Satellite company ready to go sky high

By Graeme Dickson
Updated: 12:24 EDT, 10 November 2010

It's 15 days until take off - if the shares perform anywhere near the likely trajectory for Hylas-1, the satellite being launched on 25 November by Avanti Communications (AVN), then shareholders should be very pleased indeed:

The Hylas-1 is to be launched in French Guiana (South America) on the Ariane rocket launcher, with Avanti's main purpose to give access to fast and cost effective broadband to those in remote rural areas across Europe.

This should appeal to millions who live in the countryside and experience slow connections or in some cases no connection at all.

The company has already funded Hylas-2, due to be launched in 2012, which should increase the coverage substantially by servicing the Middle-East and some parts of Africa.

The £566 million company has little revenue forecast over the next few years until all three satellites are launched (the Hylas 3 is also in the planning stage to cover new business opportunities) and it reaps substantial profits from its capital intensive investments.

A highly respected AIM and mid-cap specialist has stuck a £23.00 price target on the stock. I would be happy with £9-£10 in the short term.

Bear in mind that if the satellite fails or the launch is delayed, the shares are likely to slump, so there is no guarantee of success.

Update:

Avon Rubber – tipped as a buy at 161.5p, the stock closed yesterday at 170p. Only two weeks to go until the company issues its preliminary report, the shares are worth hanging on to.

Toumaz Holdings – tipped as a buy at 8.625p, the stock has slipped slightly to 8. No real news to write home about but keep holding for now.

Rurelec - tipped as a buy at 14.25p, it closed at 14.5p yesterday. This week will likely be a decisive one with respect to settlement from the Bolivian Government for Rurelec's seized assets, so if there is a successful outcome the shares will likely trade 20-25p, but if it goes to arbitration then we are likely to revisit 10p.

Not for the faint hearted but for those who like high-risk situations then one should hold.

Renewable Energy Holdings – tipped as a buy idea at 16.25p, it closed yesterday at 15p. Its net asset value per share is 38.8p and I believe the share price should be trading closer to a 30 per cent discount, not at 61 per cent. Hold for now.

Jubilee Platinum – tipped as a buy at 33.75p – it closed yesterday at 30.75p: the chart is starting to look unappealing but for now hold but if it closes below 30p, cut the position.

Bowleven – tipped as a buy at 177.25p, the stock closed at 268.75p yesterday, a 51 per cent gain, after the company said it had made two potentially significant hydrocarbon discoveries in offshore Cameroon. Raise the stop to 238p.

New British Palm Oil – tipped as a buy at 572p, the stock closed yesterday at 824p, a 44 per cent gain. The stock remains in break-out territory. Raise the stop to 753p to ensure profits.

IQE – tipped at 24.25p, the stock closed yesterday at 42.5p, a 75 per cent gain. Keep holding for now but raise the stop to 38p.

Tissue Regenix – suggested as a buy at 16p, the stock has slipped to 11.5p, albeit off the recent lows of 10p. The company needs news-flow to get the stock back above the entry level. Sit tight for now.

Pursuit Dynamics – suggested as a buy at 223p: last week I suggested selling original stake at 444p to ensure a risk-free investment. Yesterday it closed at 555p, a 148 per cent gain above the tip price. The stock is scheduled to release its preliminary results on 3 December. Sit tight on the balance.

The material for this report comes from Alpha Terminal and the Labour Research Department. The writer does not hold any shares or derivatives in the above mentioned companies except Rurelec, Renewable Energy Holdings and Bowleven. Some clients of Optiva Securities hold shares in the above mentioned companies.