Amino Technologies offers value and fat dividend

Amino Technologies has turned a corner. Right-sizing its product portfolio has meant a struggle for profit growth in recent years, but the brains behind internet-enabled TV (IPTV) set-top boxes will return to top line growth this year, and feel the full benefit of heavy investment in new products.

In fact, the company actually grew sales in the second half, which meant revenue edged up to £36.2 million in the year to November. And after upgrading expectations in December, underlying pre-tax profit jumped by 23% to a record £4.2 million. Strong cash generation also left Amino with year-end net cash of £20.8 million, up 6% and worth 40p per share. That bankrolled both a £1.4 million share buyback and far bigger than expected 45% increase in the full-year dividend to 5p.

North America and Eastern Europe did well, although Western Europe struggled amid a technology hiatus. Expect more of the same in 2015, chief executive Donald McGarva told Interactive Investor, although signs of improvement are evident on the continent.

New products will feature this year, too. Consumers want functionality and performance, and we'll be hearing a lot about so-called HEVC (high-efficiency video coding) this year. It dramatically improves bandwith efficiency, giving HD quality at much lower speeds, and is slated for release in the second half of 2015. It also means there'll be greater demand for 4K Ultra High Definition later this year and through 2016.

"We believe our products are better quality and more stable than rivals," says McGarva. "In a technology shoot-out, we generally win."

And McGarva's confidence has a clear benefit to shareholders. As well as the huge increase in the dividend, Amino has already pledged to raise the payout by at least 10% for the next two years. "We could not suggest a better statement of confidence," says Andrew Darley, an analyst at finnCap.

And Amino's valuation multiples suggests the potential is not fully appreciated in the City. At 125p, the shares yield over 4% and trade on just 10.9x earnings estimates for 2015 if you strip out forecast net cash. It falls to single digits for next year.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.