Avanti Communications Share Discussion Threads

[malcolmmm] 02/3/2011 10:41

He posted that he had made more than that shorting AVN , past tense
Would he not say 'I am making more than that shorting AVN' or am I being perdantic

[argy2] 02/3/2011 10:37

"Looks like SC has covered his short"

Not according to him MALCOLMMM

What's your source?

[malcolmmm] 02/3/2011 10:28

analysts have come along and trashed Invetecs suppositions also Caladonia Investments haven't sold one of their £14m worth.Looks like SC has covered his short

[pauldl2] 02/3/2011 10:25

It's interesting that of the six brokers covering Avanti, five (Charles Stanley, Liberum, Daniel Stewart, Jefferies and Cenkos) have BUY recommendations.

It's also interesting that Simon Cawkwell is not interested in their views as it doesn't help him make money.

It is also pleasing to see that none of the five houses with BUY recomendations are so desperate that they need to promote their case by posting their research on a bulletin board.

Is Simon Cawkwell interested enough in the Companies he is shorting to ever actually speak with them? I doubt it.

[omnitrix] 02/3/2011 10:23

Simon Cawkwell - 2 Mar'11 - 09:13 - 3968 of 3976


One Giant Leap (of Faith Required)

Our (i.e. Investec dated 24th February 2011) view

With one satellite in the sky, no active commercial service (pre-revenue), much
bigger competitors attacking the same markets (and more competition to
come), we are not convinced Avanti is yet deserving of its £0.5bn market cap.
Management's decision not to answer our key questions and concerns on the
investment case does not inspire confidence. A 15-year leap of faith is
required to create a value story here. We model peer-level mature profitability,
and risk to its achievement, to derive a DCF-based 488p TP. SELL.

Key points

The current share price reflects a belief by the market in the full achievement of
peer-beating profits and cash flows. The market expects sales to reach full
capacity within 3 years on HYLAS 1, and 5 years for HYLAS 2 & 3 post launch.
Execution to this plan is now crucial to merely justify the current valuation.
n Any potential value story for Avanti, however, remains one of long-term
performance, and here we have some concerns. At the interims announcement
we moved our recommendation from Sell to Under Review to reflect an apparent
strength in the headline order book and pipeline of business, and in order to
pursue answers to several material questions with management which might help
us revisit the investment case.
n With a major "option" in the order book and few recent contract announcements
the future may not be as rosy as the market believes.
n Avanti's decision not to answer our questions doesn't help. We highlight our
questions herein, and with the risks and uncertainties still lingering we reinstate
our Sell recommendation and our new DCF-based 488p price target.

24 February 2011
Avanti Communications
Mobile Telecommunications
Analyst(s) Morten Singleton
[phone]
[e-mail]
James Goodman
[phone]
[e-mail]
Sell (No Change) 597p
Target Price (Prev. 533p) 488p
Forecast Total Return (18.2)%
Impact on estimates
0.0
-50.0
-100.0
-150.0
-200.0
-250.0
2011 2012 2013
Change in EPS (norm, cont) - FD (%)
EPS (norm, cont) - FD (p) 2011E 2012E 2013E
Old (9.3) (13.5) (3.2)
New (15.6) (35.9) (10.3)
Source: Investec Securities estimates
Market Cap £507m
Enterprise value £602m
Average daily volume (000s) 318
Index FTSE AIM
RIC / Bloomberg AVN.L / AVN LN
Share price performance
Feb-10 May-10 Aug-10 Nov-10 Feb-11
800
700
600
500
400
300
1m 3m 12m
Price (6.80) (9.62) 24.27
Rel. FTSE All
Share
(7.14) (14.71) 7.37
Source: FactSet
Readers in all geographies please refer to important disclosures and disclaimers starting on page 19
In the United Kingdom this document is a MARKETING COMMUNICATION. It has not been prepared in
accordance with the rules in the FSA Conduct of Business Sourcebook designed to promote the independence of
research and is also not subject to any prohibition on dealing ahead of the dissemination of research.


Questions for investors to ask management

In the course of our research into the investment case for Avanti we posed
several questions to management which we believe are crucial to valuing the
company. Avanti management has declined to answer these questions.

We would prefer to be in a position of possessing all the material facts, but we
are not, and we believe there are many risks and uncertainties regarding this
investment that deserve closer attention. We are not dismissive of the
potential value story that Avanti could represent, if all goes to plan – but many
others have posited this story and we believe the risks have not achieved a
suitable airing. We are therefore publishing this note to highlight the
questions we think investors should ask when considering any current, or
future, holding.

Exactly what is Avanti's definition of "backlog"?

At the recent interims, Avanti moved from a publication of the proportion of next 12
months of capacity sold on its satellites, to a reflection of the contract order book, or
backlog. We were surprised at the scale of the backlog in the interims and thus
undertook a full and detailed analysis of all the contract announcements made by
Avanti since April 2007. This is illustrated in Table 1.
It is difficult to simply add up the backlog due to a number of factors: the lack of
complete information; the fact that several contracts span both HYLAS 1 and 2;
many contracts span several years, some of which are coming to the end of their
original contract length (with no sign yet of renewal); and the fact that some of these
contracts relate to projects, rather than satellite capacity.
Is not almost half the contract "backlog" merely an "option"?
It is notable, however, that the largest item in the backlog to date - a £113.4m threeyear
deal with a Western European Government for the 900MHz steerable beam on
HYLAS 2 - constitutes nearly half this backlog, and yet is no more than a Call option.
This is not therefore an irrevocable commitment to take up Avanti's service. We do
not believe this should be presented as part of the "backlog", but rather it should be
mentioned as a potential additional element, conditional upon the customer taking
up the option. Are there any other "options" in the contract backlog, and if so, how
much?
What happened to the "pre-sold" capacity metric?
It is also unclear exactly what progress has been made on sales more recently. We
understand that Avanti had effectively pre-sold 25% of its HYLAS 1 capacity since
the start of last summer (we assume this metric is measured by Avanti on a 12-
month prospective basis, rather than for the satellite life). Where is this metric now?
We suspect it may not have budged much, if at all. The initial flurry of contract
announcements immediately post the HYLAS 1 launch looks to us more like
confirmations of previously "uncommitted" pre-sold capacity rather than any new
deals.
24 February 2011

Gentlemen,

I stress that all the above is written and issued by Investec. Please also note that the 488p target price has been achieved (this morning). I have not yet received a TP update. However, I am not buying to close since momentum is now with the bears. Besides, I think the economic outlook for AVN is not good.

Simon Cawkwell

[omnitrix] 02/3/2011 10:23

Simon Cawkwell - 2 Mar'11 - 09:13 - 3968 of 3976


One Giant Leap (of Faith Required)

Our (i.e. Investec dated 24th February 2011) view

With one satellite in the sky, no active commercial service (pre-revenue), much
bigger competitors attacking the same markets (and more competition to
come), we are not convinced Avanti is yet deserving of its £0.5bn market cap.
Management's decision not to answer our key questions and concerns on the
investment case does not inspire confidence. A 15-year leap of faith is
required to create a value story here. We model peer-level mature profitability,
and risk to its achievement, to derive a DCF-based 488p TP. SELL.

Key points

The current share price reflects a belief by the market in the full achievement of
peer-beating profits and cash flows. The market expects sales to reach full
capacity within 3 years on HYLAS 1, and 5 years for HYLAS 2 & 3 post launch.
Execution to this plan is now crucial to merely justify the current valuation.
n Any potential value story for Avanti, however, remains one of long-term
performance, and here we have some concerns. At the interims announcement
we moved our recommendation from Sell to Under Review to reflect an apparent
strength in the headline order book and pipeline of business, and in order to
pursue answers to several material questions with management which might help
us revisit the investment case.
n With a major "option" in the order book and few recent contract announcements
the future may not be as rosy as the market believes.
n Avanti's decision not to answer our questions doesn't help. We highlight our
questions herein, and with the risks and uncertainties still lingering we reinstate
our Sell recommendation and our new DCF-based 488p price target.

24 February 2011
Avanti Communications
Mobile Telecommunications
Analyst(s) Morten Singleton
[phone]
[e-mail]
James Goodman
[phone]
[e-mail]
Sell (No Change) 597p
Target Price (Prev. 533p) 488p
Forecast Total Return (18.2)%
Impact on estimates
0.0
-50.0
-100.0
-150.0
-200.0
-250.0
2011 2012 2013
Change in EPS (norm, cont) - FD (%)
EPS (norm, cont) - FD (p) 2011E 2012E 2013E
Old (9.3) (13.5) (3.2)
New (15.6) (35.9) (10.3)
Source: Investec Securities estimates
Market Cap £507m
Enterprise value £602m
Average daily volume (000s) 318
Index FTSE AIM
RIC / Bloomberg AVN.L / AVN LN
Share price performance
Feb-10 May-10 Aug-10 Nov-10 Feb-11
800
700
600
500
400
300
1m 3m 12m
Price (6.80) (9.62) 24.27
Rel. FTSE All
Share
(7.14) (14.71) 7.37
Source: FactSet
Readers in all geographies please refer to important disclosures and disclaimers starting on page 19
In the United Kingdom this document is a MARKETING COMMUNICATION. It has not been prepared in
accordance with the rules in the FSA Conduct of Business Sourcebook designed to promote the independence of
research and is also not subject to any prohibition on dealing ahead of the dissemination of research.


Questions for investors to ask management

In the course of our research into the investment case for Avanti we posed
several questions to management which we believe are crucial to valuing the
company. Avanti management has declined to answer these questions.

We would prefer to be in a position of possessing all the material facts, but we
are not, and we believe there are many risks and uncertainties regarding this
investment that deserve closer attention. We are not dismissive of the
potential value story that Avanti could represent, if all goes to plan – but many
others have posited this story and we believe the risks have not achieved a
suitable airing. We are therefore publishing this note to highlight the
questions we think investors should ask when considering any current, or
future, holding.

Exactly what is Avanti's definition of "backlog"?

At the recent interims, Avanti moved from a publication of the proportion of next 12
months of capacity sold on its satellites, to a reflection of the contract order book, or
backlog. We were surprised at the scale of the backlog in the interims and thus
undertook a full and detailed analysis of all the contract announcements made by
Avanti since April 2007. This is illustrated in Table 1.
It is difficult to simply add up the backlog due to a number of factors: the lack of
complete information; the fact that several contracts span both HYLAS 1 and 2;
many contracts span several years, some of which are coming to the end of their
original contract length (with no sign yet of renewal); and the fact that some of these
contracts relate to projects, rather than satellite capacity.
Is not almost half the contract "backlog" merely an "option"?
It is notable, however, that the largest item in the backlog to date - a £113.4m threeyear
deal with a Western European Government for the 900MHz steerable beam on
HYLAS 2 - constitutes nearly half this backlog, and yet is no more than a Call option.
This is not therefore an irrevocable commitment to take up Avanti's service. We do
not believe this should be presented as part of the "backlog", but rather it should be
mentioned as a potential additional element, conditional upon the customer taking
up the option. Are there any other "options" in the contract backlog, and if so, how
much?
What happened to the "pre-sold" capacity metric?
It is also unclear exactly what progress has been made on sales more recently. We
understand that Avanti had effectively pre-sold 25% of its HYLAS 1 capacity since
the start of last summer (we assume this metric is measured by Avanti on a 12-
month prospective basis, rather than for the satellite life). Where is this metric now?
We suspect it may not have budged much, if at all. The initial flurry of contract
announcements immediately post the HYLAS 1 launch looks to us more like
confirmations of previously "uncommitted" pre-sold capacity rather than any new
deals.
24 February 2011

Gentlemen,

I stress that all the above is written and issued by Investec. Please also note that the 488p target price has been achieved (this morning). I have not yet received a TP update. However, I am not buying to close since momentum is now with the bears. Besides, I think the economic outlook for AVN is not good.

Simon Cawkwell

[omnitrix] 02/3/2011 10:12

very poor sign when management, rampers and thread police get so defensive

[marksnsparkle] 02/3/2011 09:59

dunluce ... I would say that pretty much sums up my view to

[dunluce] 02/3/2011 09:51

Interesting debate here today - I too noted ( like marknsparkle )that SC has moved on from his original bear case to the Investec note.(Perhaps unable to substantiate his original misgivings?)
We are now at (or thereabouts) Investecs target price which takes into account thier reservations re AVN. I can only see this as a positive as it should provide a floor for the shareprice. It is probably now up to AVN management to deliver and maintain a reasonable newslow over the next few months re contracts etc. If these come through I can see the share price rising quickly.

[simon gordon] 02/3/2011 09:48

Volvo,

Agreed, Evil's very good at shorting. But his attack was lacking heft, it was quickly trashed by a number of posters on this thread, until the Investec note appeared giving a cogent bear case. Bulls now need an analyst to come out and take down Investec's suppositions.

[volvo] 02/3/2011 09:41

simon gordon, momentum shorting is an art and the footballing pundit is good at that.

Investec, fair enough 488p, price reached. Like the directors I have been buying especially this morning sub 500p.

Opinions make the world go round, but if its ok I will follow the directors.

[simon gordon] 02/3/2011 09:31

UK,

The only note since the Investec note was a one pager from Cenkos which was focused on Evil's initial "faulty" attack, which he got from a hedgie. Investec have deconstructed the AVN order book and are not satisified, hence the 15 page bear note of which Evil has pasted a taster. Once again, focus on the Investec note not Evil, that is the real reason the share is weak.

[ukinvestor220] 02/3/2011 09:25

that drivel by Investec is old - where is the follow up to the recent counter claims, where is the response to the Director buys. Note 488p target has been reached. These guys are going to be closing now, the steam has run out on the downside. A rational investor would fill his boots and profit on their shenanigans while they close out.

PS - its not actually Simon posting here - its one of his minions using his account under instruction.

[marksnsparkle] 02/3/2011 09:21

Simon ... two points ...

Firstly I see your keen to stress "all the above is written and issued by Investec" ... Why?

Secondly that's not the bear case that you posted originally ...Why?

[christianf12] 02/3/2011 09:18

The share price is actually still dropping despite all the recent director buying. That will dry up soon as they can't buy shares every day, I see the volume of the director buys is dwindling by the day also. It looks as though AVN will drop further still in my opinion.

[simon cawkwell] 02/3/2011 09:13

One Giant Leap (of Faith Required)

Our (i.e. Investec dated 24th February 2011) view

With one satellite in the sky, no active commercial service (pre-revenue), much
bigger competitors attacking the same markets (and more competition to
come), we are not convinced Avanti is yet deserving of its £0.5bn market cap.
Management's decision not to answer our key questions and concerns on the
investment case does not inspire confidence. A 15-year leap of faith is
required to create a value story here. We model peer-level mature profitability,
and risk to its achievement, to derive a DCF-based 488p TP. SELL.

Key points

The current share price reflects a belief by the market in the full achievement of
peer-beating profits and cash flows. The market expects sales to reach full
capacity within 3 years on HYLAS 1, and 5 years for HYLAS 2 & 3 post launch.
Execution to this plan is now crucial to merely justify the current valuation.
n Any potential value story for Avanti, however, remains one of long-term
performance, and here we have some concerns. At the interims announcement
we moved our recommendation from Sell to Under Review to reflect an apparent
strength in the headline order book and pipeline of business, and in order to
pursue answers to several material questions with management which might help
us revisit the investment case.
n With a major "option" in the order book and few recent contract announcements
the future may not be as rosy as the market believes.
n Avanti's decision not to answer our questions doesn't help. We highlight our
questions herein, and with the risks and uncertainties still lingering we reinstate
our Sell recommendation and our new DCF-based 488p price target.

24 February 2011
Avanti Communications
Mobile Telecommunications
Analyst(s) Morten Singleton
[phone]
[e-mail]
James Goodman
[phone]
[e-mail]
Sell (No Change) 597p
Target Price (Prev. 533p) 488p
Forecast Total Return (18.2)%
Impact on estimates
0.0
-50.0
-100.0
-150.0
-200.0
-250.0
2011 2012 2013
Change in EPS (norm, cont) - FD (%)
EPS (norm, cont) - FD (p) 2011E 2012E 2013E
Old (9.3) (13.5) (3.2)
New (15.6) (35.9) (10.3)
Source: Investec Securities estimates
Market Cap £507m
Enterprise value £602m
Average daily volume (000s) 318
Index FTSE AIM
RIC / Bloomberg AVN.L / AVN LN
Share price performance
Feb-10 May-10 Aug-10 Nov-10 Feb-11
800
700
600
500
400
300
1m 3m 12m
Price (6.80) (9.62) 24.27
Rel. FTSE All
Share
(7.14) (14.71) 7.37
Source: FactSet
Readers in all geographies please refer to important disclosures and disclaimers starting on page 19
In the United Kingdom this document is a MARKETING COMMUNICATION. It has not been prepared in
accordance with the rules in the FSA Conduct of Business Sourcebook designed to promote the independence of
research and is also not subject to any prohibition on dealing ahead of the dissemination of research.


Questions for investors to ask management

In the course of our research into the investment case for Avanti we posed
several questions to management which we believe are crucial to valuing the
company. Avanti management has declined to answer these questions.

We would prefer to be in a position of possessing all the material facts, but we
are not, and we believe there are many risks and uncertainties regarding this
investment that deserve closer attention. We are not dismissive of the
potential value story that Avanti could represent, if all goes to plan – but many
others have posited this story and we believe the risks have not achieved a
suitable airing. We are therefore publishing this note to highlight the
questions we think investors should ask when considering any current, or
future, holding.

Exactly what is Avanti's definition of "backlog"?

At the recent interims, Avanti moved from a publication of the proportion of next 12
months of capacity sold on its satellites, to a reflection of the contract order book, or
backlog. We were surprised at the scale of the backlog in the interims and thus
undertook a full and detailed analysis of all the contract announcements made by
Avanti since April 2007. This is illustrated in Table 1.
It is difficult to simply add up the backlog due to a number of factors: the lack of
complete information; the fact that several contracts span both HYLAS 1 and 2;
many contracts span several years, some of which are coming to the end of their
original contract length (with no sign yet of renewal); and the fact that some of these
contracts relate to projects, rather than satellite capacity.
Is not almost half the contract "backlog" merely an "option"?
It is notable, however, that the largest item in the backlog to date - a £113.4m threeyear
deal with a Western European Government for the 900MHz steerable beam on
HYLAS 2 - constitutes nearly half this backlog, and yet is no more than a Call option.
This is not therefore an irrevocable commitment to take up Avanti's service. We do
not believe this should be presented as part of the "backlog", but rather it should be
mentioned as a potential additional element, conditional upon the customer taking
up the option. Are there any other "options" in the contract backlog, and if so, how
much?
What happened to the "pre-sold" capacity metric?
It is also unclear exactly what progress has been made on sales more recently. We
understand that Avanti had effectively pre-sold 25% of its HYLAS 1 capacity since
the start of last summer (we assume this metric is measured by Avanti on a 12-
month prospective basis, rather than for the satellite life). Where is this metric now?
We suspect it may not have budged much, if at all. The initial flurry of contract
announcements immediately post the HYLAS 1 launch looks to us more like
confirmations of previously "uncommitted" pre-sold capacity rather than any new
deals.
24 February 2011

Gentlemen,

I stress that all the above is written and issued by Investec. Please also note that the 488p target price has been achieved (this morning). I have not yet received a TP update. However, I am not buying to close since momentum is now with the bears. Besides, I think the economic outlook for AVN is not good.

Simon Cawkwell

[codhead1] 02/3/2011 09:05

This must be hurting a lot of punters out there whatever is said on here. I suppose this puts TW,s bible of fundamentals out the window since it has just taken the mighty word of E.K. to bring this one down. Whether he is right or not only time will tell but meanwhile his followers have allowed him to cream it in.Does seem crazy directors buying in if bad news over the horizon but then again when all was rosy on successful take off and ALL were tipping this to double or treble suddenly the directors sold and that put a sudden dampener on all the hype.

[omnitrix] 02/3/2011 08:55

not started any threads mate

unfortunately some AVN bulls can't take free speech so this is the new free speech thread for those who want to discuss AVN

[codhead1] 02/3/2011 08:53

Omnitrix - we get your point- blatant as it is. Why not start another couple of threads with your message.

[omnitrix] 02/3/2011 08:52

maybe the Directors and TW will get to gloat about buying at 350p having been promoting the stock to other investors at 700p ?

[adyfc] 02/3/2011 08:52

This looks bad all those director buys and still falling. Maybe a delay with hylas going live then this will tank.I still hold though.

[omnitrix] 02/3/2011 08:52

maybe the Directors and TW will get to gloat about buying at 350p having been promoting the stock to other investors at 700p ?

[omnitrix] 02/3/2011 08:51

superg1 - 2 Mar'11 - 08:45 - 3966 of 3967


Guys when a share drops against all the odds. I just presume there is something I don't know. Shares generally fall for a reason.

Seen it all before I've had the tips but the share is going the wrong way, the hype crew buy, then the news is bad. The chart was right.

Look at PCI recently share news due leaks of good news but the share was going down pre news. then the RNS was not what the rumour had said. The chart was right.

AVN Director buys, mm's put it up first thing, the buyers get in and it then drops. A bit of a pattern going on here.

Pure specualtion here but when there are bonuses up for grabs for performance then I get suspicious as when the target date gets near, salesman will do almost anything to represent the target has been hit.

AVN has it's rather large EBT that benefits the BOD, what targets have they set themselves????????????????????????????.

What do they have to do to trigger payment???????????????????????

Who knows?

And I'm a half glass full guy.

[omnitrix] 02/3/2011 08:51

superg1 - 2 Mar'11 - 08:45 - 3966 of 3967


Guys when a share drops against all the odds. I just presume there is something I don't know. Shares generally fall for a reason.

Seen it all before I've had the tips but the share is going the wrong way, the hype crew buy, then the news is bad. The chart was right.

Look at PCI recently share news due leaks of good news but the share was going down pre news. then the RNS was not what the rumour had said. The chart was right.

AVN Director buys, mm's put it up first thing, the buyers get in and it then drops. A bit of a pattern going on here.

Pure specualtion here but when there are bonuses up for grabs for performance then I get suspicious as when the target date gets near, salesman will do almost anything to represent the target has been hit.

AVN has it's rather large EBT that benefits the BOD, what targets have they set themselves????????????????????????????.

What do they have to do to trigger payment???????????????????????

Who knows?

And I'm a half glass full guy.