Growth Focus: Altium Ltd (ALU)

by Patrick Taylor

Date of Data Capture: 11/6/2019


Classification: Software & IT Services

Current Price: $32.25

Market Capitalisation: $2.86 B

Forecast EBITDA Growth: 46.78%

Yield Estimate: 1.38%

Consensus Price Target: $32.44

# Covering Analysts: 5

Discount at Current Price: 0.59%

Price Target Trend (3-Month): Up-Flat +1.15%

Signal Timeframe: Monthly-Weekly-Daily

Trend Bias: Up-Flat / Long-Medium

Short-term: Positive
Medium-term: Positive-Neutral
Long-term: Positive

Recommendation: Buy

Focus: (Dividend Income) & Capital Growth

Set up Notes:
• Strong running software design company ALU has been moving higher in aggressive cyclical uptrends - with sporadic pullbacks providing entry points - we have that here with the stock underpinned by an equally strong outlook.
• Performance has been excellent with strong growth seen across sales, earnings and profits since 2013, all while increasing margins – this is set to continue with robust forecasts to 2021.
• We are buying into short-term weakness of a strong uptrend, with pricing breaking through linear resistance just days ago as the stock bounced off $30 structural support with good momentum shown across all key timeframes.
Support ($): 30.00, 27.50 & 25.00.
Resistance ($): 35.00 then clear upside.


Our primary focus here is capital gain, we will select our stocks from the ASX Top 500 All Ordinaries Index.

The old market truism of ‘buy strength and sell weakness’ means that you have to be prepared to pay up for good quality stocks and even be willing to buy a company as it makes new highs. Ideally you want the strong technical outlook to be matched by an equally robust fundamental growth story, and we think Altium Ltd might just be an opportunity worth chasing as it emerges from a minor consolidation after hitting all-time-highs earlier this year.

The company has 30 years of trading history and have been listed on the ASX since 1999, in that time they have matured into a dominant operator in the printed circuit board (PCB) market with integrated services ranging from CAD technological design, parts administration and cutting edge production. With the company having a declared intent to dominate its field, we see good organic growth being supplemented by an ongoing strategy of acquisition, and seeing that PCBs are integral to internet connectivity, the underlying market is good and is expected to remain so in the medium to long-term.

Altium already boasts an enviable client list including global giants like VW, BMW, Toyota, NASA, Boeing, Dell and Microsoft, but are also looking to build on this position to secure market leadership with excellent growth seen in Asia and especially in China. The company is in robust condition with no debt, increasing cash balance, and generally strong performance across key markets and an expanding subscriber base, with growth focus to remain in Asia and America.

Strong fundamental performance has been a driving force behind the consistent uptrend of the last few years with consistent gains seen across sales, margins and profits, with forecasts predicting more of the same out to 2021.
Analysts are largely in agreement with an overall positive aggregate view, though it does need to be noted that current target pricing sees the stock at a premium to expectations, though these have been rising sharply in line with stronger performance, and we expect analysts to follow the price higher.

Pricing shows a classic step/stair uptrend with regular consolidation breaks over the last two years as underlying profit growth has accelerated, this should continue and if we are right we should see pricing solidify the breakout from linear resistance near $33 last week. There remains important peak-high structural resistance remaining at $35 but with our weekly/medium-term indicator rolling to the upside with strong signal correlation, we expect price to follow market expectations higher, and while we know we are chasing this one – it could be quite a catch.


This report was produced by Taylor Securities Pty Ltd, which is a Corporate Authorised Representative (Number 414063) of Bespoke Portfolio Pty Ltd (AFSL 341991). Taylor Securities and Patrick Taylor (Representative number 414064) have made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Taylor Securities and Patrick Taylor does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities or financial products. The securities or financial products recommended by Taylor Securities and Patrick Taylor carry no guarantee with respect to return of capital or the market value of those securities or financial products. There are general risks associated with any investment in securities or financial products. Investors should be aware that these risks might result in loss of income and capital invested. Neither Taylor Securities and Patrick Taylor nor any of its associates guarantees the repayment of capital. WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision.

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