on a per mb basis, Avanti's satellite is several times more expensive (their next satellite, Hylas 2, due to launch in the first half of 2012 is about three times as large as Hylas 1 but pretty similar on a cost per basis).



If this is correct, when will it become apparent? Hylas 1 is not live yet but is, I think, due to start serving customers within a month or so. Avanti has a June year end so revenue will not be material (whatever the case) in the current fiscal year. Consensus is for about £25-30m revenue in the year to June 2012. If my analysis is correct they would not generate much more than £10m for this period. But I am not sure when they would be required to announce that revenue will be materially lower than expected. Avanti is not required to begin paying interest on debt until Hylas 2 has launched (net debt at launch of this satellite will be somewhere between £100-150m I think).



I have not commented on demand. It is a matter of opinion whether there is enough unserved domestic demand in Europe willing to pay for broadband at these price / service levels. There are also other potential customers (e.g. corporate, government) which management now seem very keen to focus on in announcements. All I can say on this is that the business plan was primarily to serve domestic customers and, whoever the end customer, it is not obvious why the pricing dynamics should vary.



Management have refused to meet with me (although we have met them several times over the years on roadshows for their equity fundraisings). Recently a broker got the same treatment and, allegedly, management threatened to report them to the FSA (for what I do not know). All part of a day's work for you I am sure."


My informant warns me to expect trouble - after all, on the stated basis, Avanti will fall a very long way. I think I can live with that. I have done it before.

Simon Cawkwell

[kimball808] 23/2/2011 09:16

nice icicle forming...;-)

[hardrider8] 23/2/2011 09:08

topped up.support on previous resistance levels and hpoing for a close above the 50 week

[leluot2] 23/2/2011 08:55

superg1 thanks for your posts


I am sure it is the absence of buying and the presence of this persistent seller that is doing the damage.

Cheap as chips - ridiculous price imo

[superg1] 23/2/2011 08:48

On the selling side I'm only stating what is rumoured on the BB's.

Is it large share holder cashing in, who knows, that won't be apparent on normal trades, it's hidden from us mere mortals.

Such sales have nowt to do with future prospects. If they hit their target out they go simple.

Look at Brookwell on FUM, they knew the futura was good and huge propects ahead but they offloaded 4m shares at about 40p, months later it's doubled. They expected that but targets had been hit.

As I say it's just a hunch that selling is going on and until that stops it won't move up and more likely keep going down.

[buck581] 23/2/2011 08:37

I don't see selling pressure. I see a lack of buying, which is not the same thing. Volumes are very low.
Time to buy as far as I'm concerned. Cheap as chips.

[superg1] 23/2/2011 07:56

I have no issue with Sat BB.

I do have issue with 2 websites banning every poster that hyas a different view and adds balance (iii and ADVFN).

Yes with 3 sats in the air producing revenue on full capacity the price will be a lot higher.

It's no good picking out all the good predictions and comments of the company or brokers. You can all see what happened re predictions post launch to the real world.

It's the outrageous hype that gets me not the Sat BB issue.

Continually reading that Avanti has the monopoly on this when they are already 2nd on the Sat front is misleading for New PI's but the main crew still pump it to death.

GCCR on iii (what's your name on here) states £10 per share for Hylas 1 ????.
That's almost double some broker estimates.

Look back to the original claims. Huge demand, will be full in 1 year. Then £5m director sale, and oh it will now take 3 years as originally stated.

£229m over 7.2 years average. £31m per year, Which on recent estimates I've seen would mean Hylas 1 is half full revenue wise, before it's online, yet it will take 3 years to fill ???.

It doesn't add up.

When a series of brokers (paid) and RHPS hype it outrageously I get suspicious. Good businesses don't need to do that. Why are they doing it.?What is the benefit in the short term.???

If the company is that good and prospects are booming then why do they need to shout about it.
For what reason do they want the share price high now?. Perhaps someone wants to sell or is selling (seller in background suggested on iii).

Is it fund raising for Hylas 3 needed. Seller wanting a good price so hype it to keep the PI's buying. I don't know. But something seems to be up.

Anyone pointing this out gets blocked. The Avanti iii connection is even posted by Dregor (17 Dec 2010) where 2 know each other within the company and apparently use that connection to keep the iii BB for hype only).

Sorry for being suspicious but I have no idea of the Id's of the posters here, are they iii posters under different names, who knows but most Posters do so on various BB's.

So for the genuine unconnected PI investors tread carefully and fully research the facts.

I note the apprehension when Hyals 1 launched and then hopes that all is OK re being fully operational, but now H2 and H3, will go up no probs ???.

It's OK shouting about people that don't have BB. but do they want it. They had a trial for a no zone area with funding but then found the uptake was poor and it was a flop. Some of the area's quoted in the 100m customer base area struggle to afford to get enough food for the week never mind BB.

[mike292] 22/2/2011 20:41

UK_Analyst Tip of the day still has faith. Buy when there is blood on the streets



2nd February 2011 Analyst: Derren Nathan
Email: [e-mail]
Tel: [phone]

Avanti Communications*: Interim Results - Order book and pipeline gaining momentum. Reiterate Strong Buy with a base case target price of 1,079p and potential upside to 2,194p


Key Data

EPIC
AVN
Share Price
568.5p

NMS
500

Spread
567p - 570p

Total no of Shares
80.33 million

Market Cap
£ 456.65 million
12 Month Range
375p - 735p

Market
AIM

Website
www.avantiplc.com

Sector
Mobile Telecommunications

Contact
David Williams
(Chief Executive)
020 7749 1600



On 14th February Avanti Communications, the provider of satellite broadband services to telecoms companies, delivered its interim results for the six months to 31st December 2010, which we believe will be the last set of results to show no direct revenues from the newly launched Hylas 1 satellite which the company expects to be in commercial use in March, due to the performance of two confidential client test missions which highlights the range of new services that Ka band satellite technology may be applicable for.

Outlook

Avanti gave its most detailed update as yet as to progress with sales of capacity on Hylas 1, and on pre-sales for Hylas 2. The company's backlog of confirmed contracted sales now stands at £229 million with average contract lengths of 7.2 years for Hylas 1 and 4.3 years for Hylas 2. Avanti says that selling prices thus far have been 'strong'. Avanti's framework agreement with BT shows that the de-risked proposal presented by the successful launch of Hylas 1 is making conversations with the large telcos much easier.

The company has a further pipeline of sales of £389 million. This does not include any pre-sales negotiations for Hylas 3 and by no means encompasses every live sales opportunity for Hylas 1 and 2. Avanti has guided that for a deal to be included in the pipeline, the potential client must have at least started technical due diligence or commercial negotiations after requesting and receiving a formal price offer. Avanti has expressed its confidence in reaching a fill rate of 3 years for Hylas 1 and 5 years for Hylas 2. The Board is determined to maintain strict pricing discipline and believe that these rates could accelerate through negotiations with new telcos and Government agencies.

Hylas 2 is on track for launch in mid 2012. The company has learnt a great deal from its experience with Hylas 1 and we are confident that this timeframe will not be extended. A number of key milestones have already been achieved, including the reservation of a launch slot with Arianespace, the completion of a Critical Design Review, and the placing of orders for all long lead items. 'Solid' pre-sales progress has been made, and given the flawless launch of Hylas 1, Avanti stands to procure insurance for Hylas 2 at considerably more favourable rates.

Hylas 3 is still in the design phase and will require further funding. At the current share price the Board believes that it would be beneficial to shareholders to pursue a strategy of debt financing and hopes to repeat the success it has had at efficiently financing Hylas 2.

Financials

Revenues fell to £1.2 million (£3.3 million) reflecting the winding down of loss making pre-launch test services and the company broke even at the gross profit level. Overheads were £6.3 million which Avanti has guided will be the run rate for full provision of satellite services from Hylas 1.

The balance sheet showed the benefits of the company's significant debt and equity financing activities with total equity standing at £214.4 million vs £152.2 million six months previously. Of the £70 million raised in equity during the period £53 million was used to pay down the expensive Hylas 1 Pik bond. £90 million had been drawn down on the COFACE and Exim facilities that will be used to finance Hylas 2. The company expects this to reach £194 million by the expected launch of Hylas 2 mid 2012. Net debt stood at £26 million at the period end.

Summary

Although our forecasts only extend to 2012, Avanti's combined pipeline and backlog of sales of £618 million gives us confidence that after 2012, for which we forecast revenues of £28.8 million, sales will rapidly escalate. As the market for Ka band capacity starts to mobilise, it is eminently possible that these revenues will be brought forward. The price and speed advantages Ka band has over Ku band means that we expect Avanti to make good progress in the military and cellular backhaul markets as well as its core satellite broadband offering. Since the launch of Hylas 1 the Avanti share price has slipped 21.7% despite the good progress on filling capacity and milestones reached to secure the launch of a second satellite. We maintain our base case valuation of 1,079p per share and believe that the impediments to reaching our upside case of 2,194p are falling away. As visibility on sales rates, prices and further satellite launches develops, we anticipate being able to raise our valuation further and argue that the current share price represents an excellent buying opportunity. We reiterate our stance of Strong Buy.

Forecast Table


Year ending 30th June Revenues (£ million)
EBITDA (£ millions)
Pre-tax profits (£ million)
Diluted EPS (p)
Net Cash (£ million)
Net Assets (£ Million)

2009 (A)
8.0
(0.6)
1.8
3.39
(18.4)
64.5

2010 (A)
5.8
(1.6)
(1.96)
(3.68)
(15.4)
152.2

2011 (E)
5.3
(10.7)
(12.7)
(15.75)
(135.6)
208.1

2012 (E)
28.8
10.8
3.3
3.35
(59.2)
280.1


Source: Growth Equities & Company Research

*The SF t1ps Smaller Companies Growth Fund, managed by a subsidiary of Rivington Street Holdings, the ultimate owner of GE&CR, owns shares in Avanti Communications Group.

[tsmith2] 22/2/2011 17:00

I have support at 525p and will be looking to add if we fall a further day or so..

[malcolmmm] 22/2/2011 15:43

couldn't resist buying 695 shares at these levels

[plasybryn] 22/2/2011 13:55

£5.70 was a strong support level I believe. If so should bounce again from this level. Second time it has tested it.

[bubbleandleek] 22/2/2011 13:21

happy hovering up @ 570p - hit me chaps.

[yorgi] 22/2/2011 13:04

Thanks Horneblower, I'm not a chartist but at the same time don't ignore.

[horneblower] 22/2/2011 13:00

Chart for those interested...

[yorgi] 22/2/2011 12:57

Yes, it is a bit at the moment Gekks but as I say concentrate on the facts and not the share price or the fiction. Also if you look at the graph you will see we had a similar drop to this last year around the same time.

[yorgi] 22/2/2011 12:54

Goodness knows but as far as I can see and from all I have looked at (have had a dig around) just trust the management and ignore the short term share price drop. Ask yourself why you bought in and do all those reason still hold good. I have and yes they do and we are a lot further forward than we were a year ago.

On top of the recent (Jan/Feb) drop we now have a general market drop in part due to M/E situation.

If I had spare funds, which sadly I don't at the moment I would add while we are sub 600p

[gekks] 22/2/2011 12:49

This is depressing - too painful to keep buying down

[leluot2] 22/2/2011 12:46

What on earth is going on here?!!!

[strollingmolby] 22/2/2011 12:04

22/02/2011 - New investment aims to help the UK's digital economy grow and thrive

The government is to invest £7 million in strategic research and development projects and ground-breaking trials that will improve co-operation between infrastructure providers, content producers, users and software developers

The investment follows a competition for funding managed by the government-backed Technology Strategy Board, which sought to encourage new collaborations between people and organisations from areas of the online world that are looking for better ways to cooperate in delivering digital services. The collaborators in each project will address two or more of three major challenges - developing an internet trusted by users, evolving hardware and software infrastructure, and proving new business models for digital content and services.

Nick Appleyard, the Technology Strategy Board's Head of Digital, said:"Co-operation between infrastructure providers, content producers, users and software developers is vital if we are to extract true economic value from the Internet. Such innovative, collaborative thinking will help to create a world-leading platform for UKbusiness in the future and will allow the UK's digital economy to grow and thrive."

The ten projects will be led by 3C Research Ltd, AIMES Grid Services CIC Ltd, Avanti Communications Ltd, Cybula Ltd, Hewlett Packard Ltd, the Met Office, Mirriad Ltd, Steepest Ascent Ltd, Totally Radio and we7 Ltd. The total value of all the projects, including contributions by the industrial partners involved, is £13.75 million.

The Collaboration Across Digital Industries (CADI) funding competition will see a total of £18 million invested by the Technology Strategy Board over 12 months. A competition for a second round of funding will open in March 2011. CADI is part of the Technology Strategy Board's digital investment programme, which also involves the creation of the UK Digital Testbed. The testbed – IC tomorrow, which came online in 2010 – allows businesses to test new digital services and run trials with consumers in a dedicated area of the internet.

For more information please visit:

[dolores123] 22/2/2011 08:55

I view it as a buying opportunity and just topped up. Commercialisation of Hylas1 next month and the launch of Hylas2 next year should keep turnover and contracts flooding in.

[leluot2] 22/2/2011 08:50

Two very interesting viewpoints!

The selling pressure seems to be continuing and as chrissey says the chart looks awful!

Fingers crossed this will change very soon - today perhaps!!!

[melody9999] 21/2/2011 23:15

Reflecting back to the euphoria when we got the satellite into orbit late last year .... the share price climbed into the 700p s. Now we are days away from starting a commercial service, and the share price is under 600p. There is nowt as strange as the market.

With confirmed orders, revenue generation imminent, AVN seems like a banker.... or am I missing something?

Or maybe I'm not missing anything and the MM's are trying to frighten out weak holders by driving the share price price down because they see an opportunity. After all, if the forecasts of 1000p plus are proved correct, they will make a killing.

In that scenario, this will have seemed like a fantastic time to buy with little downside and massive upside.

[chrissey] 21/2/2011 19:35

the chart is awful, AVN could likely be 530p by wednesday or, alternatively, 625p!

I was taught that, when one doubts the real meaning of a chart and the trend, turn it upside down and read right to left.

Most people, being 'glass half full' rather than realists can then relate better to a strong downtrend.

Whoever is providing the selling pressure is having an impact more based on who they are rather than how much is being sold.

good luck all holders and before you start beating your keyboards in anger, I'm not a de-ramper, I hold enough of these to be sat up and watching very closely, I just don't like the look of this at the moment.

DYOR & DLTYATT