Altium Limited
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ALU Details
Expanding business with acquisitions: Altium Limited (ASX: ALU) has completed the integration of its Octopart and Ciiva acquisitions. ALU has closed the largest multi-year TASKING deal with a tier 1 automotive supplier wherein the deal is worth $2.7 million. The company has also partnered with Dassault Systemes Solidworks to introduce a new line of electronic CAD products. Accordingly, ALU is forecasting over $100 million revenue and intends to make further acquisitions for FY 17. ALU is expected to grow by acquiring & partnering with brands related to design of PCB and smart devices to achieve market leadership by 2020. ALU is expecting PCB product line to approach $150 million in revenue by 2020. The company has increased the quantity of new licenses sold for its flagship product Altium Designer by 23% during the first half of fiscal 2016 and increased the subscription renewal rates in the growth pool by 3% to 87% during the period. The subscriber pool has now increased to 29,300 subscribed users (with recurring revenue representing 42% of ALU’s revenue). As a result, ALU stock has risen 36.75% in the six months (as of August 03, 2016).
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Operating Expenses (Source: Company Reports)
Rising Expenses: Altium EBIT Margin fell to 23% during the first half of 2016 as compared to 26% in first half of 2015. The group’s operating cash flow fell over 22% to $5.7 million as compared to the same period of last quarter.
Despite this pressure, ALU expects expenses for the existing business for the full year 2016 to be less than 10% while the company has already incurred expenses of 8%. Overall, there seems to be a challenge for ALU to reach the goal of 30% EBITDA margin for FY 2016, as also acknowledged by the company. Based on the foregoing, we give a “Sell” recommendation on this stock at the current price of $7.31
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ALU Daily Chart (Source: Thomson Reuters)
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