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High five for Avanti

Following strong first-half sales growth, Avanti has fully financed its fifth satellite
February 6, 2015

Shares in Avanti Communications (AVN) shot up 8 per cent even as the satellite specialist - which rents out capacity to mobile and broadband providers in Africa, Europe and the Middle East - posted a sharp increase in first-half operating losses to $28m (£18.3m).

IC TIP: Hold at 240p

Investors' exuberance may reflect the successful financing of its fifth satellite, Hylas 4, through a £61m share placing announced alongside these results. The successful launch of Hylas 4 - scheduled for 2017 at a cost of $300m - promises to substantially bolster the group's capacity and complete its coverage of Sub-Saharan Africa.

Management are meanwhile building a market. They expect 49 first-half contract wins and a revenue backlog of $410m to underpin a significant uplift in third-quarter revenue. That matters because of a spiralling tab of investments: construction costs more than halved the cash pile during the first half, sending net debt up 35 per cent to $434m.

The analysts at Jefferies expect a busy second half: they reckon Avanti will post over $55m in sales - a three-quarter jump from the first half. That should translate into a full-year cash profit of $15.1m, rising to $52.5m in 2015-16.

AVANTI COMMUNICATIONS (AVN)
ORD PRICE:240pMARKET VALUE:£271m
TOUCH:239-240p12-MONTH HIGH:329pLOW: 163p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:211¢NET DEBT:183%

Half-year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (p)
201325.0-41.8-38.7nil
201431.1-48.1-44.9nil
% change+24---

£1=$1.53