Future Generation Investment Company Limited

Decent Investment performance: Future Generation Investment Company Limited (ASX: FGX) is an investment company incorporated in Australia. The objective of the Fund is to provide exposure to a group of prominent Australian fund managers in a single investment vehicle. The Fund will invest in funds managed by several Australian fund managers with diversified exposure to Australian equities. As per the latest release to the ASX dated October 08, 2018, the company has announced a share purchase & placement plan which will be offered to the existing shareholders at a fixed price of $1.18 per share, this additional capital is to be invested as per the company’s investment process and the designated committee. FGX’s gross assets on 31 October 2018 were clocked at $416.7 Mn, of which 47.1% of the assets were allocated to long equities, 36.6% to absolute bias, 15.4% to market neutral, and 0.9% to cash and term deposits strategies. The company has a market capitalization of circa $424.39 Mn as on November 14, 2018. The company has posted record Pre-tax profit for the six-month period ended June 30, 2018 which signifies a solid investment portfolio performance and paid a fully franked interim dividend of 2.3 cps for the same period.

Growth Proposition: For the period ended 31 October 2018, the investment portfolio delivered a strong performance by increasing 4.9% thus outperforming the S&P/ASX All Ordinary Accumulation Index by 1.8% considering a span of 1 year and the outperformance of 2.8% is visible when the performance is evaluated since inception. As at 31 October 2018, the Company’s NTA after Tax decreased to 116.16 cents per share from 125.05 cents per share at 30 September 2018.

   
FGX’s Fully Franked Dividend since Inception (in cps) (Source: Company Reports)

Meanwhile, the stock price has fallen over the past one month by 6.59%, however over the period of past six months the stock is marginally down by 1.23%. If we look at the YTD performance, the stock is up by a modest 2.99% and traded at higher PE level of 23.49x. Considering the strong portfolio performance but gloomy stock performance over the past one year, we suggest to have a close watch on the stock that traded at the market price of $1.190 (down 1.245% on November 14, 2018).
 

Audinate Group Limited

Overvalued at Current Juncture: Audinate Group Ltd (ASX: AD8) develops software and serves its services worldwide. The Company offers digital media networking solutions in commercial installed systems, live sound, broadcasting, houses of worship, corporate systems, professional recording, and transportation. The company has a market cap of circa $221.78 Mn as on November 14, 2018. The company achieved a revenue of $19.65 Mn for the FY 2018, which is a growth of 35% on a Y-O-Y basis, it recorded an EBITDA of $0.6Mn which was on account of strong growth in Dante enabled products, OEM customers, revenue and unit shipments. As at 30 June 2018, the company had cash and cash equivalent of $13.63 Mn.
Growth Proposition: The firm has reported an OEM growth of 39% to reach at 1639 OEM contracts & at the same time there was a 58% growth in the Dante software units. The number of Dante enabled products has seen a compounded annual growth rate (CAGR) of 65% over the period from 2H 2014 till 2H 2018. In our view, the company has a brighter outlook on the back of new products initiative in core business, expanding its sales and support team across the geographic areas, and has launched the Dante Domain Manager software platform in FY18, which represents a new revenue source sold to end-users of Dante technology via a reseller channel.

AD8’s Growing network effect (Source: Company Reports)

Meanwhile, the stock price has modestly risen over the past one month by 5.83%, however over the period of past six months the stock has substantially increased by 19.41%. Also if we look at the YTD performance, the stock has given stellar returns of 51.25%. Currently, the stock traded at higher PE multiple of 86.43x with EV/EBITDA multiple of 336.39x, signaling overvalued position at the current juncture. Investors should keep an eye on the core business and recently launched product Dante Domain Manager software platform, operating cost and capital management as these factors can fuel the stock over time. We thus suggest investors keep a close watch on the stock at the current market price of $3.530 (down 2.755% on November 14, 2018).
 

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