Audinate Group Limited

AD8 Details

Decent Growth in Revenue in FY20: Audinate Group Limited (ASX: AD8) provides professional audio networking technologies globally. The market capitalisation of the company stood at ~$552.83 million as on 2^nd February 2021. In a recent trading update, the company stated that the business has generated unaudited US$11.1 million in revenue for 1H FY21, which was in line with revenue of 1H FY20. The company added that the strengthening AUD / USD exchange rate has negatively impacted unaudited revenue in AUD, which amounts to around A$15.4 million. Moreover, the company is cautious of the near-term economic uncertainty associated with the ongoing impacts of COVID-19 around the world. During FY20, the company recorded revenue amounting to A$30.3 million, reflecting a rise of 7.1% over FY19. Gross profit for the year amounted to A$23.2 million, indicating an increase of 10.1%. As a result, the company recorded a gross margin of 76.6%.

Gross Margin in Last 5-Years (Source: Company Reports)

Outlook: The medium-term strategic priorities of the company revolve around investing to double its engineering and R&D functions to support long-term growth. In addition, the company would also be focused on strengthening its total addressable market with the addition of video and software products. The company has scheduled to release its 1H FY21 results on 22^nd February 2021.

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

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company closed the FY20 with a cash balance of A$29.3 million. In the last three and six months, the stock of AD8 has provided returns of 8.94% and 53.48%, respectively. The 52-week low-high range for the stock stands at $2.510 - $8.500, respectively. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price which is offering an upside of low double- digit (in percentage terms). On a technical front, the stock has a support level of ~$6.7 and resistance level of ~$8.457. Hence, considering decent performance in FY20, encouraging outlook and returns in the past months, we give a “Hold” rating on the stock at the current market price of $7.710 per share, up by 6.344% on 2^nd February 2021.

AD8 Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Gentrack Group Limited

GTK Details

Decent Growth in ARR: Gentrack Group Limited (ASX: GTK) is involved in the designing, development, implementation and support of specialist software solutions for energy utilities, water companies and airports. The market capitalisation of the company stood at $124.78 million as on 2^nd February 2021. For the year ended 30^th September 2020, the company recorded revenue amounting to NZ$100.5 million, indicating a fall of 10% over FY19 while Annual Recurring Revenue (ARR) for the year witnessed a rise of 4.9% to NZ$81.3 million. Adjusted NPAT for the year amounted to NZ$2.4 million, and all the business segments were profitable during the year.

Key Metrics (Source: Company Reports)

Guidance: Looking forward, the company continues to see market opportunities and will make the investment to provide market-leading solutions for its customers. In addition, GTK would continue to invest in new skills and the development of its people in line with its tech strategy.

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

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: GTK closed FY20 in a net cash position of $16.8 million, which was aided by improved working capital. In the past one month, the stock of GTK has corrected 11.41%. The 52-week low-high range for the stock stands at $0.770 - $2.300, respectively.  We have valued the stock using an EV to Sales multiple based illustrative relative valuation and arrived at a target price with an upside of low double-digit (in percentage terms). On a technical front, the stock has a support level of ~$1.113 and a resistance level of ~$1.947.  Therefore, considering the cash-rich business, growth in ARR, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.280 per share, up by 1.185% on 2^nd February 2021.

GTK Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer  

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.