5 Stocks in Artificial Intelligence Sector – APX, BRN, OPN, LVT and PME

 

Stocks’ Details
 

Appen Limited (ASX: APX)

Strong full year performance: APX, with support from Leapfrog is leading in the machine learning and artificial intelligence sector and the latest full year results for the period ending 31 December 17 have supported the stock in continuing its streak in information technology domain. Revenue rose by 50% and amounted to $166.6 million (55% in constant currency); and underlying EBITDA increased by 62% and amounted to $28.1 million as compared to last year. High growth of revenue and EBITDA were benefitted from new customer acquisition and projects. The Group continues to execute well with underlying EBITDA margins that improved from 15.6% in 2016 to 16.9% in 2017. The Board declared a final dividend of 3.0c per share, fully franked and this resulted in full year dividend of 6.0c which is up 20% from 5.0c of last year. Appen is well positioned to benefit from growth opportunities that are consistent with the company’s long-term strategy to be the global leader in the development of high-quality, human annotated datasets for machine learning and artificial intelligence. However, at the back of 133% run up in stock price in last six months, the stock looks Expensive at the current market price of $10.30
 

Financial Summary (Source: Company Reports)
 

Brainchip Holdings Limited (ASX: BRN)

Weak full year result but other significant developments reported: BrainChip Holdings, a leading developer of software and hardware accelerated solutions for advanced artificial intelligence, reported 81% rise in revenue for financial year ending December 31, 2017. However, the loss from the continuing operations widened by 185% ($13.8mn from $4.8mn of FY16) while gain from discontinuing operations was up 111%. The group did not pay any dividends as basic and diluted loss per share from operations also inched higher. On the other hand, BRN has successfully completed the Spikenet Technologies Neural Network in a Field Programmable Gate Array hardware platform. In March 2017, the Company acquired an exclusive license to learning rules and algorithms that were developed by CERCO; and in May 2017, the Company’s Game Statistics and Game Outcome solutions were placed in a field trial at a leading casino in Las Vegas. In August 2017, the Company announced the commencement of development of AKIDA, system-on-a-chip Neuromorphic Processor Unit; and in October 2017, the Company shipped its first BrainChip Accelerator card to a major European automobile manufacturer. Late last year, the Company raised about A$21.5 million before fees, through a share replacement which included interest from numerous institutional and sophisticated investors. In January 2018, the Company and Gaming Partners International Corporation entered into a licensing, development and revenue sharing agreement that were related to joint development of video analytic products for worldwide deployment in casino currency security, game table operations and player behaviour applications. If we see the share price performance, BRN has slipped by 13.95% in the past one month and this seems to provide an interesting buy the dip opportunity. However, we would like to watch out for any improvement in the financial performance based on the developments highlighted by the group, and give an Expensive recommendation at the current market price of $0.18
 

OpenDNA Limited (ASX: OPN)

Built up strategic partnerships: For OPN, the half-year ending 31 December 2017 was a built-out period for transitioning from pure development to revenue generation phase and it was highlighted by the successful on-boarding of a number of customers across Publishing, E-commerce, Media, Mobile and Gaming sectors. The revenue for the half year has been up to $72, 447 from $13, 169 while the loss has narrowed down to some extent. The Company also launched its proprietary data visualisation system, Synapse and easy to use dashboard that draws in complex data and converts it to display very clear and efficient information in a more intuitive way. With the transition from pure development to revenue generation, efforts were also focussed on scaling the team to support the successful integration of OpenDNA’s technology with customer’s existing platforms, with a view to generate revenues for the business in 2018. Meanwhile, OPN signed a binding MOU with Future Mobile Technology (FMT) and FMT aims to sell 500,000 Netsurfer phones into the market by the end of 2018. This partnership will save OpenDNA of $1M in user acquisition costs and at the same time FMT benefits by learning more about their customers’ interests and generate additional incremental revenue after the sale of the headsets. The group is thus set for better topline from the existing customers along with an opportunity to leverage on their success to further expand its global customer base. The increasing appetite for AI technologies is another positive for return on investment opportunities, wherein OpenDNA can benefit from the strong pipeline of products and technologies. OPN has expanded its channel partnerships, which now include Looker, BBDO, Columbus Agency and Pugh Morgan, each of whom continue to offer a pool of potential customers for OpenDNA’s services across a multitude of sectors. The share price declined by 20% in the last six months and we put a “Speculative Buy” recommendation at the current market price of $0.105, given the potential that exists.


Revenue Sources (Source: Company Reports)
 

LiveTiles Limited (ASX: LVT)

Strong emphasis on product innovation: LiveTiles, a global software company announced that annualised subscription revenue (ASR) has surpassed $10 million, which was up from $6.9 million as on 31 December 2017. The Group entered into a strategic relationship with N3, a sales and marketing consultancy and execution firm based in USA and it comprises of sales and marketing execution agreement and also a software license agreement. The average monthly payments by LiveTiles to N3 will be approximately US$0.8 million after factoring in expected government grant funding in the United States. The software license fees payable to LiveTiles is US$225,000 per month and represents ASR of US$2.7m and it will strengthen LiveTiles’ relationship and alignment with Microsoft (with which the group promotes its AI products). The share price rose by 137.5% in the past six months but has been down 20.8% in one month given the financial performance being below expectations and representing a rise in loss after tax (-$5,921,000 in 1H18 from -$2,774,000 in 1H17). We give an Expensive recommendation at the current market price of $0.455
 

Annual Subscription Revenue Analysis (Source: Company Reports)
 

Pro Medicus Limited (ASX: PME)

Strong level of growth: Pro Medicus recently announced an after-tax profit of $5.07 million which is up by 5.7% year on year for the first half of 2018 and it reflects an increase in margins which were up by 9%. Transaction revenue was also a major contributor to overall Group revenue which continued to grow year on year despite of the lower level of one-off professional services in the first half as compared to the first half of 2017. It also entered in a contract with Yale New Heaven Health and there are some of the best lead generations both before and after RSNA trade show, and the group has one of the best pipeline both in terms of quantity and quality that continues to grow. The group also aims to benefit from AI in the medium to long term with own product sets on healthcare imaging and integration of appropriate algorithms in relation to automating many features. Fully franked dividend was 2.5 cents for the first half of FY18 as compared to 1.5 cents unfranked for the first half of 2017. The share price rose by 65.47% in the past six months and is trading at a higher level. At the current price of $8.38, the stock looks touch Expensive.

EBIT Margins (Source: Company Reports)

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