In this weeks video insight, David takes us through Altium Limited’s (ASX:ALU) 25-year listed history, marked by a recent bid from Renesas Electronics Corporation valuing it at AU$9.1 billion. From highs of $6.70 per share in 2000 to a record low of $0.09 per share in 2011, Altium has experienced significant fluctuations. However, since fiscal 2012, there has been a turnaround with notable revenue growth and improved earnings before interest, taxes, depreciation, and amortisation (EBITDA) forecasts.
Transcript:
Hello, I’m David Buckland and welcome to this week’s video insight.
I wanted to focus on Altium Limited (ASX:ALU), one of the most successful ASX listed companies, since recording its record low of $0.09 per share recorded in mid-2011. Last week, Japanese-based Renesas Electronics Corporation, a supplier of advanced semi-conductor solutions, announced a bid for Altium at AU$68.50 per share, valuing the company at AU$9.1 billion. In short, the share price jumped 760-fold in twelve and half years.
Breaking the 25-year listing of Altium into two halves from a financial (and human resource) perspective is useful.
Soon after the float in August 1999 at $2.00 per share, the market pushed the share price to $6.70 by March 2000, and Altium was selling on 13X revenue, indicating enormous excitement. However, despite a tripling of revenue towards U.S.$50 million over the ensuing 11 years, the accumulated losses of U.S.$83.4 million by 30 June 2011 saw Altium’s share price deteriorate by 99 per cent to the record low of $0.09. What a roller coaster! At that price, Altium was selling on 0.2X revenue, and virtually all shareholders had given up on the company.
From fiscal 2012, however, Altium’s financials had commenced their upward trajectory on a sustainable basis, and the second half of Altium’s floated history began in earnest. Over the period, Altium’s revenue grew from U.S.$48.4 million in fiscal 2011 to a forecast U.S.$320 million in fiscal 2024, whilst its underlying EBITDA jumped from a negative number to a forecast U.S.$115 million in fiscal 2024.
The enthusiasm of the Altium team, including Aram Mirkazemi, who joined Altium in 1991 and was appointed CEO 23 years later in 2014; and Sergiy Kostynsky, who joined Altium in 2001 and was appointed executive director in 2018; and Sam Weiss, who was appointed non-executive chairman in 2007, really got the formulae right.
Pleasingly, Messrs Mikazemi, Kostynsky and Weiss, three of the major drivers of Altium over a very long period, own an aggregate 13.83 million shares in Altium, and between them, they will realise AU$947 million, assuming successful acceptance of the Renesas Electronics bid.
The crux of this presentation is how the rating of a listed business can go in and out of favour – from $6.70 per share or 13X revenue in March 2000 to $0.09 per share or 0.2X revenue eleven years later in mid-2011 to the current $68.50 per share takeover bid or 18X prospective revenue. And for those with intestinal fortitude, buying when something, hopefully with a future, when it is out of favour and selling when it is in favour is recommended.
Pleasingly, Montgomery and Australian Eagle own shares in Altium Limited.
That’s all I have time for this week. Please continue to follow us on Facebook and X.
The Montgomery Fund, the Montgomery [Private] Fund and The Australian Eagle Trust Long-Short Fund owns shares in Altium. This blog was prepared 21 February 2024 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade Altium, you should seek financial advice.