Set-top-box maker Amino is set to pay its first dividend as volumes rise.
Internet television set-top-box specialist Amino Technologies (LSE: AMO) has returned to profit and confirmed a maiden dividend of 2p. In the year to 30 November 2011, Amino produced an operating profit of £1.7m, with a strong year-end cash position of £14.1m.
Amino's gross profits rose by 16% to £14.5m and revenue climbed by 18% to £51.8m, thanks to a doubling of the company's business in the USA and a major new contract with Telecom Italia, which supplied £13m of revenue. Amino also signed a deal with Vodafone (LSE: VOD) in the Netherlands, a market that delivered nearly £8m of revenue in 2011.
IPTV or OTT?
In an industry rich with acronyms, OTT and IPTV are at the heart of Amino's offerings, so let me explain them.
IPTV refers to internet protocol television, which is sent over a service provider's private network. OTT refers to entertainment services sent over the open internet, 'over the top' of the service provider's network.
In terms of UK examples, Virgin Media (LSE: VMED) is an IPTV service, while LOVEFiLM is an OTT service.
The boundary between IPTV and OTT services is already blurred and is likely to become more so. From a user's point of view, you may pay subscriptions to more than one company, but all services will be delivered the same way -- through your set-top box.
The last year has seen Amino update its product range so that all models offer IPTV and OTT support. Models including a personal video recorder (PVR) are also available, and the company has just signed a deal to add wireless functionality to its devices. When combined with multiscreen support, this will mean that you can watch multiple on-demand services simultaneously, on devices such as iPads and laptops, as well as televisions.
One to pick?
Amino has the potential to become a lucrative multi-bagger if it can secure enough big contracts and protect margins as its volumes rise. Alternatively, it may be purchased by a customer, as happened to set-top box maker Amstrad, which is owned by BSkyB (LSE: BSY).
Amino currently trades on a sensible price-to-earnings ratio of 10.4 and its first dividend of 2p is covered twice, representing a yield of around 4% at today's prices.
As a very small cap, Amino does come with its fair share of risk, so you would definitely need to believe in the upside. However, if the potential of small-cap tech shares appeals to you, then Amino definitely justifies a closer look.
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