A month ago or so, someone recommended this stock on the board. I kept the reference but never had a chance to look into it. Now that I have some cash from the sale of Pandora and MTZ, I did look into it and bought a small position.
I’d like to thank the person who recommended it but can’t find the original post to do so.
Saul
Hi Saul,
Could you post your notes for this company?
Anirban.
Anirban, I haven’t had time to write it all up, but here’s what I got from that earlier post (somewhat rewritten). And then I added three links at the bottom.
Saul
Avigilon AVO.TO or AIOCF
This is a somewhat overlooked Canadian company which has been the #1 growth company in Canada the past 2 years: Avigilon, ticker symbol AVO on the Toronto Exchange, and AIOCF in the US.
Avigilon has rapidly growing sales (102% CAGR, and a current $220 million Canadian run-rate), steadily expanding profit margins (unusual for a growing company, especially in the tech sector), competes in a highly fractured international market (where no participant had more than a 5.9% market share, and the top 15 had only a 43.5% share).
Avigilon provides the only end-to-end solution for buyers of High Definition digital surveillance cameras, storage solutions, network switches, video analysis/alerts, and access control. This gives them a strong competitive advantage relative to the alternatives. It is a “Moat in the making” and should also qualify it for “Rule-Breaker” status given the unifying, one-stop-shopping nature of its value proposition in the marketplace, and its steady displacement of outmoded analog competition.
Furthermore, and most importantly regarding future growth opportunities, the worldwide market for such systems (both digital and analog, not including installation costs), was $12.6 billion in 2012 and IHS forecasts it will grow to $23.2 billion in 2017, with the High Definition digital component making up the lions-share of the growth (24% CAGR), whereas demand for outmoded analog systems will remain basically flat. It would be reasonable to expect that in the coming decade or two almost the entire analog market sector will be eliminated in favor of digital, IP-enabled, systems.
The company went public in late 2011 and has done several re-financings and is thus very well capitalized for its current and future expansion plans, even after paying all-cash for several recent modestly-priced bolt-on acquisitions (RedCloud Security, VideoIQ).
Its CEO, Mr. Alexander Fernandes, has over 20 years of experience in the technology sector, and in fact founded QImaging and then sold it to Roper Industries in 2002. As such, Avigilon gains immeasurably from his prior experience running a large technology company that engaged in a somewhat similar product set as Avigilon.
Their current production facility in British Columbia is highly automated and cost-competitive against Asian or other geographic regions, enables the protection of Avigilon’s intellectual property, and is large enough to handle annual sales of $500 million by Q4 2016 (without any further Capex) which is roughly double the current production run-rate of $220 million. Future production facilities will be set up in various regions around the world, with the Richmond facility acting as the Master template.
The company engages 2000+, and growing, system integrator resellers worldwide to handle the sales process, with Avigilon staff assisting as required to explain the compelling value proposition to end users. To date the company has installed its systems in 24,000 customer sites in 113 countries around the world.
For additional information, there is May 2014 investor presentation that can be downloaded here:
http://ir.avigilon.com/Investor-Relations/Investor-Events-an……
And the Q1 2014 Report that can be downloaded here:
http://ir.avigilon.com/Investor-Relations/Financial-Reports/……
Check pages 5-6, 7, 11, and 13-16 in particular for the following key info:
Quarterly results going back to 2012 (note that every Q1 there is a seasonal minor drop in sales due to a strong prior Q4, which is explained on page 6)
Analysis of the steadily declining cost of sales percentage
Steadily improving profit margin percentage
Outlook regarding the global surveillance market, followed by an explanation of Avigilon’s Growth Strategy
Note that the stock dropped quite precipitously recently, which provides an excellent buying opportunity for value-oriented investors, as its forward P/E has compressed quite dramatically down to about 25 (based on a price of $18.67 Canadian and annualized earnings of 76 cents Can.
The drop was caused partly by the general sell-off in the tech sector over the past few months, followed by the CFO leaving his post due to “a personal health issue” a day before the Q1 results were released on May 7 (a reason which is believable, given that he was working in such a fast-paced company, but it caused major consternation in the market because investors feared there was more to the story than just that). The interim CFO, Mr. Wan Jung, previously held that role at Avigilon before retiring, and thus can easily step back in until the search for a replacement is completed.
Here’s a link to the 1st Quarter report, which is much more extensive and complete than a quarterly report in the US
http://ir.avigilon.com/files/Q1%202014%20-%20AVO%20-%20Repor…
and here’s the link to their investor relations site
http://ir.avigilon.com/Investor-Relations/default.aspx
here’s the link to the Yahoo finance site which will give you access to articles written about them, etc.
I’d like to thank the person who recommended it but can’t find the original post to do so.
Yo Saul,
http://discussion.fool.com/hi-saul-great-board-many-kudos-to-you…
Also posts on the Rule Breakers boards.
Long Tom
Thanks, Long Tom,
I do like Avigilon.
Saul
I can’t seem to get bid/ask prices to show up at my broker. I tried placing a small order several days ago and it didn’t fill. Using AIOCF as symbol. Thanks for any suggestions.
D.
I can’t seem to get bid/ask prices to show up at my broker. I tried placing a small order several days ago and it didn’t fill. Using AIOCF as symbol. Thanks for any suggestions.
Hi, D - The best course of action in any situation like this, where you have problem buying a stock (or whatever), is to call your broker and ask them what’s the problem!!! Several days ago, when you had the problem! (It would have been nicer to have bought it then, when the price was lower, but everything is up the past two days, not just Avigilon).
Saul
Hi, D
I had no problem buying this AM on my TD Ameritrade account.
Hope you can work this out. The stock is up from the open.
Andy
So this is a foreign company and there is not an ADR, when I used the AIOCF symbol Fidelity told me that they would execute the trade in Canada and I would have currency conversions. Two opportunities to lose on spreads on each transaction. What are the tax complications from buying foreign companies?
It looks like a good prospect but my life is complicated enough…
So this is a foreign company and there is not an ADR, when I used the AIOCF symbol Fidelity told me that they would execute the trade in Canada and I would have currency conversions. Two opportunities to lose on spreads on each transaction. What are the tax complications from buying foreign companies?
Hi Flygal,
As I mentioned a few pages back, I wouldn’t buy a stock on the Australian or New Zealand exchanges, because it really would complicate my life. (Time zones, huge commissions, having to call in the order, the impossibility of getting quotes because trading time there is the middle of the night for me, etc).
This, however, is simple (at least it seems simple for me). By buying it in Canada, instead of as a bulletin board stock in the US, Fidelity is doing you a favor. You get the spread and price in Canada, where there is a lot of volume (hundreds of thousands of shares per day), and a spread that varies between a penny and maybe five cents. I put in my order for AIOCF normally, as a market order, and I get a good price. What more do I want. If there are no dividends you don’t even know that this is a foreign stock tax wise. Fidelity just reports it as a profit or loss. In US dollars.
Just saying…
Saul
Ok that sound reasonable Saul, thanks for that info. I will look again on Monday.
The growth is enticing.
And also, because I can just put the order in online, like a US stock, when I buy Avigilon Schwab just charges me a normal (tiny) commission, even though they route the trade to Canada for me. Can’t ask for better.
Saul
“…Schwab just charges me a normal (tiny) commission…”
What is the “normal (tiny)” commission that Schwab charges you?
$6.95
Here is a 17 minute video where the Avigilon CEO talks through their investor presentation and explains more about Avigilon’s competitive advantage :
Thanks, great video. Hard to watch it without wanting to rush out and buy more Avigilon.
Saul
That 17 minute video is excellent, free capital.
I too will be adding to my position. What impressed me most was the incredibly intelligent articulation from the CEO. Extremely focused.
And the macro story is simple to understand and awfully hard to find fault with.
Also love the fact that all of their incredible explosive growth is organic with no acquisitions. Obviously the continual innovation is what keeps this company way ahead of the pack.
This one has the look of a long time winner. Avigilon has been public for only 2 years.
Thanks for sharing.
Jim
Great video thanks. I like his demeanor, which is both confident and detached, while he allows the data to make his points.
I loved that video. The CEO made a great impression: knowledgeable and confident, but not trying to make a hard sell. I liked how he positioned the high def cameras as ease of use for the customer, not just a way to play one-upmanship on specifications.
One of the shrewd things they’re doing is letting older cameras integrate with their system. It lets them get a foot in the door because customers don’t have to completely replace what they’ve got. They can see what Avigilon’s systems can do, and upgrade incrementally. Reminds me of the way Apple finally managed to get the Mac into K-12 education.
One thing that is a small concern is their proprietary protocols for connecting the pieces of equipment. While it tends to lock the customer into their products (usually good for repeat business), it could backfire if they’re not careful. If they come up with a newer, better protocol, then they need to make sure the new equipment is also compatible with at least the previous generation so that customers can upgrade between generations incrementally. Not necessarily a problem, just something to keep an eye on.
I bought a small starter position today. My first time buying an OTC stock.
-Mark
My first time buying an OTC stock.
Just as an aside, I don’t consider Avigilon to be an OTC stock as Schwab buys it for me on the Toronto Exchange.
OTC, Bulletin Board, and Pink Sheet stocks tend to be tiny companies, just starting out, losing money, with questionable accounting. Avigilon is a major company, with $200 million in trailing revenue and profitable and with good accounting. Different animal!
Saul