Audinate Group Limited

Strong second quarter results: Audinate Group Limited (ASX: AD8) is an audio technology company. It is into the development and provisioning of software as well as hardware systems focused on facilitating the audio over information technology network. The primary product of the company includes Dante solution.

The company had recently released its quarterly report for the period ended 31 December 2018. As per the release, the company made a collection of cash amounting to $7.2 million for the quarter, an increase of 49.0% from the previous corresponding period of $4.8 million (2Q FY18), and an increase by 7.0% from last quarter of $6.8 million (i.e. 1Q FY19). The cash collections are primarily on the back of growth in the core business, coupled with continued strong demand for AVIO adapters. The YTD cash flow from operations was $0.6 million compared to a previous corresponding period of $0.3million. Year to date total cash outflow was $1.5million compared to an outflow of $1.3 million for the previous corresponding period. Among the key ratios, the current ratio stood at 4.51x in FY18 compared to 2.39x in FY17, a significant increase by almost 88.8%. The company’s EBITDA margin stood at 2.8% in FY 2018 which is lower than the industry margin of 16.7%.



Cash Collection since IPO (Source: Company Reports)

What to Expect from AD8 Moving Forward: The company expects to receive its R&D grant in the second half of FY19, whereas in FY18, the grant was received in the first half of the financial year. The company, going forward in FY19, will focus on expanding the sales and support teams geographically coupled with an investment in the development of Dante video solution. 

However, the stock of Audinate is currently trading at $3.900 with a market capitalization of ~$238.35 million. It has generated a YTD of 9.55% and a return of 9.24% over the last three months and is trading slightly toward a higher level. Hence, we suggest that the market players need to closely watch the stock at the current market price of $3.900 per share and wait for an opportunity to enter the stock at a lower price point.
 

Pilbara Minerals Limited

Robust operating performance at the Pilgangoora: Pilbara Minerals Limited (ASX: PLS) is under the metals and mining sector. It explores Lithium, and it is in exploration and mine development of Tantalum. The company is one of the leading lithium makers of Australia and owns the Pilgangoora Lithium-Tantalite Project.

Its December 2018 quarterly activities update reveals that the company has reported strong operating performance at the Pilgangoora Lithium-Tantalum Project.They continue the progress of the stage one processing plant. This is a mark of product quality and production growth in stage 1 coupled with shaping up of stage two expansion.

In the quarterly presentation, the company updated about the non-binding agreement with POSCO to consider a larger jointly owned chemical conversion facility of up to 40ktpa LCE in South Korea. The company also suggested a new US$50 million (approximately A$70.9 million) Nordic Bond for financing the Stage 2, 5Mtpa project. The company in its quarterly report for the period ended 31 December 2018, has reported an operating cash outflow of $A14.909 million for the quarter with $A15.390 million for the YTD (6 months). The current ratio of the company stood at 3.01x in FY18, comparatively higher than the current industry median of 1.72x.
 

Cash Flow from Operations (Source: Company Reports)

What to Expect from PLS Moving Forward: Going forward in FY19, the company will continue to evaluate the progress of commissioning and expansion at the Pilgangoora Project.It aims to achieve commercial production during the March 2019 quarter from the project and determine whether commercial production has been achieved with a range of operating and cost criteria in consideration.

The stock of Pilbara, however, is currently trading at $0.690 with a market capitalization of $1.13 billion. It has generated a negative YTD of 4.83%. Driven by robust quarterly updates coupled with the focus on commercial production in March 2019, we maintain our “Hold” rating on the stock at the current market price of $0.690 per share (up 6.154% on 01 February 2019).
 

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