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Earnings forecasts upgraded on back of excellent trading
Thursday 15 Dec 2016 Author: Steven Frazer

Just two months after an upbeat trading update from Amino Technologies (AMO:AIM) that saw earnings forecasts upgraded, the home broadcast and connectivity kit designer says (8 Dec) it will beat those raised estimates.

Better than expected trading for the full year to 30 November is being driven by record orders in August, coupled with favourable foreign exchange rates.

FinnCap analyst Andrew Darley has lifted revenue forecasts for full year 2016 by 2.5% to £74.8m. This looks marginal on its own but adds up to an 8.4% upgrade since July’s half year results.

The analyst had been anticipating £8.7m pre-tax profit post the interim figures, and now pencils in £10m implying a near 15% hike. Adjusted pre-tax profit is now set to be close on double last year’s £5.1m figure.

The improved profitability is backed by cash flow, with £6.2m year end net cash comfortably exceeding FinnCap’s £5.2m forecast.

This is an astonishing turnaround for the Cambridge-based company, but one that was predicted by Shares more than a year ago.

We flagged the rapid recovery potential on 29 October 2015 at 114p just days after Amino issued a profit warning due to a rare bout of sloppy business execution while it integrated a couple of acquisitions.

The subsequent surge of new business and soaring share price testifies to CEO Don McGarva’s skill at handling that emergency. The share price is currently trading at 175p, 53.5% above the level at the time of our original feature.

FinnCap’s Darley is currently resisting the temptation to alter 2017 forecasts. He’s sensibly hanging on until 2016 figures are published on 7 February 2017, when we should get much more detail on new business momentum and order backlogs. N+1 Singer’s Oliver Knott isn’t waiting. He has upped his own 2017 adjusted pre-tax profit estimate from £9.7m to £10.4m.

Amino has proved to be a cracking contrarian play through the second half of 2016 yet the shares remain far from expensive. Based on consensus 12.3p of earnings per share for the year to November 2017, the price to earnings multiple stands at 14.2, backed by an expected free cash flow yield of 5.4% and a 3.8% dividend yield.

We have been long-run fans, and remain so at 175p.

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