AMO Amino Technologies

27th Aug '14 by Chipspa

4 comments 7700 reads

In very basic terms, AMO specialises in the development of internet protocol.

Gervais Williams (on a Citywire video) recently called this share "devastatingly cheap". Personally I think it could be very cheap, but with some caveats on revenue growth, as outlined below.

Disclosure - I already hold, but I would be interested in other people's opinion.

As always do your own research, but here is my take:

At 93p and a market cap of £52m

PE ratio (f) 13.1 (strip out the net cash P/E is c.8)

ROCE 12.9%

EPS Growth (f) 7%

Dividend Yield (f) 4.5%

Dividend Cover 1.7

Net Gearing 0 (c.£20m of net cash)

My feelings are:

AMO already has a reasonably low P/E, but strip out the net cash (c.35% of market cap) and you get a very cheap P/E of c.8
The net cash is growing y on y. (I'm not sure what they plan to do with this!?)
Forward yield of c.4.5% is well covered by EPS.
In July, the management committed to grow the divi by 10%p.a. for the next 2 years
The cashlow is strong and infact free cashflow also covers the divi.
Margins are ok, with operating margin (c.10%) and ROCE (c.12% )

All great - However, revenue has been falling and is still below 2010 levels, but the board remains confident that results for the full year will be in line with current levels.

My view is that, subject to the sales coming through (a big subject to), this share is very cheap and should perform well. Equally the downside should be quite protected due to the large cash holding (35% of market cap) and already low P/E.

I am further heartened by the dividend yield and last months positive announcement of committing to grow this dividend further by 10% p.a. for the next 2 years at least, which I imagine reflects the boards confidence.

Any thoughts welcome

Unlock with Email

Unlock with Google

Already have an account?
Login here

TheWatchmaker

29th Aug '14

I've had my eye on Amino for a few months now.
But I've not taken the plunge as I'm waiting for some evidence that sales growth has returned. As you point out, the revenues have fallen in recent years.
If the management come good on the '2nd half weighting' of revenues that they expect, then this could certainly create a marked re-rating in my opinion. Share price could reach 130-150p if the earnings prediction for 2014 + 2015 come true. However, they will need a strong H2 this year and improved sentiment for investors to believe that it is sustainable.
In the meantime, I agree that the downside should be limited and the dividend is attractive.
Stockopedia Ranks all look good too.
Hope I don't miss the boat on this one if it sails - but I'm waiting for now.

Chipspa

19th Sep '14

Amino released a “Business Update” yesterday

http://www.investegate.co.uk/amino-technologies/rns/business-update/201409180700369698R/

Whilst this appeared generally positive I found this a quite frustrating read, even though I have a long position, as the ‘update’ is totally devoid of numbers or specifics.

Why of why can’t management quantify, or at least provide a clearer steer, as to what “good progress”, “further traction” and “achieved success” actually equates to in terms of sales revenue or profits. I am sure that existing and potential investors would feel more comfortable with this.

Anyway highlights I have taken out of the update are:

“Amino continues to make good progress in its core markets and in the development of its set-top box portfolio. The Company recently launched its new A150 mainstream set-top box into the European market and the device is already gaining traction and has been successfully integrated into existing partners' middleware offerings.

The Company has experienced further traction in Eastern Europe for its lower specification device which has, as previously reported, also achieved success in Latin America.

Amino has received further industry endorsement for its home monitoring and control offering and the Board remains confident that this will open up new opportunities for the Company in new and adjacent markets.

Commenting on the announcement, Donald McGarva, Chief Executive Officer, added:

"We are making solid progress in our core markets and are successfully taking our products and expertise into emerging markets. Our focus on product innovation and the fact that our products are continuing to gain recognition from the wider market gives the Board confidence in our ability to keep delivering in the future."

valueman

7th Oct '14

Chipspa
I think your focus just on the numbers is fine but its the lack of sales growth that the market is concerned about. We need clear evidence.
Wondering whether to top up on this weakness ???

AlanJenkins2

I have some too.It is possible that the recent fall has caught them on the hop accounts-wise - that they simply don't know yet exactly how the numbers will add up.After their recent optimistic statements,a poor set of results would be embarrassing and bad for their credibility.The current market valuation is pretty well underpinned by cash and divis.

AMO Amino Technologies

Unlock the rest of this article with a 14 day trial

About the Author

Chipspa

4 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...