HY2021 Earnings

The company announced yesterday a brilliant half year result, with revenue up 7.8% to $148.4M and revenue up 127.7% to $13.3M compared to the PCP.

With these sort of earnings, the SP looks incredibly cheap, however the movement was muted by management maintiaing guidance for full year profit of $18-$20M. Whilst this guided range is still significantly higher than the previous year, it implies profits will more than halve between the first HY to the second HY. The reasoning for this is unclear & it raises a question mark over the next couple of years.

It is assumed the company has enjoyed a net benefit from Covid overall, and potentially a weighting towards the first half, which contains the christmas holiday period, however this result weighting appears extreme.

I am hoping this will be discussed and clarified on the earnings call today.

Target price maintained at 87c.

China Tariffs

As covered in my valuation, the china tariffs do not have a dramatic impact on the company in a direct way (although in a perfect world, china would be an area of potential expansion for the business). The china export is a very small part of the business, which is primarily Aus & UK based.

Basic economics would tell you however, that the tariffs do have potential to make an impact if they cause more supply to the markets AVG do operate in. TWE for example has had major issues in the US market where there is actual dumping, so if anything similar was to happen in Australia or the UK - it is reasonable to believe AVG would be negatively impacted, particularly being fairly concentrated between those two markets.

It will be interesting to see if this is discussed at the HY result presentation later this month.