By Tom Winnifrith, The Sheriff of AIM | Sunday 28 February 2016
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
With a hat tip to a reader who is clearly as much of an anorak as I am, I trek over to Companies House and discover that on 9 February, shortly after its piss poor interims, folks behind Avanti Communications (AVN) established three new Companies. Hang on Henry, what on earth is David Williams, the most bombastic CEO on AIM up to?
The three companies are:
1. Avanti Communications Africa Infrastructure Limited
2. Avanti Communications Africa Infrastructure 1 Limited
3. Avanti Communications Africa Infrastructure 2 Limited
The directors are all the same, David Williams, Nigel Fox, David Bestwick and Patrick Willcocks from Avanti Communications PLC. The sole shareholder in each case is Avanti Communications PLC.
Perhaps give the less than transparet nature of Avanti accounting - which is why I have asked the FRC to investigate the sham of the 2015 accounts HERE - bombast Williams might care to explain what he is up to?
One analyst suggests that we are about to see a re-run of the Turkey episode reported in the year to June 30 2014. In that period Avanti built an infrastructure project in Turkey for Profen as you can see HERE
This resulted in c$10 million of revenues but with a $9.4 million debtor on the balance sheet to be paid down over a number of years at an interest rate of 5.25%. Avanti only admitted to the somewhat delayed in cash terms nature of the $10 million of revenues when the bombast had to explain away the poor relative performance in the next year.
Will we see the same again as Avanti struggles to meet its FY 2016 revenue targets, the company booking sales in Bongo Bongo land?
I'd guess that now we'll see a re-run of the Turkey play but where Avanti this time gets much of the cash up front to enhance its cashflow position, so:
1. Buy assets on leases as part of the $70 million "permitted capacity"
2. Include these assets as part of an "infrastructure project" such as a big ground satellite dish station, which they lease/sell to a customer/telecoms service provider
3. This time, receive the cash upfront instead of over an extended period of years, but probably at a discount to the value of the project, such is the need for cash.....
4. Include the cash received in the balance sheet at year end (won't impact net debt much, but all the focus is on the cash position) and in the revenues in the P&L (not sure of the profit impact - do you think you could take some profit in at the beginning).
5. Don't tell anyone they aren't satellite bandwidth sales (until you need to explain why FY17 revenue growth is so weak).
Hey presto - FY16 cash and revenues better than expected, sceptics confounded, share price goes up then a quick infill share issue to supportive shareholders (AKA equity holders who'll be wiped out if they don't support the company)
Maybe this speculation is wrong but why has David Williams set up these three subsidiaries? The chances of a rational explanation from a company that will not say how much cash it is making from trading with the Islamofascist butchers and war criminals at ISIS, as well as answering numerous other questions, is NIL.
At 101p the stance is sell with a target price for the shares on 0p - ZERO.
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