With a massive takeover offer from NASDAQ Listed Autodesk NASDAQ: ADSK, this seems to have spurred investor sentiment in the upwards direction. So we take a look and see “Should I Buy Altium Shares 2021 (ASX:ALU)

Altium Share Price

Shares in Altium have been on quite the roller coaster ride over the last 12 months, with the 52-week range from $23.66 – $40.21 / share. Shares are now trading towards the top end of the 52-week range at $36.22 / share.

Should I Buy Altium Shares 2021 (ASX:ALU)
Altium Share Price 1-Year Performance

Altium (ASX:ALU) shares were arguably a massive bargain back in May 2021 at ~$20 per share, however with Autodesk seemingly more willing to be discounting their software to increase revenue shareholders had some questions.

Altium shares are still one of the best performing ASX200 shares over the last 5 years being up a massive 440%.

Should I Buy Altium Shares: About

Altium (ASX:ALU) Limited is a publicly-traded software company that provides PC-based electronics design software for engineers who design printed circuit boards. Founded as Protel Systems Pty Ltd in Australia in 1985, the company has regional headquarters in the United States, Australia, China, Europe, and Japan.

Should I Buy Altium Shares: Investor Sentiment

After surveying 47 Investors about their current ALU shares sentiment: BUY-HOLD-SELL, as well as their target price over the next 12-months here are the results;

Prophets Trusted Affiliate Partner
Source: Raw Data from survey

Average target share price over the next 12-months sat at approx $38 / share, indicating that investors see some slight upside to the share price over the next 12 months.

Should I Buy Altium Shares: Fundamentals

Market Capitalisation$4,760,958,878
ASX Rank105 of 2,271
Last (Price)$36.28
PE Ratio104.04
Dividend Yield1.4%
Price to Book15.84
Source: Raw Data as of Publication

Based on the current fundamentals, at face value, Altium (ASX:ALU) appears expensive, however, it is important to remember that these metrics are backwards based and not forward-looking estimates. The ROE for the company has been impressive, they are also debt-free, which is a trait we like to see.

Should I Buy Altium Shares: Financials

Historical Data

On the 18th of June 2021, Altium released a trading update to the market. ASX:ALU mentions in the trading update that they anticipate the revenues for fiscal 2021 to be at the lower end of the previously provided guidance range of US$190 million to US$195 million, with margin to also be at the lower end of the range between 37-39% on an underlying basis (excl. one-off acquisition costs and write back of the SolidWorks minimum contractual amount due to termination of the agreement with SolidWorks).

The margins in Altiums business are quite impressive, it’s worthwhile pointing out that Altium appeared to start discounting their subscription based software early in the FY, hence margins at the lower end of guidance in my opinion were already priced into the stock price.

Altium (ASX:ALU) in 2020 delivered a high return on equity (ROE) of 15.23%, which is down significantly from the ROE deliverd in FY2019 of 28%. I am expecting that the ROE will be similiar in 2021, to the 2020 result.

Investor Update to the Market June 2021

Altium CFO, Mr Martin Ive commented “momentum has returned to ALU business with double-digit growth
in the second half, however, after a slow first half due to the impact of COVID and our pivot to the cloud, the
a full year is likely to be at, or slightly below, the low end of our guidance”.

Interesting to point out that ALU’s “pivot to the cloud” has been ongoing for a number of years.

Adoption of the Altium 365 cloud platform has increased and there are now more than 13,100 monthly active
users and over 6,300 monthly active accounts.

ASX:ALU also provided an investor slide presentation to the market on the 18th June 2021, re-affirming the companies ambitious revenue target of $500million by 2025. Given that the company managed to nearly double revenue from $100m in 2017 to over $189million in 2020, this may be achievable.

However, we will be keeping a close eye on ALU being able to provide high double-digit revenue growth over the next two years.

Key Financial Results

This is the income statement from the previous full year. Here we see decent revenue growth to $189million, which has translated to a profit of $30 million, and an EPS of 23.60cps. For Altium to achieve its ambitious $500million revenue prior to FY2025, we will look for this revenue growth to maintain above 10% YOY.

ALU also have over US$93million of cash and cash equivelants as of FY2020 financial report, with total equity sitting at US$189million.

Should I Buy ALU Shares: Technicals

The general consensus within the Technical Analysis community is currently Neutral on ALU shares. The moving averages and Technical Indicators seem to indicate a Strong Sell.

In summary, the short-term will rebound towards $6.63 before a new drop. The alternative scenario is that above $6.63 look for $7.08 and $7.35.

Insider Ownership And Trading

We can see that ALU is largely owned by the General Public and Institutions 47% and 40% respectively. Private companies own 0.1% of the company and individual insiders own 12% which is significant for a relatively large established company with a large market cap.

Ownership of Altium Shares

Substantial Holders:

NameTotal SharesHeld (%)
BlackRock, Inc11,942,4629.1%
Pinnacle Fund Services Limited9,634,2407.34
Aram Mirkazemi9,518,4037.25

Altium Takeover Bid from Autodesk

Sydney, Australia – 7 June 2021 – Altium Limited (ASX: ALU) confirms it has received a formal, non-binding, indicative and unsolicited proposal from Autodesk, Inc. (NASDAQ: ADSK) for the acquisition of 100% of Altium shares at A$38.50 per share to be implemented by way of a scheme of arrangement (Proposal).

We long saw Altium as a prime takeover target of Autodesk with the entire suite of software and model significantly aligned with Autodesk’s business model. At $38.50 per share, this sent the share price to the moon back in June. However, the board of Altium rejected the takeover offer considering the offer “significantly undervalues Altium’s prospects”

The board also mention that Altium has a unique position in the electronics ecosystem.

Should I Buy Altium Shares: Prophet’s Take

  • Revenue is still expected to exceed $500 million in FY2025, which equates to over 150% of today’s revenue figures.
  • The Company is completely debt free and has significant cash on hand (~$90 Million) 
  • In relation to their current PE (104) and book value of $15.85, the current share price is priced with investors expecting relatively large growth figures into the future.

We are closely monitoring ALU share price, however, we wish to see high double-digit growth to return to the company to validate the existing valuation metrics and share price placed on the company. At the moment we will be standing on the sideline waiting for their full-year results in August, however will likely re-evaluate the company in Q1 2022 to see if growth is returning. We are Undecided on ALU at the current prices.

Please Remember all Articles Published on Prophet Invest are Opinion only

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