Ai-Media Technologies Limited

AIM Details

Company Response to Research Report: Ai-Media Technologies Limited (ASX: AIM) is engaged in the provision of quality live and recorded captioning, transcription, and translation services. It delivers speech-to-text accuracy through the combination of technology and human expertise. As per a recent update, the company has given a response to an uncommissioned research report issued by Morgans Financial Limited on 12 November 2021.

• The Group has stated that it does not adopt or endorse the views and forward-looking financial projections made in the Research Report. The report had stated that the projected Group revenues in FY22 are expected to be $61.6 million, revised from $70.5 million in the report issued in August 2021. The reports also projected EBITDA to be $0.6 million in FY22, revised from the previous reported figure of $9.6 million.
• As per AIM, it has not published earnings guidance for FY22 or beyond and considers to be too early to comment on it.

Q1FY22 Performance Update:

• The company reported revenues of $14.9 million in Q1FY22, reflecting an increase of 35% on the pcp.
• Gross margin also improved to over 50% during the quarter, compared to 39% on the pcp. The growth has been achieved on the back of a growing share of SaaS products, and lower cost base on services revenue.
• The volumes in SaaS product line Lexi and Smart Lexi increased by ~75% on the pcp.
• The company witnessed key customer wins during the quarter including NBC’s Olympics and Paralympics on Peacock and TVSN Australia's ‘shopping network’.
• AIM achieved breakeven in operating cash flow performance during the quarter.
• It ended the period with a cash position of $15.5 million as of 30 September 2021.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: The company’s share price has been under pressure due to an uncommissioned report from Morgans Financial Limited, commenting on FY22 performance. Thus, the company is prone to the risk of the opinion of independent research firms.

Outlook: The company is targeting positive operating cashflow in FY22 and beyond. It will also look to increase its revenue base with transition from Services to higher margin recurring SaaS revenue. The company remains optimistic on its prosects going forward driven by growth in revenue and favourable tailwinds from the accelerated use of video and live streaming, aided by worldwide regulatory settings.  The company has updated that it will commence its buy-back program from 15 November 2021 for up to 2 million of AIM shares, over the next 12 months. 

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

Source: 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: As per ASX, the stock of AIM is trading below its 52-weeks’ average levels of $0.67-$1.150. The stock of AIM gave a negative return of ~22.27% in the past one month. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight discount to its peers’ average EV/Sales, considering the recent volatility in stock prices, and negative profitability over the past few years. For the purpose of valuation, few peers like Ooh!Media Ltd (ASX: OML), News Corp (ASX: NWS), HT&E Ltd (ASX: HT1) have been considered. Considering the expected upside in valuation & current trading levels, decent performance in Q1FY22, higher gross margins, key client wins, and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.695, as on 17 November 2021, 10:31 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.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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