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I had Acorn shares at 8p
Life changing.
If anyone knows the history of Arm then you'll know what I mean.
However, AWE investors probably aren't that sophisticated so have no idea what I'm talking about.
Lol!
Cheers
Barcap
AWE closest peers are on NASDAQ and yes they have similarly increased.
In the last month, Broadcom has risen approximately 18% and Marvel 20%.
Credo has risen about 35% in the last month. Credo is similar in market size and does high end connectivity like AWE except that it generally offers "N-1" products meaning one step behind the latest generation tech. Credo has more cash in the bank as it has not splashed out on acquisitions like AWE and is not yet profit making territory.
Take note that AWE had suffered a retrace of approximately 44% since the H1 interim results as the market perceived the cash flow stats unfavourably. Assuming AWE keep on top of their cash flow management then their future growth should exceed their peers by considerable margins.
This stock has risen 20 per cent in the last month. Anyone out there with information to share? Is it rising along with the other semi conductor stocks?
When does it go ex divi.?
Funny thing that Arm, etc came up 🤣
"Company tops competitive Deloitte Canada’s Enterprise–Industry Leaders award winner list, sees 15X growth over four years after strategic acquisitions, technological leadership growth"
https://www.businesswire.com/news/home/20231108634227/en/Alphawave-Semi-Named-One-of-Canada%E2%80%99s-Enterprise%E2%80%93Industry-Leaders-Winners-in-Deloittes-Technology-Fast-50%E2%84%A2-Program
Interesting interview with Alphawave's CTO Tony Chan Carusone.
https://www.youtube.com/watch?v=-RpHEBy2_L4
He makes the point that where AI was originally happy to piggy back off more general processing and network h/w, over time it has been migrating to more domain specific solutions. We have already seen this on the processing front with NVIDIA's AI chips. However such chips with their massive parallelism need to be able to suck in data from everywhere at once which creates new data transfer challenges.
Cue Alphawave's leading edge data transfer capabilities. Cue Alphawave's leading edge ability to develop and package chiplets.
A positive indicator in the trading update is in pages 29 and 30 of the corporate presentation, were I note that Licence and Non Repeating Engineering bookings are described as essentially USA EMEA and APAC and Royalties and Silicon 75% China 25% USA. Even without adding back the $20M deferred orders this implies the China business at about 31% and reducing. Assuming the rapid increase in USA business continues the earlier heavy reliance on China will soon be history.
"The trading statement was much as I expected and was largely moribund.
I look forward to the analysis by BlueRaphus."
Barcap has provided his two-word conclusion of his personal analysis on the trading statement.
Perhaps his conclusion was reached on the basis of the only main negative in the statement and that is that the year-on-year comparison of new bookings shows a fall of 9%. In particular, the Licence and NRE bookings part has fallen by more than a quarter amounting to almost $15 million less than what they reported in Q3 of 2022.
The company however, pointed out that this does not include the fact that they won a further $20 million in custom silicon NRE bookings during Q3 but was not signed until the 3rd week of Q4. Had it been signed within the period this would have meant a 16% rise in bookings. They are sticking to playing by the book which is fair enough.
Moreover, if you look at their Q1 & Q2 trading updates, the bookings there were 312% and 196% up respectively compared with previous year on year bookings. The Q3 update also states that there is a very strong pipeline of opportunities expected in Q4. If you total up the 2023 bookings so far for Q1, Q2 & Q3, these add up to $260.1 million which already exceeds the total annual bookings achieved in 2022 of $228.1 million.
Given the strong pipeline forecast for Q4, they are on track for more than $300 million in bookings annually and quite likely to be around the $350 million mark which is similar to their guidance revenue for the year, therefore they are at least maintaining their backlog.
The design win rate is such that it is now heading toward exceeding 30 wins a year.
Only around 11% of new Licence & NRE bookings for the year to date has come from China, meaning that the company are effectively reducing their reliance on China revenue while still being able to scale up the business.
Perhaps one of the more interesting highlights is that they have received a design award for next generation chiplet-based AI with a view to a definitive agreement during Q4. As part of this design award the customer is replacing one of their long-standing semiconductor vendors with Alphawave. That on its own should tell you where Alphawave’s future is likely heading and I think there are plenty of polar-opposite words to moribund that can be used to describe this trading update.
The trading statement was much as I expected and was largely moribund.
I look forward to the analysis by BlueRaphus.
Cheers
Barcap
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.