Centralnic Share Discussion Threads

[rivaldo] 12/7/2020 08:05

Nice tip summary from i.i.i this weekend:



"CentralNic (CNIC)

Internet domain name registry and services provider CentralNic (LSE:CNIC) has also been doing well with little in the way of negatives from Covid-19. On top of this, the acquisitions of the past couple of years are providing greater scale and improved profitability.

In the past couple of years there has been a swing away from profit being supplemented by one-off sales to it being dominated by recurring revenues. Last year, recurring revenues were 92% of the total of $109.2 million.

The first quarter has been strong with an initial contribution from Team Internet. Revenues are expected to nearly double to $202.5 million this year. This growth is partly down to the four acquisitions made in 2019, but there is also organic growth.

The previously expected dividend has been put on hold, but that is not a surprise given the current uncertainty. Net debt was $76 million at the end of the year, which is predominantly the company’s bonds quoted on the Oslo Stock Exchange. The company converts all its profit into cash so the debt will reduce significantly over the next few years before any further acquisitions – which are likely.

Earnings per share are expected to grow to 6.87 cents a share in 2020. The shares are trading on 16 times prospective 2020 earnings, reducing to 12 the following year. That does not reflect the strong recurring revenue base and further acquisitions could reduce the multiple. Undervalued."

[rivaldo] 07/7/2020 08:28

Beginning to rise again now after having consolidated in the mid-80's for a while - buying at the full 88p offer.

[rivaldo] 05/7/2020 07:39

Good summary of the new note here:



"CentralNic's capital markets day highlights its growing opportunities says research house

Following the event, Edison forecast CentralNic's revenue to double this year to US$203mln and to rise again to US$214mln in 2021

CentralNic Group PLC’s (LON:CNIC) capital markets day last week highlighted the opportunity for the internet domain specialist to grow both organically and through acquisition, according to Edison.

The capital markets event covered the benefits of scale, cross-selling and the integration of new businesses through a robust, automated M&A process, reported the research house.

Management focused on the opportunities for the different service lines, it said, highlighting a shared service approach as management pushes for higher value-added services to drive organic growth over the next three years.

Following the event, Edison forecast CentralNic revenue to almost double this year to US$203mln and to rise again to US$214mln in 2021, while profits are tipped to reach US$18.9mln on a normalised basis this year and US$23.4mln a year later.

“CentralNic continues to trade on an FY20 EV/EBITDA of 9.1x and a P/E of 15.8x, a material discount to its peer group, with our DCF indicating further share price upside. M&A could bring CentralNic’s multiples down further,” the research note said."

[ali47fish] 03/7/2020 09:39

edison has published anote today
hxxps://www.edisongroup.com/publication/a-platform-business-looking-to-scale/27195

[nfs] 02/7/2020 23:04

Thanks for the updates everyone, I need to listen to the webcast!

[rivaldo] 02/7/2020 12:26

The Capital Markets webcast is excellent and really worth a listen.

It's emphasised that CNIC have had a very good COVID-19 - and in particular that monetisation (Team Internet) have done well as online has grown and grown.

The Team Internet acquisition appears to have been a steal, in being acquired from a distressed seller at a bargain price and bringing in a team already known to CNIC.

The Zeus analyst points out that organic growth this year at some 15% is well ahead of the mere 4% that they've baked into their forecasts. Which bodes well.

I've bought a few more. There's some stock around at 86.9p, but not that much.

[saucepan] 01/7/2020 12:03

Thanks, too :-)

An interesting listen.

[mdchand] 01/7/2020 10:53

Another link to Zeus talking about CNIC (out today)

[saucepan] 29/6/2020 15:37

Thanks for the above :-)

[davebowler] 29/6/2020 09:18

Zeus-
CNIC LN Technology

CMD – Positive new insights
CentralNic's CMD gave us new positive insights into the company's investment case. CentralNic's organic growth is stronger than we thought, the Direct division generates high ROI, the monetisation market was shown to be critical to the domain name market, Team Internet's market leadership was further reinforced and acquisition opportunities were shown to be larger than anticipated. These investment views are not reflected in CentralNic's low valuation multiples, in our view.

Strong organic growth confirmed: CentralNic estimated that organic revenue growth accelerated sharply to 15% in Q1 2020. Q1 growth indicates potential upside to our full year organic growth estimate of only 4%. Similarly, annualised Q1 2020 revenue ($56.4m) is 11% above our 2020 revenue forecast.

High ROI opportunities: CentralNic provided customer acquistion cost and profit data that indicate the Direct division generates high return on investment. Customer acquisition cost (CAC) is only $30, while ARPU is $95 and margin is 47%. As a result, payback is only eight months. These attractive economics lead us to be optimistic on CentralNic's plans to invest in sales and marketing.

Go Team!: The CMD evidenced the upside potential of Team Internet in multiple ways. First, Team Internet appears to be trading strongly. We believe the group's 15% organic growth in Q1 was led by Team Internet. Second, Team Internet's monetisation market may represent a larger opportunity than anticipated. It was shown to be a core part of the domain name world with over 28% of annual registrations estimated to be used for advertising. Third, Team Internet's market leadership was further reinforced. Its market share can now be demonstrated based on revenues, websites using its technology and domain names under management. Team Internet was further differentiated as a "white hat", premium operator, having cleaned up its customer base ahead of being sold to CentralNic.

Acquisition upside: The presentation gave us increased confidence that acquisitions will be a driver of earnings growth for many years and that CentralNic can extract substantial value from them. CentralNic believes there are hundreds of potential bolt-on acquisitions available and that it is seeing more acquisition opportunities since it is gaining a reputation as a well-managed consolidator of the market. The company's acquistion execution capabilities are also building. CentralNic now has a proven template for integrating acquisitions and it has successfully demonstrated large synergies from, for example, consolidating technology platforms. CentralNic's potential upside from acquisitions may be underestimated.

[taffer87] 27/6/2020 21:43

Presentation is on website now

hxxps://investor.centralnicgroup.com/wp-content/uploads/2020/06/Capital-Markets-Day-Investor-Presentation-June-2020.pdf

[welsheagle] 27/6/2020 11:20

Hi Rivaldo,
Any feedback from the webcast/presentation - quick summary would be great.

[taffer87] 24/6/2020 21:28

Any updates from the investor webinar?

[rivaldo] 24/6/2020 08:27

The Capital Markets webcast/presentation is 2.00 today - I'll try to be there (though the back garden in the sun is tempting!), anyone else?

[rivaldo] 23/6/2020 10:16

Indeed, that's exactly what Kestrel do. They seem like big conviction buyers - they just keep going and going once they start.

This morning's RNS confirms that it was Gresham who sold to them. It only states that their holding is less than 3%, but they must be at or pretty close to zero now.

I contacted Edison - they've had to reissue their new note as they'd mixed up their cents and pence in calculating their P/E ratios....the new note is correct.

However, they've also differentiated themselves from Zeus in having much lower forecast adjusted/normalised PBT and EPS. This is because they've included $5.8m deferred consideration as a P&L item, which Zeus haven't (and AFAIK most other analysts don't either).

This seems wrong to me, as such costs aren't an ongoing item and don't reflect the core continuing profitability of the business. The analyst almost confirmed as much to me, saying that this would be an ongoing debate, and that investors could look at the forecasts both before and after such costs.

IMO this is disingenuous - many (most?) investors won't ever get past the headline figures!

[deanowls] 22/6/2020 14:24

Hopefully sees a bounce and that kestrel keep accumulating.

[rivaldo] 22/6/2020 12:29

Kestrel now have 41.86m shares (22.2%), up from 34.02m shares:



It sems likely that they've cleared out Gresham's holding as I noted above, which would be great news.

[ali47fish] 22/6/2020 10:35

kestrel adds form 18 to c 22pc

[allonblack] 19/6/2020 10:53

Fwiw I saw this note on this today. Dyor.https://www.edisongroup.com/publication/core-internet-infrastructure-consolidator-2/27094

[rivaldo] 18/6/2020 14:58

Huge trades today - 18.1m shares traded. And a tick up, although I note that there are still quite a few shares available to buy online.

I can't match the particular trades specifically to the list of major shareholders, but it's possible the 9.28m trade is the clearance of the rest of Gresham's holding, which was down to 10.7m shares.

Edison also have a big new note out today, but I won't link to it as imo it's got a fundamental error or two in it which I'm hoping to talk to them about.

[rivaldo] 04/6/2020 09:33

Cheers davebowler. Zeus's new note today is well worth reading - it's very thorough at 15 pages long, and concludes as follows:

"Conclusion and valuation

We believe CentralNic’s improved market position and its market consolidation potential are not fully factored into its valuation multiples. Nor are its attractive investment characteristics below:

 High recurring revenues: 92% of total revenue
 High customer stickiness: Less than 1% of customers change supplier each year due to high switching costs and complexity. Sticky customers should make acquisitions in the sector more compelling and lower risk.
 High cash conversion: Near 100% (pre-tax) due to annual subscriptions being paid in advance
 Operating leverage: EBITDA margin should increase with scale but this is not factored into our forecasts.
 Low customer concentration: The largest customer represents less than 5% of revenues.

We believe CentralNic’s valuation multiple should approach those of its larger peers as the company consolidates the market, demonstrates strong execution and delivers further acquisition synergies."

[davebowler] 04/6/2020 08:44

Zeus-
Pulling ahead
After completing six acquisitions over the last two years, CentralNic has diversified its market exposure and significantly improved its competitive position. In this report we provide an update of the company’s markets and its competitiveness within each market. We conclude that CentralNic’s increased scale and broadened market exposure puts it in a strong position to consolidate the market and deliver further synergies to investors. We provide our estimates for H1 2020.

Diversified market exposure: The company has expanded market exposure to include domain name investors in addition to resellers and end users of domain names. CentralNic has also improved its market growth outlook. The company is now exposed to the rapidly growing digital advertising market (10% growth) as well are the domain name market (4%+ market growth).

Improved competitive position: CentralNic’s Reseller division is now one of the two largest independent wholesalers of domain names globally and its Monetisation division leads the market with c.26% share. Its Direct division has been strengthened with a global infrastructure that should position it strongly in a market dominated by local competitors.

Market consolidation opportunities: CentralNic’s increased scale and broadened market exposure, combined with its proven management team, puts it in a strong position to consolidate the market. The domain name markets remain largely fragmented with competitors often owner managed. This should provide substantial opportunities for CentralNic to deliver synergies by consolidating technology platforms, reducing administration costs and increasing sales productivity. The company has already provided early evidence of synergies from recent acquisitions. Management has already delivered acquisition synergies equal to about 15% of pre-acquisition EBITDA and expects to realise further synergies from these acquisition during the remainder of 2020. We see CentralNic further consolidating the market and delivering synergies for investors.

Attractive valuation: We believe that as CentralNic increases in size and builds a track record of earnings outperformance and successful acquisition integration, its multiples will rise to approach its peers. Shares trade at only 10x EV/ 2020 EBITDA, a sharp discount to peers, GoDaddy and Tucows, which trade at 18x and 11x EV/ 2020 EBITDA, respectively.

[deanowls] 19/5/2020 16:11

I reckon they are a bit light myself.

[rivaldo] 19/5/2020 15:44

Hi esther1975.

Zeus's latest forecasts are:

this year : 9.9c EPS, $31.5m EBITDA, $22.2m PBT
next year : 10.4c EPS, $33.1m EBITDA, $23.6m PBT