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Amino is cashing in on broadcasters' desire to offer online services.
October 29, 2015

First instincts may be to flee when a company issues a profit warning, but we reckon that this week's instance involving Amino Technologies (AMO) provides a buying opportunity. The maker of internet-connected set-top boxes says second-half revenue and pre-tax profit for the year will be flat and below expectations. But when acquisitions, an expanded product range and a broader customer base kick in, growth will resume. Meanwhile, the shares are now rated far below peer companies and come with a prospective dividend yield of 5.5 per cent.

IC TIP: Buy at 111p
Tip style
Speculative
Risk rating
High
Timescale
Medium Term
Bull points
  • Strong sales and profit growth
  • Acquisitions have boosted earnings
  • Widening its product range
  • Shares offer combination of yield and growth
Bear points
  • Poor sales execution
  • Recent profit warning

The main reason for the expected revenue shortfall is poor sales execution and Amino's bosses say they have taken steps to resolve the issue. It doesn't reflect a lack of demand. As the likes of Sky and Netflix cash in on consumers' insatiable appetite for on-demand programmes across all types of devices, cable and satellite-TV companies have turned to Amino to modernise their offerings.

Amino recently acquired US competitor Entone, whose technology enables telecoms operators to offer both broadcast TV and online video. The $73m (£47.5m) deal promises to broaden Amino's global footprint and provide entry into the US market. Moreover, management expects Entone to boost earnings next year, and both it and recently acquired Booxmedia - which helps broadcasters to offer high-quality streaming on mobile devices and other platforms - are generating cost savings ahead of expectations.

 

 

Booxmedia recently inked a contract with a Dutch digital services group to install and maintain a cloud-based on-demand video platform, and landed a deal with Belgian broadcaster RTL to implement catch-up video, live-streaming and subscription services. Amino has also developed new products. Its Live Advanced Media Platform (LAMP) allows family members to pause live TV, watch on-demand content on their preferred device and download content from the company's app store. Its Home Reach product uses cameras and motion sensors to let people monitor their homes via a smartphone. And it recently unveiled a 4K Ultra-HD platform designed for the next generation of TV sets.

Amino is also offering products at more price points. Strong sales of LAMP and the launch of the high-end A150 set-top box drove revenue in North America up 36 per cent to £10.7m in the six months to the end of May. Combined with brisk demand in Latin America for cheaper boxes, that drove adjusted operating profit up 56 per cent to £2.8m.

Amino's progress underpins robust growth prospects. Broker finnCap reduced its forecasts following the warning, but it still expects cash profit to rise a tenth to £7.5m this financial year, then soar 72 per cent to £12.9m in 2015-16. Yet strip out cash of 25p a share and Amino's shares trade at an enticing 10 times forecast earnings, and there's a prospective yield of 5.5 per cent.

AMINO TECHNOLOGIES (AMO)
ORD PRICE:111pMARKET VALUE:£78m
TOUCH:109-111p12-MONTH HIGH:170pLOW: 97p
FORWARD DIVIDEND YIELD:5.5%FORWARD PE RATIO:12
NET ASSET VALUE:49p*NET CASH:£17.3m

Year to 30 NovTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201241.72.95.63.0
201335.93.56.33.5
201436.24.37.95.0
2015†41.04.37.05.5
2016†69.08.39.26.1
% change+68+93+31+11

Normal market size: 3,000

Market makers: 6

Beta: 0

* Includes intangible assets of £11.2m, or 19p a share

†finnCap forecasts, adjusted PTP and EPS figures