Consensus community valuation
Average Intrinsic Value
Overvalued by
Active Member Straws
##HY 2020 Results
Added 3 months ago


Hard to be too displeased with the latest set of numbers. As shareholders have come to expect, revenue grew strongly (up 19% on the half), margins improved, license numbers increased etc

The business is still debt free and has over $80m in cash. 

HOWEVER, Net profit did fall -- for the first time in a long time, dropping 2%. The reason for this was that Altium was previously applying a large deferred tax asset, which has now been fully used. As such, Altium paid US$8.7m in income tax for the first half, comparted with just US$2.3m in the previous corresponding half.

That being said, pre-tax profit was around 23% higher (see attached image)

The company did reiterate full year revenue guidance of between US$205-215m, with an EBITDA margin of between 39-41%. BUT, the coronavirus in China and an underperformance of Octoparts (revenue grew just 2% in the half), mean that they expect to come in at the lower end of this guidance. 

That suggests a full year NPAT of ~US$50m, which on a per share basis in AUDs is about 56c. So although shares have fallen today, the PE is still ~65x (at time of writing)

Management reaffirmed the longer term revenue target of US$500m by 2025, which is 2.5x the current level. So a premium is certainly warranted if you think this is achievable, especially if you give extra points for business quality (as I do). It's just a question of how big a premium you think it deserves.

I really like the business, but feel a lot is already priced in by the market.

Results presentation is here

Read More
#Bull Case
Added 6 months ago

I attended the Altium technology day where management outlined their plans.  Key tak-outs were as follows :

  • Their strategy is to transform the industry through dominance - this indicates an unwavering desire to crush the competition 
  • IoT is the new "gold rush", so Altium is focussed on building a better spade to help IoT manufacturers dig better
  • Their new product is looking to consolidate the three key segments of the industry - electronics manufacturing, design and parts supply
  • They are targetting to double their user base by 2025 (from 50k to 100k)
  • They are also looking to mitigate some of the industry players risk from design to production by creating financial instruments that help 
  • The sales strategy is to have strong account based management with deep relationships with customers and understand the end user needs - this is meaning that they will use fewer distributors if any so that they can control the sales cycle

All in all, the long term thesis is very interesting and definately a long term hold

Read More
#Market update
Added 3 weeks ago

May 2020

Altium said it expects some headwinds from the ongoing restrictions associated with COVID-19, which will impact performance for the final quarter.

SME's cash preservation priorities are expected to impact sales in May and June, which are typicaly the strongest months for sales.

Importantly, long-term aspirational target of US$200m in revenue for FY20 is now a low probability. That's a big change from the reiteration of this target only one month ago.

I really like the company, but feel shares are overpriced -- especially in light of today's update.

ASX announcement here

Read More
#Digital Design Days 2020
Last edited 3 weeks ago

06-May-2020:  DDD20 Day 1

That presso, which is Day 1 of Digital Design Days 2020 (DDD20, held last week) is not specifically about Altium, but Altium is one of the companies that enable people to design the chips to make all of this tech work.  The intro is pretty amazing and some of the companies presenting on Day 1 include PayPal, (Mother of Social Media Dragons), LinkedIn, Airbnb & Amazon's Alexa, as well as the founder of DDD and a few journos. 

Magellan (MFG) is one of the companies that invests in these sorts of companies, like eBay - who owns PayPal, Alphabet - who owns Google, Microsoft Corporation - who own LinkedIn, Tencent - who own WeChat and WeChat Pay, Alibaba - who own AliPay and many other businesses, and Facebook - who own WhatsApp and Instagram.

For a LIT that gives you exposure to all of those, Magellan's MGG is one option. You buy/sell units in MGG on the ASX just as you would buy shares in any company, and you have exposure to all of those global IT giants (but not Amazon, because Hamish Douglass regards Amazon as too expensive to buy). 

In the USA, IT (information technology) as a sector represents 25.7% of their entire market (NASDAQ + NYSE) whereas it represents just 3.7% of our Australian market.  IT is the largest sector in the US, followed by Health Care (at 15.4%) and then Communication Services (10.8%).  Our top 3 are Financials (24.4%, thanks mostly to our big 5 banks), Materials (/Mining, 19.1%, thanks mostly to BHP & RIO) and Health Care (12.5%, thanks mostly to CSL, RHC, SHL & COH).  We have our WAAAX stocks, but we don't have the stocks with the global footprints of the FAANGs and the two fast-growing Chinese giants (Alibaba & Tencent). 

I currently hold shares in PAI, WQG, MGG & MHH for that global IT exposure.

Read More
#Business Update
Last edited 2 months ago

08-Apr-2020:  Altium Confirms its Strong Operational and Market Position

Altium Confirms its Strong Operational and Market Position Within COVID-19 Environment 
But Prudently Withdraws FY20 Earnings Guidance

Electronic design software company Altium Limited (ASX:ALU) confirms its strong operational and market position in the new COVID-19 environment. However, given the evolving nature of COVID-19 and uncertainty regarding its direction, it prudently withdraws its FY20 earnings guidance.  

Operational and COVID-19 Update  

Despite the uncertainty surrounding COVID-19, Altium is operationally and commercially well positioned, with electronic design anticipated to be relatively resilient to weather the prevailing and unfolding market conditions.  This is, however, dependent on how long and in what future form COVID-19 takes and the rapidly evolving broader business, industry, economic and social impacts that may arise.  

Altium’s CEO Mr Aram Mirkazemi commented, “as a high-tech company, Altium’s global workforce is geared to work digitally and for the past two months we have greatly increased our focus on driving productivity in this new operating environment.  We are fortunate that our operating model is robust and highly adaptable to the new global conditions, as our marketing and direct selling are conducted through the Internet and via telephone.  Moreover, we are well diversified across industry segments and regions worldwide”. 
Mr Mirkazemi further stated, “at an industry level, electronic design is holding up relatively well in the new environment as engineers use excess time and capacity from the slowdown in manufacturing and supply chain to revert back to prototype designs”. 
“We are accelerating the rollout of our new cloud platform Altium 365, as worldwide demand is growing rapidly for cloud-based collaborative tools across all sectors and all regions.  Altium 365 is a core enabler of our strategy of industry transformation through market dominance and supports our drive to 100,000 subscribers by 2025. Altium 365 is particularly relevant to the circumstances that are unfolding under COVID-19, as it allows engineers to work from anywhere, and connect with anyone.  We are also accelerating the rollout of our online/high volume selling approach, which will dramatically extend our inside sales capacity to support our drive through Q4 and beyond”, said Mr Mirkazemi.

Withdrawing Full Year Earnings Guidance    

Altium’s CFO Mr Joe Bedewi commented “in light of the rapidly evolving COVID-19 environment, whose duration remains uncertain, Altium feels it is prudent to withdraw its formal FY20 earnings guidance. Altium management nevertheless remains firmly committed to its longestablished aspirational market leadership target of US$200 million for FY20”.   

Mr Bedewi further noted, “as a global software company, we are operationally geared to work well in a digital environment, our business model is highly adaptable to the new conditions and the electronic design industry is relatively robust.  Altium is continuing to close sales and our pipeline is looking solid at this point”. 
“Moreover, Altium is financially very strong with real earnings and profitability and a strong balance sheet.  Altium’s cash reserves have continued to grow and are expected to remain strong”, concluded Mr Bedewi.  

During this evolving period, Altium will provide further updates on the impact of COVID-19 on the company’s operations and business performance as appropriate. 

--- ends ---

Read More