16-Oct-2020:  Ausbiz: Wall of money to move into alternatives, but infrastructure is the safe second

Ben Clark from TMS Capital is watching the infrastructure space closely saying it is a safe bet for investors.  Audinate is also on the watchlist.  He discloses that TMS have recently bought into AD8 and his views on why begin around the 6 minutes and 30 seconds (6:30) mark of this video.

15-Oct-2020:  AGM Presentation & Trading Update

Audinate (AD8) closed up +99c (+16.64%) today - at $6.94 - on the back of this update, making them one of the day's best performers.

Excerpt - starting at slide #11:

1Q21 Trading Performance

• Steady improvement in trading conditions since May
  • Customer and market segments impacted differently
  • Good momentum in corporate conferencing & higher education
  • Challenging conditions in live sound & large events
  • Sales backlog circa pre-COVID-19 level
• Unaudited Revenue for 1Q21 amounted to USD $5.2m
  • Selected products experiencing strong growth (relative to FY20), including Adaptors, Ultimo, Broadway and Retail Software Sales
  • Brooklyn revenue down on pcp [previous corresponding period] reflecting exposure to live sound
• Unaudited EBITDA for 1Q21 of AUD $0.3m
• Prudent return to investing for growth
  • Expecting to add around 10 roles globally over FY21
  • Further incremental opex expected to amount to around $1.5m over FY20
  • Additional updates, as relevant, over the remainder of FY21

Focus areas for FY21

• Medium-term strategic priorities
  • Investing to double Audinate’s engineering and R&D functions over two years (from July 2019)
  • Putting in place the business infrastructure platform to support long term growth
  • Developing next generation Dante audio and video software implementations
  • Make Dante video the technology of choice for OEMs [Original Equipment Manufacturers]
  • Expand its Total Addressable Market with the addition of video & software products
• FY21 objectives
  • Drive designs wins during economic downturn & prime the pump for economic recovery
  • Broaden Dante video product offerings
  • Validate new business models, e.g. in-field activation
  • Expand training offerings to include Dante video and a wider range of languages
  • Build business systems & development capability
  • Explore M&A opportunities to accelerate growth
  • Drive short term revenue opportunities
  • Manage total net cash expenditure

--- click on the link above for the full presentation, with pictures --- 

[I do not hold AD8, but they are on my Strawman.com scorecard.  I would hold them in real life if I had more money to invest.  I like the longer term story a lot.  However, patience is the key with this one.  It's going to take time for their full potential to play out.  Limited capital, so limited number of real life holdings.]

On 21-Aug-2020, Livewiremarkets.com recorded a "Buy Hold Sell" segment with Ben Clark of TMS Capital and Victor Gomes of Eiger Capital.  This week they discussed small-cap stocks that are marching to the beat of their own drum.

The stocks discussed include 1) A technology company that trades at a forward PE of 73x and pays a small dividend (Appen), 2) An essential service which is paying a reasonable dividend (CWY), and 3) A company flying under the radar (HUB).  As usual, the guests brought along two stocks that fit the recession-resistant thematic.  Ben's company was AD8.  Here's the link:

https://www.livewiremarkets.com/wires/buy-hold-sell-5-pandemic-proof-small-caps

Ben discusses Audinate (AD8) from around the 4:20 mark, and presents a short but pretty compelling bull case for them.

Interestingly, on the same day, Livewiremarkets.com also published this article:

Audinate: It's not cheap, and it's not growing

There are clearly a few fundies who don't agree with Ben's assesment that AD8 are growing 8 times faster than their nearest competitor.

Personally I like AD8, and I wished I'd bought some in March when they were sub-$3.  I think they look reasonable at around $5 to $5.50, but I don't currently own any.  I think they might get cheaper from here due to COVID.  At least I hope they do.   They are on my Strawman.com Scorecard - added at lower price levels than where they are today.  When I think of Audinate, I always go back to that analogy with Bluetooth - i.e. if Bluetooth was a traded company, or was owned by a traded company, what would it be worth.  Answer: A LOT!!  AD8's Dante platform is very likely to be as dominant as Bluetooth is - in their own respective niche area of digital AV/media networking in a few years time (every major AV - audio visual or audio/video - brand will have incorporated Dante into their own products), so if you look at it that way, they are still cheap at current levels.  If I had unlimited funds, I would certainly hold AD8 personally, but I don't.  I reckon I'll be buying them at some point in the next 18 to 24 months however.

22-7-2020:  Audinate Equity Raising - Investor Presentation

23-7-2020:  Audinate Group Limited (“Audinate”) (ASX:AD8), developer of the professional AV-industry leading Dante® media networking solutions, is pleased to announce that it has successfully completed a A$28 million fully underwritten Placement at an issue price of A$5.15 per share (“Placement Price”), representing a 5.1% discount to the 5-day volume weighted average price (“VWAP”) of the Company’s shares traded on the ASX up to and including 21 July 2020 of A$5.43 per share.

The Placement will result in the issue of approximately 5.4 million new fully paid ordinary shares (“New Shares”). New Shares will rank equally with existing ordinary shares on issue and allotment is expected to occur on 28 July 2020. Eligible existing institutional shareholders who bid for an amount less than or equal to their ‘pro rata’ share of New Shares under the Placement were allocated their bid in full, on a best endeavours basis. The Placement was undertaken within Audinate’s existing placement capacity under ASX Listing Rule 7.1 and accordingly, shareholder approval was not required.

Proceeds raised from the Placement will be used to:

• increase investment in engineering, R&D capabilities and business infrastructure to extend Audinate’s market leading position in the audio networking space;
• strengthen the Company’s balance sheet position in the uncertain COVID-19 period;
• accelerate investment in additional video and software products; and
• provide flexibility to pursue potential M&A opportunities that complement the Company's mediumterm objectives.

Audinate’s CEO Aidan Williams said: “We would like to thank our existing shareholders for their ongoing support and we welcome new shareholders to our register. We also look forward to eligible retail shareholders having the opportunity to participate in the Equity Raising via the SPP. Following the Equity Raising, Audinate will be well-positioned to weather further potential COVID-19 impacts, accelerate its growth plans and deliver on its medium-term strategic priorities.”

As announced on 22 July 2020, Audinate is also offering Eligible Shareholders the opportunity to acquire up to A$30,000 in New Shares in the non-underwritten SPP to raise up to a further A$12 million (which may be varied or subject to scale back at the Company’s absolute discretion). This represents an increased offer size, both on an absolute and relative basis, from the oversubscribed A$4 million SPP completed in July 2019 and recognises the strong ongoing support from our retail investor base.

The SPP issue price will be the lower of:

• the Placement Price (A$5.15 per share); or
• the price that is a 2% discount to the VWAP of ordinary shares in Audinate traded on ASX over the 5 trading days up to, and including, the SPP Closing Date.

The SPP Booklet and Application Form will be released on the ASX separately and despatched to Eligible Shareholders on or about 29 July 2020, being the date on which the SPP offer will open. Application Forms and payments are due no later than 5:00pm AEST on 11 August 2020.

Further information can be found in the announcement and investor presentation titled “Audinate Equity Raising - Investor Presentation” released to ASX on 22 July 2020.

--- click on link above for the full announcement ---

16-7-2020:  Audinate Trading Update

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.

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!

06-Apr-2020:  COVID-19 update & withdrawal of FY20 growth commentary