Amino Technologies designs and supplies the technology used in high-performance TV set-top boxes, the magical little boxes whose bells and whistles will enable television network operators to boost their revenues. Aside from storing TV programmes and streaming them via the internet, an Amino box has a multitude of applications, including gaming, gambling, internet browsing and recording. In other words, it can transform a bog-standard TV into a state-of-the-art model.
- Potential of internet TV
- Technology to help cash-strapped consumers
- Backed by Intel
- Rated more like a value stock
- Reliance on one big customer
- Fierce competition between telcos
That may be important in the coming years because in the developed world cash-strapped consumers will be reluctant to splash out on a new telly. TV sales are already set to decline this year, in large part because the big replacement cycle for TVs has already occurred. Households already have a large flat-screen TV in their living room, and are unlikely to replace it for an average of five years. Instead, consumers will spend money on a device, such as an Amino box, that enhances TV viewing, especially via the internet. Multimedia Research Group expects IPTV – internet-based TV – subscriptions to grow by 32 per cent a year until 2013.
So, TV broadcasters – telcos – will be bulk buyers of set-top boxes as they fight to retain customers. This has been evident in the UK, with Virgin Media's TiVo and BSkyB's Sky+ fighting for customers both through aggressive pricing and adding more applications to their set-top boxes. Happily, the effect on Amino may be limited because it simply supplies boxes. The majority of Amino's current customer base consists of a global spread of small- and mid-size telcos, although it is reliant on one large customer – Telecom Italia – which accounts for about 25 per cent of revenues and which has just started supplying Amino's premium multimedia box, Cubovision. Other large operators are currently trialling the hardware.
AMINO TECHNOLOGIES (AMO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 51.5p | MARKET VALUE: | £28.3m | |
| TOUCH: | 50-51.5p | 12-MONTH HIGH: | 54p | LOW: 37p |
| DIVIDEND YIELD: | 4.3% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 37p | NET CASH: | £14m | |
| Year to 30 Nov | Revenue (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 31.9 | 2.16 | 3.77 | nil |
| 2009 | 25.3 | -8.73 | -15.97 | nil |
| 2010 | 44.0 | -0.88 | -0.61 | nil |
| 2011 | 51.8 | -0.62 | -0.39 | 2.0 |
| 2012* | 50.9 | 2.75 | 4.99 | 2.2 |
| % change | -2 | – | – | +10 |
Normal market size: 2,000 Matched bargain trading: 4 Beta: 0.4 *Singer Capital Markets forecasts (profits and earnings are not comparable with historic figures) | ||||
Indeed, technology giant Intel seems to believe in the potential of Amino's kit. The latest Amino boxes are exclusively based on Intel's latest dual core microprocessors. Backing from Intel could help Amino gain traction in the US, the world's largest entertainment market. That said, sales from the region have already been growing well, having more than doubled to £14.9m in 2010-11. Amino's management also plans to extend this reach to South America later this year, following recent changes to the regulatory landscape, which previously prohibited the group from selling its kit to South American network operators.
Until then, investors can be reassured by Amino's substantial cash pile. Tight working capital management meant cash balances of £14.1m by the end of November, up from £3.6m a year earlier. This allowed management to institute a maiden dividend of 2p in 2010-11 and City analysts expect dividends to rise by 9 to 10 per cent a year at least over the next two years.
