Hi Guys, Thanks for your figures and input. Will have a detailed look at this over the weekend. Looks like those large buys might be having an effect on the sp. Would be nice to see this move above 200p again having been in the doldrums for a while.
I've been looking back through past statements by the company. The CEO said that he expected the capacity to be sold out in 2016 and nothing has been said to amend that view. I take that to mean H1 & H2 as H3 will have only just come into service and H4 will not have been launched. If so, on the basis of the recent US$500M EBITDA which was derived from sales of US$700M, the expected turnover for 2016 should lie between £134M and £211M (ie max theoretical capacity). Yet the consensus analyst forecast for sales are £84M for 2016 and £114M for 2017. H3 would add a further £60M to the turnover if it sold out.
So I believe the company should move into positive ground in 2016 and then become substantially profitable as H4 kicks in with its much larger capacity from 2017 onwards. Everything depends on the selling price being maintained at $2000 per MHz per month and the capacity sold hitting 2/3rds of theoretical max capacity. If it can do this it will have earned and deserve a higher PE than companies such as Inmarsat as its market is narrower and growing faster.
Looking again at the Financial report for 2014 I am encouraged by the notion that if Avanti continues to sell its space at its planned price structure, the recent declared EBITDA of $1.7 million will be increased to EBITDA of $500 million. Now, I am no accountant, and maths not one of my strong points, so please correct my following calculation if its wrong!
My thoughts are that If this target of $500 million dollars is reached, then given the number of shares in issue, ( around 112 million shares, the present loss per share of around 80 cents, should be translated into an EPS of around $4.4
This seems to me to be a clear pointer as to why we should hold these shares. What do others think?
Thanks very much for your Interesting posts. Looks like someone also worked that out with two massive buys gone through this morning of 668,560 shares at a cost of £1,323,748 each! Should we not see an RNS covering those?
Having now had the chance to look at the figures for competitors I am confirmed in my belief that AVN is a potential star amongst satellite operators in ageographical area where they seem to be getting real traction. I still don't understand why the analysts are predicting such low sales figures for 2015 and 2016 given that sales seem to have been doubling year on year now that AVN has succeeded in putting together a credible fleet. On that basis I would expect sales in 2015 to be closer to GB£80M+ (analysts:£52.9) and 2016 commensurately higher. The whole case for AVN now rests on the team selling the space at $2000 per MHz per month or better and not selling valuable capacity at a cut price. I suspect (?hope) that the BoD has now got its act together in respect of information released to the market. If they have I expect the run up to the AGM on 27/11 to be well prepared by RNS announcements as by then we will be nearly through the 2nd Quarter of 2015.
I have now had a chance to go back to basics, looking at the "known knowns" rather than speculation and inference. I have excluded earnings from Artemis as they are difficult to forecast and I would rather have them as potential additions than in the base figures.
The starting point is capacity of 18GHz provided by Hylas 1-3 and 28GHz from Hylas 4. The recent statement says that sales are currently being made at or above the target price of US$2K per month so the maximum revenue from H1-3 is $432M and with H4 is $1,104M. The statement says that the fleet (including H4) is capable of generating sales $700M per annum i.e. unutilised capacity is assumed as being 36.6% and that EBITDA is $500M. So the cost of sales excluding depreciation and interest is about 28.5% (currently 60% but clearly there are economies of scale to be generated). Depreciation will increase with H3 coming in but H4 should be revenue earning before its depreciation charge weighs in so say an annual charge of $55M (currently $47.3M). Interest will be charged on the loans etc of say $50M (currently $39M). I would therefore expect pre-tax earnings of around $175M. There may well be a tax holiday created by the Capex but let's assume worst case 20% giving a net profit after tax of $140M which converts into $1.25 ish per share (assuming no further shares are issued). On a multiple of 15 - low but could be significantly higher if the prospect of more satellites is tenable) - this would give a share price of around £11.80. The ability to sell the unutilised capacity of $404M obviously gives a substantial upside to the bottom line as everything except tax has already been written off.
Why was I so upset before my time away? Well, the answer is in the fleet. As I instinctively sensed the business with only H1-3 appears to be very marginal... profitable just... more so if they can achieve higher utilisation rates. H4 is the elephant in the room and that's why it had to be included.
It really would help if the BoD could say what they think the percentage utilisation could be. There's obviously some loss but is it really as high as they appear to assume or are they keeping it under their hat to produce better figures later in the game? I've looked at the sales forecasts that are published e.g. 4 Traders and there seems to be a disconnect between what the company is saying and what the analyst think. For example 2016 Sales £84.1M at recent exchange rates equate to $133M but by then H1-3 will all be live and have potential income of $273M. But if the analysts are to be believed they will still have unsold planned capacity of $140M when H4 comes into service. So there's a real disconnect between what the company is saying in its published statements and what the analysts are assuming. 2015 will be a critical year because it should begin to show who's got it wrong.
I completely agree about shorting , it is such a cynical thing to do .The problem with AIM is that people want and expect instant riches and that just isn't the way the world works. Having said that if the herd move and you don't you get caught with your pants down,it's very frustrating. My recent experience is that no "news" is a cue for shorting and day trading and good " news" is a signal to sell . It is crazy but you start thinking that if that is what you have to do then you maybe should join them. Certainly buying and sitting on a share ,however good, is not the thing to do it would appear. Having said all that AVN ,as you say, for all those with the balls to sit and let all the madness go on around them will come good in the end. Where that end is is the big question . Good luck to all in here.
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