Timestamps
Macro/equity outlook. Start
Polarean Imaging. 11:55
Verici Dx. 13:20
LungLife AI. 20:40
Avacta. 24:25
Belluscura. 29:30
Destiny Pharma plc. 32:45
Good Energy. 38:50
Alphawave Semi. 39:45
Sondrel. 41:40
Michelmersh Brick Holdings PLC. 49:55
Venture Life Group plc. 54:30
Inspiration Healthcare. 57:45
TP ICAP. 63:20
OnTheMarket. 67:45
Disclosure: I own MBH, SND, IHC & TCAP. Plus I'm paid by Vox to interview BELL, VRCI, LLAI, VLG & AVCT
The discussion between yourself and Justin over LON:AWE was interesting as I'm invested in this one (currently 33% up). Although Justin's understanding of the stock is not great, he is almost correct (where you almost seemingly laughed mockingly) in saying they are similar to LON:SND because AWE acquired OpenFive (basically an ASIC company like Sondrel only way better imo). Essentially, AWE have expanded from being a silicon IP only player to being vertically integrated having acquired OpenFive, Banias Labs and Precise ITC. Chiplets and custom silicon as well as PAM4 & Coherent Optical DSP technology are all significant growth areas in data centre infrastructure. I did look at Sondrel only a few days ago and I decided they are too small a company for me to invest in at this stage. I'm generally not overly keen on AIM stock - too many bad experiences however will definitely revisit this company after next year's results. I have a lot of confidence in the management at AWE. The massively overvalued IPO was nevertheless a great success for them personally while not at all good for the IPO investors. They have nevertheless made some very astute acquisitions and I believe they have every good chance of being a $10 billion market cap company within the next 5 or so years given that the products they already have are already better than most their competitors. The Banias Labs deal was tied in with a hyperscaler agreement (likely Amazon) to develop the coherent optical technology - a deal which is likely to generate well in excess of $300 million revenue and beyond. If I recall correctly in one of the investor calls CEO Tony Pialis hinted that some of these coherent optical products should be ready by year end. You are quite correct that Samsung are a foundry partner not a customer. AWE have partnerships with all the leading foundries as far as I know. AWE have won TMSC's partner of year award for the third time running for high speed SERDES IP.
Very best of luck wrt AWE. It certainly is the poster child stock of the UK listed sector.
BTW, why did the CFO Daniel Aharoni leave with "immediate effect"?
Thank you. Let’s hope it does achieve the success I think it has the potential to reach. There’s no doubting though that there’s plenty of high risk with this stock.
Daniel had to leave because it was the second year running that AWE had delayed its results and on this second occasion put them past the deadline permitted by FCA rules resulting in a suspension on the exchange. This is a serious failing in a CFO. As a Barclays man being involved in the IPO it never felt right to me that he should have had the job in the first place.
Notwithstanding, he’s actually a nice bloke and came across reasonably well in investor calls and presentations. While not an excuse, it is easy to understand why the delay happened when you realise; 1) that external auditors having been subject recently to very large fines from the FCA and their current staff shortages is putting auditors under huge pressure to do the job right and 2) AWE had used the IPO proceeds to make three transformational acquisitions of privately owned companies within the financial year. Sorting out the accounts on three companies whose accounting format and systems won’t have been aligned with the requirements for presenting accounts for companies listed on the LSE main market. It is especially more complex to sort out the accounts when one of those companies OpenFive was a carve out from its larger parent company SiFive.
To provide assurance to the market AWE put out full preliminary results on the day they announced the delay to the audited results. During the delay I believe there was a bit a wrangle between company and KPMJ on the fair value assessment of OpenFive that resulted in a slight reduction in annual revenue and effecting a slight net profit into a small net loss.
Was this a concern for me. Not after I analysed the results and changed in more detail.
Yes the type of business they are in, means that it is potentially easy to manipulate their results. The Verisilicon joint venture is a bit of bother and I suspect on balance it won’t end up being anything like as profitable as they had initially envisaged if at all in fact. Aside from that I think they stand to do very well.
The Banias Labs acquisition and agreement with a North American hyperscaler has some dilutive elements to it so that will need a close eye on - that along with their seemingly rather generous employee share scheme.
My forward model takes into account a 2.5% annual dilution and provided they hit their guidance expectations for this year and hit their revenue targets set to 2026, it’s not unreasonable to expect that the price should be well north of the IPO entry level by then.
Thanks Phil
Agreed hopefully most 'digital & sub 10nm focused ASIC stocks' should ultimately rise with the boom in accelerated computing. Or in other words 'stealth AI' plays
