Aferian PLC (LON: AFRN)

Aferian PLC is an FTSE AIM All-Share index listed United Kingdom-based media technology company. The Company operates through 24i and Amino and enable operators, broadcasters, & content owners to provide viewers the choice and usability. The Company was formerly known as Amino Technologies PLC.

Recent trend of dividend payments

The Company will pay a final dividend of 2.09 pence per share on 22 April 2022, while the ex-dividend date was 07 April 2022. It has taken a full-year FY21 dividend to 3.09 pence per share. In comparison, the Company had paid a total dividend of 1.87 pence per share in FY20. 

Growth Prospects

• Acquisition Benefits: The Company has accelerated its strategic progress with the acquisition of AI-powered video recommendation service, the Filter, to address the convergence of streaming services and traditional Pay TV.
• Customer Deployments: The Company has completed strategically important customer deployments during FY21, including the Canadian Hockey League and Cinessance for 24i. Meanwhile, the Company has also deployed Go Malta and CableNet in Europe, Optage in APAC and Conway, Home Telecom and Hay Communications in North America for Amino's Android TV platform.

 Key Risks 

• Ukraine Tension: The mounting concern over the Russian invasion of Ukraine can continue to weigh on the equity market.
• FOMC Meeting Minutes: The Federal Open Market Committee's meeting minutes indicated that the Federal Reserve is preparing to move aggressively to head off inflation.
• Record UK Inflation: British inflation hit a 30-year high of around 7.0% in March 2022, intensifying the cost-of-living squeeze faced by households. Thus, it may result in a further interest rate hike by the Bank of England.

Key Fundamental and Shareholders Statistics of Aferian PLC.

Kestrel Partners LLP is the most significant shareholder as it holds nearly 18.71 million shares.

Financial Highlights (for the 12 months period ended on 30 November 2021, as on 10 February 2022)

(Source: Company Filings)

• Strong Top-Line Business: The Company’s top-line revenue grew year-on-year by around 12%, with almost 43% growth in Annual Recurring revenue during FY21.
• Profitability: AFRN’s adjusted earnings per share rose by around 14% to 11.45 US cents per share during FY21.
• Net Cash Position: AFRN had shown significant improvements of around 49% in net cash from USD 9.50 million as of 30 November 2020 to USD 14.2 million as of 30 November 2021.

Share Price Performance Analysis

 (Source: Refinitiv, Research done by Kalkine Group)

On 14 April 2022 at 11:20 AM GMT+1, AFRN’s shares were trading at GBX 132.00, down by around 1.12% from the previous day’s closing price. Stock’s 52-week High and Low were GBX 172.00 and GBX 130.30, respectively.

On a daily chart, the stock price is sustained around the lower Bollinger band. Hence, there could be an uptick in the stock price in the near term. Furthermore, the 14-days RSI of ~33.06 illustrates an oversold territory.

Valuation Methodology: Price/Earnings Approach (FY22E) (Illustrative)

Business Outlook

The Company had generated double-digit growth across the majority of the key performance metrics during FY21 and entered FY22 in a solid position. Moreover, AFRN would continue to strengthen the pipeline of potential M&A opportunities aligning with the 2025 strategy. Meanwhile, the Company targets to converge the worlds of streaming services and traditional Pay TV over the medium term. In a nutshell, the Company aims to drive increased returns for the shareholders with enhanced revenue growth & visibility and transformation into a software-led company.

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Considering the solid annual recurring revenue growth, significant improvement in net cash position, consistent dividend payments, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Aferian PLC at the current market price of GBX 132.00 (as of 14 April 2022 at 11:20 AM GMT+1), with lower-double digit upside potential based on 16.09x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

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 for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

Note 3: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 4:  Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Note 5: Dividend Yield may vary as per the stock price movement.  

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 the 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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