Audinate Group Limited

Significant Rise in Audinate’s Revenues: Information technology company, Audinate Group Limited (ASX: AD8) provides professional digital audio networking technologies globally.The company recently announced its new issue where 10,000 fully paid ordinary shares will be available at the exercise price of $0.062, 99,502 fully Paid ordinary shares will be available at the exercise price of $0.26 and 4,498 unlisted options with exercise price of $0.26.

In another update, voting power of AustralianSuper Pty Ltd (Audinate’s substantial holder) decreased from 8.37% to 7.20%. The company's revenue increased by 60% pcp to $14.2 million in first half of FY19. The company’s results for 1H19 demonstrated a rise of 51% in USD revenues versus 1H18, supported by a 59% increase in the shipments of Dante units (Chips, cards, modules, adapters & software). The revenue growth was aided by growth in the repeat revenues associated with Dante Brooklyn units (>30% growth) and Dante Ultimo chips (approx. 50% growth).

Its gross margin reduced from 74.6% in H1FY18 to 73.3% in H1FY19, due to product mix (adapters) & a part shortage which led to a rise in costs temporarily.


H1FY19 P&L Statement (Source: Company Reports)

What To Expect From The Company: Audinate is determined to invest in growth initiatives to drive future revenue. Its key priorities for FY19 includes broadening its suite of core Dante products to accelerate penetration within OEMs and continued promotion of Dante AVIO adapters and Dante Domain Manager. However, increased capital deployment in Dante AV (Video) and expansion of Sydney office as well as consistent strategy and successful execution are also the key priorities.

Stock Recommendation: Audinate’s share generated a positive YTD return of 69.10%. It is currently trading at its 52 weeks high level, which indicates a possibility of correction. In the span of previous three months and six months, the company’s stock has witnessed the rise of 62.70% and 64.03%, respectively.

Considering the aforesaid facts and current trading level, we give an “Expensive” recommendation on the stock at the current market price of $6.250 per share (up 3.821% on 9 April 2019) and we further advise the investors to wait for corrections and look for a better entry position. 

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