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Sell Avanti Communications at 234p – A horrid accident waiting to happen

By Tom Winnifrith | Friday 11 October 2013


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.


I once believed in Avanti Communications (AVN). I also used to believe in the tooth fairy, Santa Claus and the idea that West Ham might one day win something again. How naïve. A while back I became a mild sceptic. I am now convinced that this is a colossal accident waiting to happen and should be shorted aggressively. It is my top AIM short to pay for Christmas.


I am not an expert on this stock. And so in my analysis I defer to bear analyst Matt Earl, the man who unmasked Connaught and many others and who is to Avanti what I am to Sefton (SER) in that he knows the company better than anyone else. Matt is an Avanti anorak as I am a Sefton train-spotter.

 

Matt will be speaking on the bears panel at UKInvestor Show on April 5 presenting on Avanti – for more details go here

So why am I a bear. On most points I defer to Matt’s analysis and will simply link to his articles. But suffice to say that there are red flags all over the place now flying at full mast.

1. Debtor days – Avanti has a bit of an issue with customers taking ever longer to pay and in many cases not paying at all: see HERE


2. Filiago – a German investment that has NEVER been explained to anyone’s satisfaction. More on this from Matt see HERE


3. Debt – it is ballooning at an alarming rate – see HERE


4. Avanti keeps missing targets and suffering broker downgrades to forecasts – see HERE


5. The Avanti sales team is just not delivering as its uber-Welsh CEO David Williams claimed it would – see HERE


6. I add my own little observation that Governments are always the worst investors. They make Bulletin Board morons look like Warren Buffett. As such I always view any company that hoovers up Government (or even better EU) grants as a pretty certain sell and this rule has, to date, been pretty infallible. Avanti ticks that box. One of my golden rules is also that companies that stick MP’s (even better ex ministers) on the board are usually a sell. Once again Avanti ticks that box.

My sixth point is not financial analysis although, if you care to check, both rules are pretty infallible. Matt Earl’s analysis is brilliant. I am utterly convinced by it that Avanti shares will at some stage tank disastrously.

Avanti is now my top short to pay for Christmas.



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