Centralnic Share Discussion Threads

[jeanesy] 31/1/2023 07:33

I am totally baffled by the continued muted response to the ever positive story here. Im not sure what it is going to take to see a rerating myself. Perhaps i am not getting something ?

[joeyjojo1826] 30/1/2023 22:49

Great results but I'm not surprised by the muted share price response today, as this has been the market response to multiple "exceeds expectations" announcements from CNIC over the last year.

I'm very positive that value will out in the longer term, but a bit of patience is probably required.

It's worth bearing in mind that one year ago, the expectations for 2022 revenue and earnings were $444m and 12c/share. It looks like the actual result will be $728m and about 20c. That's quite some outperformance.

I think we can assume that the current 2023 forecasts are excessively conservative, as even continuing the Q4 revenue and earnings run rate gives us $805m revenue and $92m EBITDA. Whilst I don't expect the explosive growth of the last few years to continue, 20-30% growth in both revenue and earnings looks very possible.

One year ago, CNIC was on a PE ratio for the year just finished of 14. Today, it is on a PE ratio for the last 12 months of about 9. Assuming the company's business model isn't in danger, it looks like really good value.

I think the move away from growth by acquisition is a positive one, as this will really let the market see the significant cashflow generation of this company, which is what is likely to lead to a re-rating. A PE of 15 x earnings of somewhere in the region of 24c/20p in 2023 could see a share price of 300p. Not an unrealistic target over the next 12-15 months.

This is one of my largest holdings and one that I'm very content to hold given the significant underlying growth and cashflow generation. I welcome any other views, positive or negative. Does anyone else have any other thoughts about why the rating is relatively low considering the continued positive newsflow?

Andrew

[bazzerp] 30/1/2023 19:01

Got in today at 147.
Difficult to find theses companies under the radar.

[azaman] 30/1/2023 18:20

The net debt position will be £2.8m at the end of this year. Surely, this should act as a buy signal for many who have been skeptical of this stock because of its high debt.

[doobz] 30/1/2023 16:25

Averaged up again today, now my largest holding.

[adamb1978] 30/1/2023 10:20

Thanks for posting Adrian. THeir 17.2p EPS for FY23 looks extremely low - doubling of H2 FY22 EPS gets you beyond that without any growth!

[rivaldo] 30/1/2023 10:18

Cheers davebowler. To be specific, Zeus have "conservatively" raised their forecasts as follows:

- last year : 19.9c EPS, or 16.1p EPS
- this year : 21.3c EPS, or 17.2p EPS

And there's "the opportunity for multiple upgrades in 2023, continuing the trend
of five EBITDA upgrades since the beginning of 2021".

Zeus's DCF valuation for CNIC is 216p per share.

[davebowler] 30/1/2023 09:57

Zeus-
Strong, resilient growth
CentralNic issued another positive trading update, leading us to upgrade Adjusted EBITDA again, this time by 4% in both 2022 and 2023. The company continues to grow rapidly (60% organic revenue growth) and margins continue to expand, demonstrating resilience to a slowing economy and online marketing sector. We conservatively raise our 2023 forecasts due solely to base effects, leaving revenue growth at only 6%. As a result, we see the potential for CentralNic’s upgrade cycle to continue into 2023. The company’s low earnings multiples (5.7x EV/ 2023 EBITDA) do not reflect the company’s strong growth, expanding margins and cash generation.

2022 trading update
¨ CentralNic traded ahead of expectations in Q4 2022. Revenue for the full year is expected to be about $728m, ~3% ahead of our estimate of $710m. Adjusted EBITDA is expected to be at least $85m, over 4% ahead of our estimate of $82m. Net debt is expected to be about $57m, in line with our forecast of $51m after including the acquisition of a publishing network announced 19 December for $5.2m. Adjusted operating cash conversion was over 100%, implying continued strong cash conversion in Q4 2022. Adjusted operating cash conversion was 105% in the first three quarters of 2022.

¨ Continued high growth and margin expansion: The company grew by about 60% organically in 2022, compared to 66% in the twelve months to the end of September and 62% in the LTM to June 2022. Growth continued to be led by the Online Marketing division, which doubled in the twelve months to September. We estimate Adjusted EBITDA/Net revenue margin was over 48% in 2022, implying 49% margin in H2 2022, up from 47% in H1 2022 and 39% in 2021.

¨ Forecast upgrades: We conservatively raise our 2023 and 2024 forecasts solely due to base effects. Our revised forecasts leave considerable room for outperformance. We forecast 6% revenue growth in 2023 and 2024, down from c. 60% organic growth in 2022. Similarly, we forecast margins are broadly steady at 11.9% in both years. Our preferred measure of profitability, Adjusted EBITDA/ Net Revenue, rose to 47% in the first nine months of 2022 from 39% in 2021. We see the opportunity for multiple upgrades in 2023, continuing the trend of five EBITDA upgrades since the beginning of 2021.

¨ Underrated: CentralNic trades at only 5.7x 2023 EBITDA and 8.3x PE, at the bottom of its peer group range, despite having a FY22 FCFF yield of 13.0% and delivering strong growth and earnings outperformance.

[adamb1978] 30/1/2023 09:14

Hi Ammons

I saw them mentioned somewhere and the move to focus on shareholder returns rather than M&A so I dusted off the numbers. Looking back at my notes from when I sold in 2016, there were a few things (i) opaque numbers in their reporting, (ii) some guidance which they'd provided which didnt stack up with recent trading, (iii) most of the turnover growth at that point being acquired rather than organic...all of which combined to being too much uncertainty.

Looking at them now, if the focus is on shareholder returns then with a relatively ungreared balance sheet and their cash generation, then the story is quite different and I think could lead to a significantly different multiple going forward. They could easily return 5%-10% of current market cap p.a. I believe whether via dividends or buybacks and without hindering investing in growing the business still.

Adam

[ammons] 30/1/2023 09:05

Thanks AdamB. Genuine question, you sold these in 2016 and not commented again here until this month. What made you decide to jump back in? I myself have been watching from the sidelines for a while. The results seem great in recent times yet the share price languishes. Share price now is only back to where it was in Oct 21. Too many acquisitions perhaps? I am not an accountant but if debt is down and cash is up then cash generation must be very good?

[adamb1978] 30/1/2023 08:51

I think pre-amortisation EPS will be approaching 20p next year given that they should be doing $100m EBITDA based on the run-rate levels going into 2023

[hsduk101] 30/1/2023 08:42

What's PE and EPS looking like now?
I'm guessing the results don't include the latest acquisition's profits

[gswredland] 30/1/2023 08:41

Yes same old same old eh?
However this will eventually come through with such good trading and a low PE

[deanowls] 30/1/2023 08:39

Those q4 figures are outstanding.

200m sales, 50m net revenue, and 24 m of ebitda. All dollars.

You can see the money coming in with debt down, cash up whilst also doing the buyback and paying off considerations on previous acquisitions.

Even if they just continue q4 this is an absolute bargain.

If they can look at using that for shareholder returns also this will rerate.

[johndoe23] 30/1/2023 08:26

Always a disappointing reaction to good news here, for some inexplicable reason. Still, opportunity to accumulate at decent levels ?

[jeanesy] 30/1/2023 08:23

Disappointing reaction to that update so far

[adamb1978] 30/1/2023 08:18

The game changer for me with CNIC is the focus on shareholder returns, which again they mention in this RNS. The CEO tone is also more on returns given the comments about discipline rather than on further acquisitions.

Given the FCF yield this could be a lot higher with that change of emphasis

[yf23_1] 30/1/2023 08:15

Great trading update.

[robsy2] 30/1/2023 07:25

Fantastic results. that 300p price target looks in sight now.

[rivaldo] 30/1/2023 07:16

The year end update shows CNIC trading way ahead of even the recently upgraded forecasts yet AGAIN.

Revenues are almost $20m ahead of expectations, gross profit (I think "net revenue" is a type is $4.5m ahead, and EBITDA is $85m compared to $82m forecast.

Zeus's EPS for last year is now likely to be above 20c (previously 19.7c), i.e at least 16.5p EPS.

Net debt reduced by an excellent 30% and is now pretty low at arpund $57m with terrific operating cash conversion. And the outlook for this year remains extremely positive.

There's still huge potential upside here on a single-digit P/E:

[rivaldo] 25/1/2023 08:26

Kestrel continue to buy prior to Monday's update - another 26k at almost 143p, and they're now up to 23.01%:

[rivaldo] 24/1/2023 10:21

Cheers GrimesPT, reads well - good to see MWM's target price raised to 200p.

Looking forward to next Monday's update.

[gswredland] 23/1/2023 16:24

Thanks grime

[grimespt] 23/1/2023 13:58

Update in Master Investor today giving a target price of 200p hxxps://masterinvestor.co.uk/equities/centralnic-looking-ahead-to-q4-results/

[jeanesy] 23/1/2023 08:15

it was the sale of 1 million at 140p that did it. Could this have been managed with the buy back i wonder ? Any way all in the price now. not long until the update.