Avanti Communications - please explain your 100% rum & coke subsidiary accounts?

Comments

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   Drunken Sailor

   28 February 2016, 20:46

   Avanti announced:

   During the first half, Top-20 Customer Bandwidth Revenue Growth increased 44.0%, driven by increasing demand from core customers. This drove an increase in Average Fleet Utilisation into the 25% to 30% range in the second quarter, from the 20% to 25% range in the first quarter.

   And:

   Revenue was $31.0m (H1 2015: $31.1m). The year-on-year comparison was impacted by the translation of Sterling and Euro revenues into Avanti’s reporting currency of US$. In addition to that, the first half of 2015 contained an element of revenues to sub-contractors and higher low margin equipment sales than for the six months ended 31 December 2015. Adjusting for these factors, underlying revenue grew 18% and strong contract wins during the period support a stronger full year growth outlook.

   Second quarter revenue was $17.3m, representing 27.7% growth versus the first quarter on a constant currency basis.

   All these double digit % growths are great except there is no start figure in actual cash terms to work out what they are now in actual cash terms. If the start figure on what these double digit growths every quarter was £1k they may have now grown to over £3k.

   Moving from a range of utilisation of 20-25% to a range of 25-30% could be a move from 24.5% to 25.5%.

   They have just announced another great contract:

   http://uk.advfn.com/stock-market/london/avanti-communications-AVN/share-news/SuperUydu-Signs-New-Contract-with-Avanti-Communica/70544504

   As usual no commercial terms only blather. No doubt this will result in more double digit % growths in Q3. But will it actually make a significant difference to real revenue? will we see utilisation moving from the 25-30% band into another band?

   Companies that only report % rather than give the actual numerator and actual denominator are generally trying to hide something.

   Agree AVN is not a buy and agree 0p is where they could end up. Still do not see them achieving 0p in 2016, unless the cash is complete fiction like a China Fraud / Globo. The cash has almost certainly come from murky places and not from real sustainable revenues, but I believe it is there. If it is not really there then yes AVN could be the GBO of 2016. Full year audited accounts will be interesting – should be out in Sept. After QPP and GBO auditors must be taking a bit more care I would have thought.

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   BlueFrew

   29 February 2016, 04:02

   Drunken Sailor, I think you are correct about growing from a tiny base. It seems that the deal between Avanti and the Government to provide subsidised rural broadband has signed up a grand total of 24 customers. Revenues of around £100 a month for each customer if they are lucky. So about £30K a year if they are extremely lucky. Easy to see why they don’t like to put actual numbers on these contract wins. That’s while they rely on the Government to subsidise the installation. http://www.theregister.co.uk/2016/01/25/folk_shun_subsidised_satellite_broadband/

   You would only sign up for satellite broadband if you really had no other option. So in the long run even these revenues aren’t really sustainable. Fibre optics are getting cheaper and faster (I work in the industry). At some point, if the Government is to subsidise anything, it will make sense to subsidise fibre optic connections to more rural communities. Even now, if you live in a rural community it makes far more sense to band together and install microwave broadband. Expensive to install perhaps, hence why you need to band together, but the ongoing costs are cheaper than satellite and by all accounts, user experience is much better.

   Needless to say I’m short Avanti.

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   Drunken Sailor

   29 February 2016, 05:23

   BLUEFREW,

   As an individual or small group wanting Internet access, I agree entirely, the buy your own dish model will never catch on, apart from with terrorists where it has other advantages.

   However what is needed, and I think is the opportunity Avanti are going for, is to provide the big pipe for large areas that would otherwise have shockingly bad connection. Where I am now I can only Skype the Mrs outside the peak times here. Even then it keeps cutting out or I can hear her but she can’t hear me. The problem is the big pipe is not big enough. Thus I think there may be something in that business model. But that will only become clear when they stop messing around with made up revenues and start delivering real revenues with real growth that matches utilisation growth.

   I thought the 2 recent announcements were interesting.

   “SuperUydu will use Avanti’s HYLAS 2 satellite to deliver broadband communications services to SMEs, large enterprises, and consumers throughout Turkey.”

   Is this Avanti provides the pipe, SuperUydu do the ground connectivity?

   “contract with isNet, a subsidiary of Isbank, one of the largest banks in Turkey.

   isNet will provide Ka-band satellite connectivity to its enterprise customers in Turkey and Europe through Avanti’s HYLAS 1 and 2 satellites.”

   This sounds like the lots of small dishes model, or in reality not many small dishes.

   As usual no commercial terms are announced. Avanti are very good at blathering on about total values of contracts – $4m is mentioned in the interims, if that is $4 for a 1 year contract, not bad lets have a few more of them. If it is $4m total for a 20 year contract, what is the point?

   The only point I take issue with is 0p in 2016, they would really have to go some to spunk all that cash away in 12 months. If the 3 tin cans already up are not getting the utilisation, what is the point of launching more in 2017 and at some point I would expect the Capex to get pulled. Unless of course the cash gets stolen ala Globo.

   Good luck with your short you are probably on to a winner there.