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Barcap,
Why is it shambolic?
Under current London Stock Exchange rules there is no obligation for listed companies to issue trading updates except when they are in possession of price-sensitive information. I'm sure Alphawave will issue a Q3 update but they are not obligated to do so and are free to determine its timing as suits them.
Agreed.
I wish I'd sold now at £1.50 when I was considering it.
Unfortunately the move above £1.60 kept me in, and then the loss declaration nose dived the stock .
Part of the living and learning curve i suppose......
Standard for this company to be honest.
Shambolic
Probably will be on Monday. You're right though it should have been this week.
AWE had declared that they would publish their "Q3 Trading Statement 2023" this week ?
https://awavesemi.com/investors/financial-calendar/
it is now listed under 'PAST EVENTS' even though nothing has appeared ?
Am I missing something ?
There's a press release out today regarding the Arm Total Design ecosystem which Alphawave has joined.
This effectively integrates Alphawave's most advanced high-speed connectivity IP and chiplet-enabled custom silicon platforms with Arm's Neoverse Compute Subsystems. In other words it gives Arm's customer base access to Alphawave's connectivity solutions.
https://awavesemi.com/press-release/alphawave-semi-elevates-chiplet-powered-silicon-platforms-for-ai-compute-through-arm-total-design/
https://www.arm.com/company/news/2023/10/arm-total-design-ecosystem
Hi Corissant, yes, the revenue of $315.5m shown on SimplyWall.st is the annual revenue made up of H2 2022 & H1 2023. H2 2022 revenue = Total 2022 revenue (185.4m) - H1 2022 (57.1m) = 128.3m. Therefore, annual revenue covering H2 2022 & H1 2023 = 128.3m + 187.2m = $315.5m.
So, in fairness to you, you were right to say the China portion of revenue for that 12-month period would have been around $200m.
As explained in my previous post the China portion of the revenue is expected to be reduced going forward in line with their 'simplified China go-to strategy' while revenues from all other regions start ramping up.
The decision to change the policy direction was influenced by the recent change in both the geopolitical attitudes and macroeconomic factors toward China over the last couple of years. The gradual withdrawal from the commitment to invest in Wisewave, has inevitably skewed the investment performance in what was the 'China Product Partnership'. The replacement revenue now coming from other regions nevertheless appears to be gaining some traction.
Q3 update expected this week.
Yes you are right by saying "this year" it should mean 2023 H1 only.
The data I was referring to is from simplywall.st and I suppose that contains estimation for whole 2023.
"I saw there is around 200m revenue from China this year. This 2/3 of total. What a big portion. ([LINK REMOVED]"
When you say this year, you should note we only have the interim report for the first half of this year.
The total revenue for the 6 months period was $187.2m, of which about $124m (2/3) has come from China.
Take note also that the company secured the same amount in bookings and have therefore maintained their backlog at $365.4m.
The License & NRE bookings for H1 was $114.9m of which only 9% comes from China.
The remaining $72.2m of bookings is royalties and silicon coming from both North America and China. The split for that part is not stated. What is clear is that the portion of revenue coming from China is intentionally being reduced fairly rapidly and they have stated that in the near future the level of revenue coming from China can be expected to be below 10%.
"Also AW seems to bear losts from WiseWave involvement".
The company intends to exit the Wisewave venture as quickly as they can and in the last investor call they said
they will do that in the second half of next year. You can read the Chairman's statement under the heading
"Simplifying our China go-to-market strategy" near the bottom of page 7 of their 2022 annual report.
"Any discussion on their China involvement and WiseWave investment?"
Hopefully what I have said above should be sufficient to answer your questions.
I saw there is around 200m revenue from China this year. This 2/3 of total. What a big portion. ([LINK REMOVED]
Also AW seems to bear losts from WiseWave involvement.
Any discussion on their China involvement and WiseWave investment?
"In 2004 I was immensely impressed by the Google search engine but did not buy any stock because I felt IPOs of 'trendy' operations were always at least fully priced. Big mistake, the price at the time was about $2.70 against $133 now."
Thought for the day: I wished too I could have invested in Google back in 2004. Although Google has had a fairly steady rise throughout the nearly 20 years it has been on the market. It has had some significant ups and downs on the way. In December 2007 the share had reached $17.87 and almost a year later had fallen to $6.56. That was a fall of 63%. Only as recently as November 2021 Google almost peaked at $149 and fell to as low as $87 only a year ago. That was a decline of more than 41%.
Alphawave's recent decline has amounted to not more than 33%. Maybe it could drop some more, maybe not.
If you are satisfied you've identified a genuine undervalued stock with long term growth prospects then it's always a case of sitting back and letting it run its course. Take the knock downs and big rises in your stride and be super patient. If you have a well disciplined trading strategy and the cash spare, buy a little in the lows and a sell a little after the sharp rises, but never play with the core holding until the day you decide you want to cash in your profits.
No one can guarantee Alphawave will be an eventual big winner because things like macroeconomics and geopolitics are extremely difficult to predict but technology growth trends if you have understood them well do tend to outperform even the rough moments of both the macroeconomics and geopolitics.
Extremely full response from AWE, encouraging!
Hi BlueRaphus,
No reply yet but that may be because I addressed the IR@ address. I will re-route to Jose's email directly and see if that helps.
The opportunity certainly looks enticing. There is, of course, many a slip between cup and lip but it is also all too easy to underestimate the potential of tech stocks, simply because the upside is outside of our experience. In 2004 I was immensely impressed by the Google search engine but did not buy any stock because I felt IPOs of 'trendy' operations were always at least fully priced. Big mistake, the price at the time was about $2.70 against $133 now. The trick was, I believe, a combination of intellectual depth and confidence to be leaders in the new technologies of the time.
While I struggle to fully understand the subtleties of this technology wave I can see the immense demand for big data will drive the demand for technology to support it. As far as I can see AWE have a real shot at the big time and the early post IPO issues will turn out to be an opportunity for investors to get in at a reasonable price. Looks like Mr Sutardja has done this in a serious way.
I have a decent stake but have not bet the farm - and will now watch with great interest as the story unfolds.
And just to add to my reply below on the very specific matter of capitalised R&D expenditure, I had asked if we could expect to see this amount significantly diminish in the future. Their answer was:
"Definitively lower as a percentage of revenue. As you noted, we are investing in the development of new products ahead of the beginning of the production ramp in 2024. There is always going to be investment in new products to support revenue growth but as the business scales even the same amount of investment will be relatively smaller."
So the short of it is that you should expect to always see some capitalised R&D expenditure on the balance sheet but that you can expect to see this decrease in percentage terms against the revenue generated. I'm personally confident the cash flow should start to look much healthier in future reporting periods.
Although these products are at the leading edge of the technology, this development is already well beyond the stage of 'proof that it works', and well into preparing them for manufacture at the foundry stage. The main risks associated with projects like this is not so much the new leading edge technology being deployed but rather things such as hyperscalers delaying or cancelling their plans as they adjust to the ever changing macroeconomic climate conditions.
Hi Monty,
I'm wondering if you have had any luck with a reply yet? I received a reply to my queries this morning.
Some of my questions were in relation to where the company sees its gross and EBITDA margins levels maturing to.
They believe their gross margins will progress to around the 50% region and EBITDA margins to around 40%.
By comparison to their mature large scale peers (e.g Marvel and Broadcom) they operate EBITDA margins in the 30 to 40% range.
More interesting though is that I also asked specifically about the kind of margins they are expecting to eventually achieve with respect to the optoelectronic products currently in development. They believe these will achieve gross margins in the 60 to 70% range.
Some points worth bearing in my mind with the optoelectronic development; they already have a framework agreement with a hyperscaler to sell these products to, the silicon products have already been deployed, and when revenue starts coming in next year that means production parts are being shipped to the customer.
In addition, these can be sold as standard products and the company has already engaged with key module makers which effectively opens doors to further opportunities with other customers. This segment of the business covers the full range of silicon from Active Electrical Cables (AEC) and Active Optical Cables, the full DSP range (in both PAM4 and Coherent) and there will be other types in the future.
I think it's also worth mentioning that the company has expectations of eventually generating very high revenues well in excess $300 million with the hyperscaler that they are involved with within the next five years or so. The transition from copper to optics within data centres for both the short and long reach connections is an inevitability in order to achieve the rapidly growing demand for faster data transfer rates at low power and low latency. So the addressable market at $1.4 billion growing to $3.6 billion by 2026 is very likely to be well in excess of $10 billion by the 2030s. Currently, there are very few competitors working in this space so AWE look to be in a good place to capture a commanding portion of this addressable market.
Thanks BlueRaphus,
I am happy to wait for the answer, and do understand the likely reason for the delay. Thanks also for your well articulated views.
I think we can be relaxed on the share based payment issue although a confirmation or indication from the company is always helpful.
The amortisation of acquired intangibles is what it is and I strongly disagree that it is not part of "the underlying operating performance of the business" They are assets that have been paid for and will hopefully give value to the business in future periods; if not they should be immediately written off. At an amortisation rate of £12M p.a. it is not trivial. Having said that it is not a huge issue - I will simply not deduct it from reported costs. I suppose the argument could be that it relates entirely to the newly signed agreements and thus should be deferred but that is unlikely imv - more likely it contains a lot of accumulated asset, not all of it at margins expected by AWE.
Capitalised development costs are a more complex issue, much debated in any software or hi-tech operation. In principle I accept it is right to match costs against income, the problem is that it is so hard to really know when and how much that income will be. If one is building new tech there is always a danger of it not arising as soon, or in the amount, anticipated, when contracts were signed yet capitalised costs are absolute and certain (ofc sales can outperform too). I guess the best we can hope for is an indication from management that margins will be realised as expected and that we are warned in the event such an outcome became less certain. Also ofc we must be confident that the capital investment prior to realisation of revenue is affordable in cash flow terms in a period where capital comes at a realistic cost. If I didn't believe we could trust AWE to do that I wouldn't be invested!
Hi Monty,
Usually Jose is usually quite prompt at replying but I guess the period immediately after results are his busiest as that is when he gets the most enquiries coming in. I sent an email only yesterday and I'm prepared to wait a couple of weeks for a reply. There's no harm giving him another reminder though. His direct email is jose.cano@awavesemi.com.
My impression is that the share based payments are as a direct consequence of the M&A activity and it would have taken a few months before making these hence why they are showing in the H1 2023 figures and not in the preceding 2022 figures. If you listened to Christian's answer to the question on the capitalised development expenditure he explained that these start to get amortized as soon as the revenue starts coming in. I'll leave you with the transcript of that part of the Q&A session:
Question: Can you talk about the capitalised R&D and what’s included and if this run rate is to be expected in the long term?
Chris: Yeah sure. So what’s included in the capitalised R&D? Well, it’s mostly our own product development as we said in the presentation. So there’s a mixture of things, there will be some IP, there will be some engineering work going into those actual products. In terms of the sort of Life Time of that capitalised R&D and effectively what were amortizing over that can range from 5 to 8 years depending on the nature of what’s being capitalized. Some of that will start being amortized quite quickly because it starts amortization as soon as that technology is available for use and some of that technology is for us to use within the business so that will start amortizing quite quickly but then some of it will take longer and as Tony has said you can expect to start seeing our own product revenues materialize in 2024. That’s when the majority of what we are capitalizing today will start to amortize.
My comment: You will note the $24.7 million capitalised development expenditure. Most of that is attributed to the cost of developing the optoelectronic products for the North American hyperscaler, so when the revenue starts coming in next year this cost will be amortized against that revenue. I am however expecting quite a bit more of this capitalised development expenditure to materialise in H2 this year as well and you should see that figure pop up in the end of year result next April but it will all be eventually amortized against the incoming revenue.
BlueRaphus,
Following your helpful reply I did drop an email to IR@awavesemi.com with two questions to try to understand better the true nature of the adjusted profit adjustments. Disappointingly, a week on, I haven't received a reply from them, even to say, for e.g. my questions were too specific. I am a bit surprised as one of the issues they are grappling with is the public perception of the transparency of management. Other companies have almost always replied within a couple of working days.
In case it is of interest text of the email posing the two questions was as follows:
QUOTE
Dear sirs,
I am a private investor with holdings in Alphawave Semi in my SIPP and ISA accounts.
I enjoyed your interim presentation and was very happy to learn of your continuing strategic development. However, having come through a period of significant merger activity the profit after tax is a more interesting number for me than EBITDA, so I can understand the ongoing costs of the assets acquired, including amortisation. The adjusted profit after tax was an encouraging figure, so its justification of the adjustments made to restate the disappointing statutory profit after tax are of particular interest. To get a feel for the nature of those adjustments I have essentially two questions:
Share based payments and Retention payments.
I understood that these are substantially the result of recent acquisitions and made to encourage staff to remain working for the company following the take-over / merger. Of course it is sometimes the case you will want to award staff with an LTIP in the normal course of business but would it be reasonable to assume no more than 10% of the total cost incurred in 1H 2023 would be incurred in any future 1 year period, except as a result of further M&A activity?
Amortisation of acquired intangibles.
Is this a normal amortisation expense, to be written of over its expected useful life? Alternatively is it a 100% write off of acquired intangibles that you do not see as of value to the business. Essentially I would like to understand whether is will repeat for the next 3 plus years or is a one off in 2023.
Ideally I would like, if appropriate, to share your answers on a public bulletin board, but, if you would prefer I did not do so, I will respect that but please let me know!
I look forward to hearing from you.
UNQUOTE
BlueRaphus
Fair play mate.
We both have our positions so interesting to see how things unfold in the future.
Barcap,
I’m well aware that company reports have a positive spin on them and it is to be expected that they contain forward looking statements. That’s normal. They are however also audited and it is illegal for them to contain misleading information. Therefore you can generally count on them as good sources for understanding the company.
I usually add quotes to sentences that have been cut and pasted and often provide the link to the source. If I haven’t done that it usually means it is my own compilation effort from various sources.
I’ve mentioned before I am capable of looking for both the negatives and positives on the information I research and am more than willing to share these and offer my opinion on them.
I’m not a lazy copy and paster as you seem to imply. It takes brain effort and critical thinking to do objective research.
I share some of what I research on these boards for the the benefit of anyone who cares to read it. That is what these boards are for.
My biggest admiration is for those who can successfully work with the stock in both directions. This requires being able to understand and anticipate market sentiment ideally before it happens or at least responding to it rapidly. It requires being highly attentive, having a disciplined strategy and being emotionless. I don’t have enough time or energy to follow that method so I stick with the basic value investor strategy and lots of patience. In recent years this has proved very effective for me.
BlueRaphus
Your posts usually consist of figures ripped from the company reports and announcements which is fine but you should realise that company reports are a PR exercise and tell people what they want them to hear.
You have a lot more time than me to produce lengthy posts but to be honest I've given up reading them.
Potential investors should take care that they fully research this company in detail and be cautious of facts and figures posted by individuals.
The key is DYOR for readers of this discussion board so neither me nor you influence them too much.
We both have opposing extremee views of the future for AWE so readers should make up their own minds.
Cheers
Barcap
Copied from where Barcap?
BlueRaphus
Thanks for some more lengthy cut and pastes.
Yes, hindsight trading is a wonderful thing but unfortunately most of us trade the future not the past.
Good luck with you future readings along with your cutting and pasting. Sometimes it pays to use your own brain than copy others.
I'll continue using my intuition and digging around behind the publicised reports.
Cheers
Barcap
No the weighing machine is not corrupted. It is the ‘voting’ machine that corrupts the market and it’s the weighing machine that brings the eventual justice.
Alas, it was Benjamin Graham who made the famous quote.
Benjamin Graham was a highly successful investor and is considered one of the most influential figures in the field of investing. He achieved notable success both as a practitioner and as a teacher of investment principles. Graham's investment philosophy, which focused on value investing and fundamental analysis, has had a profound impact on the investment community and has been followed by many successful investors.
Graham himself had an impressive track record as an investor. He was able to achieve significant returns by identifying undervalued stocks and holding them for the long term. One of his most famous investments was in the stock of a company called Geico, which he purchased when it was trading at a deep discount to its intrinsic value. The investment turned out to be highly lucrative, earning Graham and his clients substantial profits.
Furthermore, Graham's teachings and principles continue to be widely studied and applied by professional investors to this day. His book "The Intelligent Investor" is considered a classic in the field of investing and has influenced generations of investors, including renowned investor Warren Buffett, who was one of Graham's students.
Alphawave is now trading a deep discount and is well positioned to become highly lucrative.
Well done if you profit well from your shorts, though for someone who believes the company will go bust it should have been a no brainer for you to make your additional short while it was sitting for a couple months in the 140s & 150s but no you could only manage it near the bottom of the market’s ‘voting’ run! As you are convinced this one is going bust I’d suggest you hold the short until the administrators knock on the door, though be warned if there’s any chance of that happening it could likely be when your grandchildren are collecting their pensions.