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.
- Strong sales and profit growth
- Acquisitions have boosted earnings
- Widening its product range
- Shares offer combination of yield and growth
- 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: | 111p | MARKET VALUE: | £78m | |
TOUCH: | 109-111p | 12-MONTH HIGH: | 170p | LOW: 97p |
FORWARD DIVIDEND YIELD: | 5.5% | FORWARD PE RATIO: | 12 | |
NET ASSET VALUE: | 49p* | NET CASH: | £17.3m |
Year to 30 Nov | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
---|---|---|---|---|
2012 | 41.7 | 2.9 | 5.6 | 3.0 |
2013 | 35.9 | 3.5 | 6.3 | 3.5 |
2014 | 36.2 | 4.3 | 7.9 | 5.0 |
2015† | 41.0 | 4.3 | 7.0 | 5.5 |
2016† | 69.0 | 8.3 | 9.2 | 6.1 |
% 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 |