The outlook for
-Sentiment in the live sound/events industry is improving
-Sourcing of silicon chips remains the greatest obstacle to fulfillment
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The most notable is the turnaround in live sound/events which means an earnings inflection point has likely emerged for the business. Moreover,
The company has guided for FY21 revenue of
This is consistent with market expectations in FY22,
Furthermore, that demand is improving as Shaw notes the US, a key market, has been lagging, given the extent and duration of the pandemic, but the quicker-than-expected roll-out of vaccines has meant it is now on the upturn.
Obstacles
The sourcing of silicon chips remains the greatest obstacle. If original equipment manufacturers (OEMs) have shortages of other chips required within their products it will impact on
There has been a record backlog of committed sales orders as ordering patterns from OEMs have changed since the pandemic, with increased lead times for components and chip manufacturers requesting up to 12 months visibility.
The company has indicated a global supply of chips and electronic components remains uncertain. This is the point on which
Shaw agrees the struggle to procure critical components could have a negative impact and constrain revenue growth, but highlights this as one reason why
To date, the company has managed fulfillments and has sustained minimal, albeit not zero, impact on orders from the shortages, despite some downtime in
The prices are lower yet have higher specifications compared with competitive offerings that are already in the market. Recent product launches are a major positive UBS concedes but would like the product range to be broadened further.
The stock continues to be a key picks in the small cap space for Shaw. Over the longer term the broker describes the stock as a "ripper of a story" with a clear earnings trajectory and technology that is the default global standard.
The main risk is any macro downturn in the AV space, exacerbated by the prolonged pandemic. On the other hand, the company is well capitalised post the 2020 capital raising and has gross margins of 77%.
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