Satellite service provider could grow fast

By Graeme Dickson
Updated: 12:29 EDT, 30 March 2011

In November last year I tipped satellite service provider Avanti Communications (AVN) at 655p in anticipation of sustained buying following the successful launch of Hylas-1, its first satellite to orbit space.

Subsequently, the shares spiked to an intraday high of 763p before some directors started to cash in their profits with the stock slowly trading through my suggested trailing stop of 675p just before Christmas.

Since then the shares have plunged to a low of 421p on 15 March before settling yesterday at 454p.

The Hylas-1 satellite is designed 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 is not expected to turn a profit until next year, when earnings per share according to its house broker Cenkos, is expected to reach 8p while in 2013 it should reach 34.9p of which the management of Avanti have confirmed they feel comfortable with.

Avanti has £229 million of orders on its books with an additional £389 million of potential orders in the pipeline.

Directors' have been buying in quite a big way too with the chairman and chief executive paying almost a pound higher at 549.75p five weeks ago before buying lower down.

Cenkos have a long term 2300p price target, some 409 per cent above yesterday's closing price. In the meantime expect shorter-term price movements to be influenced by contracts with network operators.

Update

Globo (GBO) – suggested as a buy at 17.25p, the stock closed yesterday at 16.625p. Continue to hold for now as we await results circa 20 April.

Optare (OPE) – tipped as a buy at 3p, the stock closed yesterday at 3p despite winning a £2.5 million contract with a Merseyside bus operator to supply 13 hybrid busses. Hold for now

Rheochem (RHEP) - tipped as a buy at 15.13p the stock closed at 15.13p. The shares might be under slight pressure given the new tax hike on North Sea oil production, but for the patient sit tight as we await further news regarding Athena and its other 10 exploration licences.

Evolution Group (EVO) – tipped as a buy at 78.5p the stock closed yesterday at 80p. Last week's results were actually disappointing with a pre-tax loss of £2.6 million, albeit the management have taken action to align revenues with costs. Place a stop based on a close below 70p.

OMG (OMG) – tipped as a buy at 43.75p, the stock closed yesterday at 41.5p: not ideal and like many stocks that have had a good run, are susceptible to the odd bit of profit taking a we approach the end of the tax year. In the meantime the company is announcing good deal flow that should prop the shares up over this period.

ZincOx (ZOX) – tipped as a buy at 60p, the stock closed at 51p. Continue to hold as the company trades at the same level of cash it has in the bank and attributes no value towards its flagship South Korean project.

Pendragon (PDG) - tipped as a buy at 23p - it closed at 23.5p. Continue to hold and keep the stop based on a close below 20p.

Cyan Holdings (CYAN) – suggested to buy at 1.325p, the stock closed at 1.075p. The company issued results which looked okay but it really needs to deliver on more order flow to convince the market this stock has really turned the corner. Cut the position if it closes below 0.8p.

GB Group (GBG) – suggested to buy at 36.75p, the stock closed yesterday at 34.25p.The stock seems to finding a base: in the meantime watch out for a trading statement circa 18 April. Keep the stop based on a close below 32p

SocialGo (SGO) – suggested to buy at 3.55p, the shares closed yesterday at 3.075p and should be interesting by the time you read this as the stock would have already delivered its preliminary results. If this company can work its way into making social networking a necessity for corporates just like a website is an almost necessity for any company's existence it could be highly rewarding for investors over time.

EMED (EMED) – suggested to buy at 12.25p, the stock closed yesterday at 16.25p. Continue to hold as we await mining permits and the company to reinvigorate its copper concentrator before production starts.

Active Energy (AEG) – suggested to buy at 6.13p, the stock closed yesterday at 2.875p. The stock has been the worst performance to date. Although appalled by the performance, at £3.2 million the company looks over-cooked on the downside, but needs to get a grip on reality that if it cannot deliver on deal-flow, investors will get bored and eventually 'abandon ship'.

Edenville (EDL) – mentioned as a buy at 1.195p, the stock closed yesterday at 1.605p. Having already suggested to sell one's investment stake out at 2.51p, the company confirmed an earlier press report that it had purchased a 51 per cent interest in a coalfield in Southern Tanzania which has proven reserves of 49 million tonnes of coal.Continue to hold.

Weatherly International (WTI) – suggested to buy at 8.1p, the shares closed yesterday at 12.25p. The company has secured a price of $9,643 a tonne from the sale of 34 per cent of its anticipated copper production over the next 18 months, giving investors a degree of comfort should the copper price wane over the period. Sit tight for now.

Toumaz Holdings (TMZ) – tipped as a buy at 8.625p, the stock closed at 7.25p. The company issued its results yesterday unveiling its potential to city analysts with potential markets not only into healthcare, but sports science, smart metering and digital radio. One cause of concern is cash burn, but in the last few months the company has been able to raise funds at a premium to the prevailing share price with notable investors.

Renewable Holdings (REH) – tipped as a buy idea at 16.25p, it closed yesterday at 15p. The stock may ultimately benefit from the recent detractions of nuclear energy while its discount to its Net Asset Value will appeal to investors looking for a safer haven. Hold for now

Bowleven (BLVN) – tipped as a buy at 177.25p, the stock closed at 370.25p yesterday following the issuance of its interim results last Monday. Suggested three months ago to sell half after an initial 102.8 per cent gain, the balance should be retained as we await further progress from its Sapele-1 drilling campaign and the Etinde permit while its $189 million (£116 million) net cash position should keep the company well funded for the aforementioned projects.

Tissue Regenix (TRX) – suggested as a buy at 16p, the stock has picked up from its lows and is now trading at 11.25p. Keep holding as we await trial results from its NHS trials, while its recent European patent application for the preparation of tissue for knee meniscus implantation should help the shares going forward.

The material for this report comes from Sharescope and a meeting with Globo. The writer does not hold any shares or derivatives in the above mentioned companies except EMED, Globo, SocialGo and Weatherly International. Some clients of Optiva Securities may hold shares in the above named mentioned companies.