Has anyone got any thoughts on this?@hazza25For what it’s worth,...

Has anyone got any thoughts on this?

@hazza25

For what it’s worth, my thoughts on AIM are as follows.

Interestingly, the Company is now trading at the same EV (~51mA$ or ~34mUS$, at today’s FX rate) as the price they paid to acquire EEG in May 2021 [*].

By way of reminder, that consideration corresponded to a FY2021 EV/EBITDA of ~10x, for a business that has subsequently experienced >20% pa Revenue growth as well as margin expansion (partly at the expense of AIM’s “old” ACS business which has since shrunk).

Everything else (i.e. ACS and the legacy non-US AIM business) is basically being given away for free.

Looking at the overall Group business, I find it noteworthy that

a) it has reached the stage of being self-funded (i.e. it is net cash and cashflow positive),
b) it still has a material growth opportunity within its own iCap distribution network, with over 70% of the total iCap volume not yet monetised via either Lexi or AI Premium, and
c) it has additional room for growth outside iCap via existing platforms (e.g. the integration with MS Teams has opened up an addressable market of >250mm Teams users potentially wanting paid/premium captioning services)

In EV/GP terms, and assuming the Company delivers merely the low end of FY2022 guidance for both Revenue (60m$) and GM (53%), the business is currently valued at a FY2022 multiple of 51m$/(60m$*53%) = 1.6x

If EEG keeps driving overall Revenue growth and Gross Margin expansion, I see it reasonable to expect that an increasingly large portion of that Gross Profit will soon be converted into EBITDA (hence into FCF, given no debt, relatively low payments for PPE/Intangibles and no income tax liability for the foreseeable future).

Given the undemanding starting point in EV/GP, the pace of underlying GP growth (>20% pa) and the likely decoupling between GP and Opex (i.e. Opex not growing as fast as GP), I personally expect AIM’s FCF yield to reach double digits relative to today’s EV (i.e. >5m$ pa, on a run-rate basis) at some point in FY2024, and possibly even get to the 15%-20% pa area within the next 2-3 years.

Based on that, I have been buying the shares over the past few days, and AIM currently represents ~1.5% of my NAV.

Let me know if I'm missing anything obvious here.

Cheers

[*]: fully diluted and adjusted by the ~4mUS$ that is still to be paid as earn-out for the EEG acquisition.