By Tom Winnifrith, The Sheriff of AIM | Monday 9 May 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.
As ever, when Avanti Communications (AVN) sees its share price slipping it announces a new contract win. There is a brief rally, and the rally gets smaller each time this trick is pulled, and then the shares start to fall again because - as we know - this company is hurtling towards insolvency. And so with the shares sub 90p to sell on Friday what do we have today?
Oddly it was not admission of the terrible news Avanti did not tell us about last week, but instead it was another contract win. Smack my naked buttocks with a cold herring Mrs ...what a surprise.
Avanti says that it has:
won a contract to supply EE Limited with satellite capacity for cellular backhaul. Avanti will connect a number of cellular sites across the UK to EE's network using the HYLAS 1 and 2 satellites, to provide communications in remote areas and additional network resilience. The first phase of this multiyear contract has an initial value of $29m, plus options to double the capacity.
Ok so the whole package is worth $29 million. How much capacity is being sold. We gain no indication of price here, of whether Avanti is giving away space really cheap just to book some sales, but it sounds like a big number anyway. But is it. What does Avanti mean by multi year? If it was, say, over ten years and payment was received over ten years then the impact on sales and cash generation would be minimal. What is the expected pattern of cash inflows? Again Avanti says nothing. As forf the option to double up? Anyone has the option to get more capacity on HYLAS 1 and 2, it is not as if there is any shortage of unused capacity.
The reality is that this will make sod all difference to cashflows during the next 12 months and it is during that period that Avanti's cash will all have gone leaving just a vast debt mountain, some little used tin cans in orbit and the monstrous ego of uber-Welsh bombasticf CEO David Williams. Back at 93p it is an opportunity for shorters to sell some more or for long suffering shareholders to get out. The stance remains sell with a 0p target.
Just for the Welsh bombast in chief, a parting song from those other proud Welshies, Catatonia. I think it was written with Avanti's institutional shareholders in mind.
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