Consensus community valuation
$10.32
Average Intrinsic Value
61.5%
Undervalued by
Active Member Straws
#Financials
Added 3 months ago

Half - year report for the half - year ended 31 December 2019

  • Revenues from ordinary activities up 14.1% to 16,147
  • Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) up 11.3% to 1,873
  • Profit before income tax benefit down 82.4% to 129 Profit from ordinary activities after tax attributable to the owners of Audinate Group Limited down 59.6% to 341
  • Profit for the half - year attributable to the owners of Audinate Group Limited down 59.6% to 341

Dividends

There were no dividends paid, recommended or declared during the current financial period.

Review of operations

For the half-year period ended 31 December 2019, the Group reported an increase in revenue of 14.1% to $16.1 million from $14.2 million in the prior half -year period (six months ended 31 December 2018). Gross margin grew 20% from $10.4 million for the prior half-year period to $12.5 million for the half-year period ended 31 December 2019. Gross margin % also improved to 77.1% from 73.3% for the prior half-year period due to favourable product mix of more software sales relative to lower margin chip sales.

The directors consider Earnings before interest, tax, depreciation and amortisation (‘EBITDA’) to reflect the core earnings of the Group. EBITDA is a financial measure which is not prescribed by Australian Accounting Standards ('AAS') and represents the profit under AAS adjusted for non-cash and significant items.

 

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#Bull Case
Added a month ago

Just on your #Bear Case straw @Foolednomore, I would just point out that AD8 has only risen to around the same level as they were 12 months ago ($6 to $6.40) but that they were trading at over $8/share for most of the 3-month period from 21-Nov-19 to 17-Feb-20, and they got up to $9 twice during those months.  They were sold down to as low as $2.51 in March, and the strong rise since that low point is just a reflection that they were very oversold at that level.  The market has the ability to look through the current crisis now that the indiscriminate selling has stopped.  In March there was a mad rush to liquidate any assets that could be sold, and so good companies got sold down along with bad ones.  With the larger cap stocks, there are often some longer-term thinkers sitting on the sidelines waiting to snap up good companies at bargain prices, which can put some sort of a floor under those stocks.  With the smaller companies, especially the microcaps and the nanocaps, the liquidity can be so thin that there is often no safety net - or floor - and there's no limit to how low they can be sold down.  The only thing that stops the fall is often that there ends up being NO buyers at all.  But that was March, and this is April, and a lot can change in a couple of weeks.  We're still in the middle of the COVID-19 crisis, however the panic has stopped, at least for now, and people are looking through the crisis at whether companies are going to be permanently affected by this, and - if so, how much?  Companies with little or no debt who can ride out the storm and come through it with much the same business and business model as they had when they went into it - are now being evaluated in terms of where they are likely to be trading in around 12 months' time.  Growth stocks and disruptors, companies with new tech that has had growing acceptance and good market penetration - such as AD8 - are probably going to resume their upward trajectory when this is all over - in terms of business fundamentals improving, and their share price will follow the same trajectory.  So even if you assume they was already a few years worth of future growth priced in at $8 to $9, many people are going to think, "well, they're probably worth at least $7..."

So, to summarise, yes, the near term is certainly challenging for AD8, but their longer-term growth prospects are probably relatively unchanged, and they were clearly oversold.  Personally I think they're getting back towards fair value now, and I don't think I'd be buying them at over $7, but they looked really good at $2.51 to $4!

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#Bull Case
Added 3 months ago

Yes the growth has not been as the market hoped. I will be adding on he pull back. Great product with great growth potential

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#Risks
Added 4 months ago

I have a mate that uses this company and rates them highly for quality of sound, visual and customer service. I have a very small holding but am tempted to add. My fear is the price could be too lofty based on expectations? Thoughts please.

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#Bull Case
Last edited a week ago

17-May-2020:  The risk/reward trade-off now at $5.50 to $6/share is obviously not as compelling as it was sub-$4 in March, but I think the investment thesis is that the Dante platform has developed such a market share now that their competition is really irrelevant.

It is highly likely that Dante will continue to be the dominant platform for scalable, flexible, digital AV networking into the future. I'm not the first person to say this, however it's probably really useful to think about it this way:  If Bluetooth was a listed company, what would it be worth now?  Bluetooth are completely dominant in wireless data transfer over short distances and device manufacturers don't have much choice - they have to include Bluetooth connectivity in their devices or else immediately be at a commercial disadvantage to their competitors.  AD8's Dante platform will be similar.  Everybody in the industry will be using it - as long as it continues to be the dominant platform for digital AV, and they don't currently face any SERIOUS competition. They of course DO have competition but that competition is largely irrelevant because of Dante's dominant market share.

They are a juggernaut that has been temporarily coronered, but their ascendancy will continue. They don't have any structural issues, only temporary ones that everyone else in the industry is also facing.

In their own words, Dante replaces point-to-point audio and video connections with easy-to-use, scalable, flexible networking. Adopted by hundreds of manufacturers in thousands of professional products, Dante is the de facto standard for modern AV connectivity.

That's the investment case. How big can they get.  Enormous I reckon, but I don't know how long it will take.  I think there's a better than 90% chance they will get taken out by a much larger company at some point at a very healthy premium to their share price at that time, but I very rarely buy into companies on takeover speculation or potential.  The fact is that AD8 have developed and are rolling out a technology that WILL almost certainly be the dominant platform in the future (as it is already) and it's hard to imagine the upper limits of what that's going to be worth in future years, but it's almost certainly a lot more than their current share price.

That future potential is very hard to value accurately today, but trying to come up with a half-sensible valuation for Bluetooth (as if it was a listed company) might be a good starting point.

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#Bear Case
Added a month ago

I really like this company but I am totally confused by this price surge. No sports, no music so what have I missed? 

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#COVID-19 Update
Added 2 months ago
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