Avanti Communications Share Discussion Threads

[peterblok] 08/10/2012 17:14

No doubt they will issue updates for what they're worth, following the results.

[2350220] 08/10/2012 16:39

Does make you wonder what they think they know, if the variation is sooo wild, from 600p to 2000p!

John

[rathlindri] 08/10/2012 16:17

do the analysts know something the rest of us don't perhaps?

[garymott] 08/10/2012 16:11

For a long time, certainly over a year, the lowest 12 month price target from analysts on FT.com had been 259p. Interestingly this forecast is no longer shown, leaving just 3 forecasts with a median target of 903p, a high estimate of 2052p and a low estimate of 600p :-)

[nugacity] 08/10/2012 14:13

Cleared T20's @ 3.51, 3.43, 3.40, 3.28 and 3.04 just now for 3.53 and 3.527 which is a relief now but I will regret giving them away come Wednesday I suspect?

If you are new to T20 you might be interested to know that I was offer £3.53 on £7k and only £3.47 on £20k - so worth the 3 commission charges methinks.

Tom Bulford still likes us - buy up to twice current price.

[willessa] 08/10/2012 13:46

Avanti has increased its Backlog (i.e. binding contracts for the sale of capacity in future periods) to GBP246m, an increase of GBP33m since Avanti last reported Backlog as at the end of April, 2012. The pipeline of potential sales stands at GBP502m.
Avanti estimates that it needs to add approximately GBP11m per month to its Backlog in order to meet its objectives of selling all the capacity of HYLAS 1 and HYLAS 2 within three and four years of service launch, respectively. In the eight months since Avanti established this KPI, it has exceeded this target.


This was from trading statement of 11th July. Clearly sales momentum has actually been increasing with £33m added in just 2 months. This could lead to the satellites being filled earlier than anticipated.

[sidam] 08/10/2012 13:13

re Nugacity post 10783. Good piece, but it is only partly correct as using the numbers, a DCF value of H 1 can be calculated. However, that is the satellite value and not the company's value as the company has substantial additional costs - say £12m pa. A factor is whether that should be applied in total to H1 as it is the only revenue producing satellite at present or should it be spread over H 1 and H2. If all against H1 that satellite has a quite small value, but H2 is very valuable. Also in a DCF calculation, year 15 cash flow is valued at only 23% of year 1 using a 10% discount rate. It will also take 3 years before H1 gets to optimal revenues and 4 years for H2 so it is not over the full life.

But if one uses the revenues projections for H1 and H2 and do the maths, the DCF derived company value is well over £10 per share and then there is H3, smaller than H2 but a very low cost per MghZ. Analyst's DCF values are subject to a number of variables. Revenues (in this case, it is my understanding the company guidance is for revenue per transponder to be increased after year 5), direct satellite costs (insurance, orbit maintenance etc) and the discount rate. My view is that with 2 or 3 satellites 10% is a reasonable discount rate, but some may go for a larger or smaller number. A few years ago, the then house broker used 5% which was certainly much too low as there was a PIK bond with a 16% interest rate.

I am a holder and consider that a 2 year target of £8++ is realistic. I hope I am correct.

[nobbygnome] 08/10/2012 12:01

The chart is fascinating here! We haven't yet got a breakout to the upside from the clear wedge which is forming. The plunge last week could have signalled further downside but the fact that it recovered so quickly is encouraging.

I expect a decisive move shortly probably triggered by the results this week. The trouble is, will it be up or down? For the record I have a small spread bet which says it will be up!

Nobby

[backmarker] 08/10/2012 11:31

I agree with yorgi that AVN is already doing preliminary work on H-4, and maybe even modelling potential H5-10. and if they're not, then they probably should.

it's clear that H-2's progress is going to be most critical, as it will establish just what sort of demand really exists for ka-band in Africa, ME, etc. if this demand proves exceptionally high then as H-3 is smaller and later than originally planned there may be a window for an H-4 that is earlier than H-3, and is deployed to cover additional areas beyond the H-1/2/3 coverage.

if demand is that high then finance should not be a problem; revenues from H-1 & H-2 would be above plan and this extra profit could be ploughed into H-4, and the ease with which the finance for H-3 was raised indicates that if the demand is there the finance will follow.

I'm not saying H-4 before H-3 is likely, but is must be a possibility at this stage and AVN should be planning for it.

[yorgi] 08/10/2012 10:38

I would agree it is Nugacity and I'm quite sure the BOD will be also but I would still think they would be doing some preliminary work on the next satellite.

[disc0dave] 08/10/2012 10:19

Looking better today tho, in a bad market...

[nugacity] 08/10/2012 08:51

I am beginning to understand why our share price is low.

[nugacity] 08/10/2012 08:46

Was making the point , a good word , that Motley was well aware that Avanti have plans to launch more than 3 satellites.

I guess the 20 slots will go or have gone already because of the new rulings/timings that SES/Lux tried to invoke against #2. But that policy may free up some spaces so not an issue. But will they be free?

[yorgi] 08/10/2012 08:45

I have not seen Hylas 4 being mentioned but I would be very surprised if there is not some initial work being done.

[johncsimpson] 08/10/2012 08:43

lavagrouch - I think not - he posted similar elsewhere and got into a 'argumentative discussion' when others took him to task.

Had he used the word 'sellers' instead of 'traders' then fair enough. But he didn't.

[johncsimpson] 08/10/2012 08:33

Nugacity 8 Oct'12 - 08:16 - 10783 of 10783

He is right - he means in the immediate/medium term future - he wrote this on 8th Jan 2011 ....

---------------------------------

In that case, what a pointless post.

[2350220] 08/10/2012 08:28

Nice piece Nugacity.
The only thing is, from what I've understood, they haven't put forward proposals to fill the 20 slots with Hylas satellites.
In fact, am I right in thinking that there isn't even a Hylas 4 on the drawing board?

John

[nugacity] 08/10/2012 08:16

He is right - he means in the immediate/medium term future - he wrote this on 8th Jan 2011 ....

Recommendations: 11

I agree that Avanti is difficult to value, as too many assumptions on revenues and costs need to be made to achieve a realistic valuation. The analysts don't actually publish their spreadsheets to reach the heroic numbers they get to, which doesn't surprise me. It's fair to say that Avanti is a more vague valuation than any other share I've owned for many years.

That's not to say that there isn't upside. The upside probably will be considerable, unfolding gradually over many years to come as new satellites are progressively launched. The key details are that Avanti has permission (obtained for free a few years ago) to launch about 20 satellites into geostationary orbit. The first satellite HYLAS1, now in orbit, is relatively small compared to other recent satellites built and the likely Avanti ones that will follow it - HYLAS2 will be about three times it's capacity. HYLAS1 cost about £120m to build and launch, and has the capacity to provide around 350,000 residential broadband connections, which, when sold at around £25/month by Avanti's partner ISPs (of which Avanti will receive about half), will produce revenue of around £150/year per user to Avanti or £50m/year for a fully-sold satellite. Most of the operational costs would fall to the ISPs, so Avanti will be looking at say £40m EBITDA/year from the £120m initial cost over a ~15 year life. The calculations may well be more attractive for larger later satellites due to economies of scale in build/launch, and later satellites may well be funded by pre-selling their capacity. It will take years for Avanti to gradually reach the potential of it's orbital slots, but IMO there is plenty of opportunity to create value.

[sg31] 08/10/2012 08:05

Avanti currently only operates one satellite, but there are two more planned,

Erm, how should I say this. WRONG.

[nugacity] 08/10/2012 07:50

Motley fool - 5 tips for the week (5th Oct) include this ....

Avanti

Fancy a growth share punt? Satellite communications operator Avanti Communications (LSE: AVN), which will release full-year figures on Wednesday, might be worth a look. Avanti provides satellite-based high speed broadband, and it's a business that's on the rise.

The much bigger Inmarsat (LSE: ISAT) has enjoyed very nice share price growth over the last few months, as its main marine communications market is back to growth, so what are the prospects for Avanti?

Well, revenues have been low and profits have been erratic -- in fact, the firm has recorded a pre-tax loss for the past two years, and a loss of over £9m is expected for the year to June. But there is a very small profit forecast for 2013. Avanti currently only operates one satellite, but there are two more planned, over Africa and the Middle East, which are two strongly emerging markets for telecommunications.

After falling from a high in July, Avanti shares are currently priced at 341p.

[plasybryn] 07/10/2012 22:05

Nice summary. Fingers crossed

[rathlindri] 07/10/2012 19:44

Michael, I share your optimism, patience required ! IMO...

[waterloo01] 07/10/2012 17:56

Nice summary Michael. Thanks