AI-Media Technologies Limited  

AIM Details

AI-Media Technologies Limited (ASX: AIM) operates as a media technology company providing live record captioning, transcription, and translation services. The company’s technology platform combines artificial intelligence and human ability to deliver speech-to-text accuracy. It serves Australian customers in broadcasting, education, corporate and government sectors. AIM was listed in ASX on September 15, 2020.  

Q1FY22 Trading Update:

• Revenue spiked 35% YoY in Q1FY22 to reach $14.9 million, led by strong volume growth of 75% at SaaS product line Lexi and Smart Lexi.
• It had launched a new SaaS product suite to support parliamentary captioning services and Hansard workflow.
• The company integrated its multilingual live captioning solutions on Microsoft Teams.
• During the quarter, AIM won several customers covering Lexi, Smart Lexi, Alta, Falcon and iCap products in APAC, EMEA, and North America.
• It had partnered with NBC to deliver Olympics and Paralympics broadcast using its automated SaaS product lines.
• It had clocked a gross margin of over 50% in Q1FY22 in contrast to 39% in PcP.
• AIM closed the period with a cash balance of $15.5 million as of September 30, 2021.

Recent Business Developments:

• As per November 5^th announcement, Quest Asset Partners Pty. Ltd. has acquired over ~12.126 million shares representing voting rights of ~5.79%.
• On October 26, 2021, AIM announced an on-market buyback for up to 2 million shares over the next 12 months. The program has commenced on November 15, 2021.

A Quick Look at FY21 Performance:

AIM clocked revenue of $49.2 million, ahead of the prospectus forecasts of $43.8 million. AIM completed three acquisitions. Its notable acquisition includes EEG for US$34 million. AIM had posted a gross profit of $20.4 million in FY21, above its prospectus forecasts of $18.1 million. On the geographical front, North America showed strong traction with customer wins and acquisition of EEG. It had narrowed its net losses to $10.7 million in FY21 as compared to a loss of $12.7 million in PcP.

Current Ratio Trend (Source: Analysis by Kalkine Group)

Key Risks: AIM is a young company with limited operating history. Delay in customer wins, and intensified competition in SaaS-based captioning services may invariably affect its margins. Widening losses may drain cash resources and may expose to funding risk. The spread of the new variant may slowdown the expansion plans.

Outlook: AIM is targeting positive operating cash flows in FY22 and beyond. It is accelerating the transition to a higher-margin recurring SaaS revenue model through the launch of the SubSilo platform.  AIM is focused on offering a ‘one-stop shop’ with bundled recording and captioning services in markets like India, where the service offtake is limited. The integration of EEG is nearing completion, and it has secured additional resources for product enhancements that are targeted to complete in FY22.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last six months, the stock has corrected by ~16.37%. AIM is trading lower than the average of the 52-week low price of A$0.670 and the 52-week high price of A$1.150. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price with an upside of low double-digit (in percentage terms). The company can trade at a slight premium to its peers, considering the launch of bundled services in underpenetrated markets like India, customer wins and an uptick in Q1FY22 sales growth. For the valuation purpose, peers such as Nine Entertainment Co Holdings Ltd. (ASX: NEC), Ooh!Media Ltd. (ASX: OML), HT&E Ltd. (ASX: HT1), and others have been considered. Considering the healthy sales pipeline, share buyback program, decent cash balance, synergies from EEG acquisition, upside indicated by the valuation, and key associated business risks, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.715 as on 22 December 2021, 10.30 AM (GMT+10), Sydney, Eastern Australia.

AIM Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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