I noticed on another Discussion Group a message from somebody who was having trouble with the potential turnover and margins mentioned in the recent statement. My starting point is the fact that these RNS statements are carefully written and are crawled over by lawyers; they mean no more and no less than they say.
So when they refer to "a business that can potentially generate over $700 million in revenues and over $500 million EBITDA annually if the current fleet is filled" they mean exactly that ie Hylas 4 is excluded as it does not presently exist and nor do most of its costs. What they will take into account are all of the costs already incurred that, if they have been capitalised, need to be written off over the useful life of the asset eg base stations. What we don't know as investors is what the true margins are on any contract. We do now know that the target is $2000 per MHz per month and that this is being achieved overall BUT we don't know how that relates to costs incurred or to individual contracts. Elsewhere I have observed that for Ka band providers it is the utilisation of each band that is critical as some can be sold out when others are empty. In that respect AVN is very similar to fashion retailers: it doesn't matter a jot if you sell 30% of your stock at premium prices, its what you move the rest at that sorts out the men from the boys as the 70% can reduce or eliminate your profits.
As AVN gets bigger and less vulnerable (to major contracts, equipment failure, one off capital costs etc) they will provide us with more information prepared on a consistent basis - it's in their own interests to do so. While they are currently beset by short sellers I can understand why they are reticent to divulge anything more than they have to as almost anything is turned into a speculative frenzy.
I derived some comfort from the remarks about sales and satellite capacity in the recent statement but decided to do some further reading as I'm not a techy. The most interesting thing I've come across is a discussion on a US site of Ka band - they are actually an Avanti customer in Africa I believe but also operate their own satellites - and one comment was that the overall capacity figure for a satellite with steerable beams is misleading as some beams are more popular than others. So on one of their satellites certain beams are sold out, others are near max but a number still have lots of capacity. Given that they are steerable I'm not sure why this should be. Does anybody know of a technical reason that would cause this phenomena?
Yes, I'm averaging c£2.30 and expecting much better long term. As someone mentioned before, this looks like a digital investment - either it tanks completely under high debt, poor penetration and/or strong competition or it moves to a cash cow model in the next 5 years (max), as its high quality service / offering delivers increasing utilsation of bandwidth and increased revenue which rapidly dwarfs the relatively low and fixed running costs of the business. DYOR and IMO as always...
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