Centralnic Share Discussion Threads

[74tom] 08/3/2021 10:03

rivaldo, I think that article is a sell tip disguised as a buy. 'cautious investors may want to sell out' = those investors who can understand financial statements?

'provided Crawford keeps a firm grip on the tiller' is contradicted by the latest figures which show an increase in debt, in spite of what was stated a year ago about reducing the net debt to EBITDA ratio.

The article also incorrectly claims profits increased in 2020, when the accounts clearly show a loss before taxation of $9.4m, up from a loss of $6.6m in 2019...

So yes, cautious investors may went to sell... and they are by the looks of the share price this morning.

[rivaldo] 07/3/2021 07:36

Cheers Tole, good to see the Mail updating their tip. That should bring in some more interest.

Here's a direct link:



Conclusion:

"Midas verdict: CentralNic has expanded rapidly both organically and through acquisition. Cautious investors may want to sell out at 81p, but Crawford is keen to continue at pace. Fast growth always presents some risks, but provided Crawford keeps a firm grip on the tiller, this stock should continue to deliver."

[tole] 07/3/2021 06:33

https://www.dailymail.co.uk/money/investing/article-9333169/MIDAS-SHARE-TIPS-UPDATE-CentralNic-soared.html?ns_mchannel=rss&ns_campaign=1490&ito=1490

[taffer87] 06/3/2021 08:02

boadicea - only for the €15m raised in Jan/Feb - not the rest of the debt

[boadicea] 05/3/2021 23:47

74tom - You may be right about the floor rate i.e. that it doesn't allow for Eurobor going negative (and why not?), however I still assert that if they can sell ~28 months of 100Eu bond for 104.5Eu which they did in January/February (?from memory), then the true cost of a 7% coupon over that time is little more than 5%.

[davebowler] 05/3/2021 15:56

Edison;
CentralNic delivered FY20 revenues of US$241.2m, a 121% y-o-y increase (FY19: US$109.2m). Adjusted EBITDA rose 71% to US$30.6m (FY19: US$17.9m), supported by the acquisitions completed in FY19 and FY20 and led by growth in Monetisation. On a pro forma basis, adjusting for the Codewise acquisition, the group delivered 9% organic revenue growth in FY20. In FY21, the group has already completed two acquisitions (SafeBrands and Wando) and secured €60m of additional bond headroom from shareholders, of which €15m has been placed to fund Wando and future M&A deals. On the basis of the strong FY20 results, with the group trading in line with management’s expectations ytd, we have updated our forecasts. The valuation continues to look attractive versus peers.

Year end

Revenue (US$m)

PBT*
(US$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/19

109.2

16.1

9.24

0.0

12.4

N/A

12/20

241.2

19.8

10.25

0.0

11.2

N/A

12/21e

323.4

26.7

9.71

0.0

11.8

N/A

12/22e

350.0

30.1

10.70

0.0

10.7

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items, share-based payments and non-core operating expenses.

Monetisation growth rebalances business mix

CentralNic delivered FY20 revenues of US$241.2m, a 121% y-o-y increase (FY19: US$109.2m) following the acquisitions completed in FY19 and FY20. Adjusted EBITDA rose 71% to US$30.6m (FY19: US$17.9m), with margins falling to 12.7% (FY19: 16.4%) as the business mix has changed, with the acquisition of Codewise and the continuing growth and outperformance of the lower-margin Monetisation segment. Operating cash flow rose to US$18.1m in FY20, with cash and cash equivalents rising to US$28.7m. FY20 net debt increased by US$10m to US$85m.

Organic growth, recurring revenues, cash conversion

Revenues in the Indirect segment grew by 41% to US$85.8m, increasing by 7% on a pro forma basis. In the Direct segment, revenues fell 7% to US$43.4m, as certain businesses were reallocated to other segments. On a pro forma basis, Direct revenues were flat year-on-year at US$44.4m. Monetisation was the fastest growing segment, with revenue growth of 35% to US$103.4m (excluding Codewise), and 13% on a pro forma basis. Recurring revenue increased to c 99% in FY20 (typically 90%+), with adjusted cash conversion of c 106% (typically c 100%), in line with the long-term trend. Our revised estimates reflect the stronger than expected revenue growth and rebalanced business mix.

Valuation: Undemanding FY21e P/E of 11.8x

On our updated estimates, CentralNic trades on a P/E of 11.8x normalised FY21e earnings an FY21e EV/adjusted EBITDA of 8.9x, markedly lower than its global peers, despite a five-year revenue CAGR of 78% to FY20 and strong growth estimates. As CentralNic consolidates a fragmented market of sub-scale, cash-generative businesses, we would expect earnings accretive M&A to bring these multiples down further.

[74tom] 05/3/2021 14:25

@boadicea, their 2023 bond has a floor price of 0% EURIBOR, so can't ever get cheaper than 7%. In addition, it makes sense that they could get a better rate on a much smaller bond, so I wouldn't be reading too much into this. Having net debt of around 5 x operating cash flow isn't ideal, at 7% interest it means that a large chunk of operating cash flow is being spent on servicing the debt + there are chunky arrangement fees on top of this. I think until they reduce their debt pile the market will look unfavourably upon any new acquisitions, as each one increases their financial risk + poses integration risk.

[davr0s] 05/3/2021 13:42

People think they are a genius when price rises and have to go find a negative reason when it goes down. To me this is normal price volatility for this type of share and is to be expected even when nothing untoward is happening. It's noise as far as I'm concerned. I know at what price I'm wrong and if it goes that far I exit and move on - I don't care why it's gone down and I may never know. I would have to locate and ask every person that sold it down that low to and that ain't ever glen going to happen

[tole] 05/3/2021 13:24

720k sale reported which looks like it caused most the damage but at least it is out the way. Thanks for the clarification too Rivaldo.

[boadicea] 05/3/2021 13:15

Diesel raises an important point. The company's borrowing position seems to be pretty much fixed until a large bond maturity in July 2023. Its standing actually looks quite good if I understand it correctly. The bond rate is 7% above 3 month Eurobor which is itself currently around 0.5% negative, so 6.5% effective for bondholders at par. The company recently raised 15M Eu at a 4.5% premium which, spread over the 2.25 years remaining, is worth about 2% discount to the effective 6.5%, i.e. it can currently borrow (with a recently raised call headroom on the bond) at ca 4.5% which seems a good deal to me (if I have correctly understood).

Yes, the rate can rise but is only locked in until July 2023.
The question is what happens then? Possibly an equity raise, but we would hope at a much higher price.

[rivaldo] 05/3/2021 12:19

I've been in touch with the CEO, and he's given permission to quote him as follows:

"CentralNic’s monetisation division does not use cookies, so we do not expect to be directly impacted in any way by Google’s decision to stop supporting third party cookies".

Enough said, and now put to bed!

[davr0s] 05/3/2021 12:05

Or they read this bulletin board - all this talk of 80p support showed there were likely stops just below so they went fishing. My stops out of the noise and ain't saying where it is

[diesel] 05/3/2021 11:13

The biggest risk here is interest rate rises and that’s been signalled recently, esp following the budget where the Chancellor seems to have ignored he possibility.
Anyway, Edison have reiterated their positive view on the acquisition policy and rate them good value compared to peers.

[boadicea] 05/3/2021 11:06

Looks like the mm's shook out a bunch of stops and made a nice porofit on them this morning. They're either uncannily successful at guessing the stops - or they're given a wink?

Whatever, it's a nice bounce.

[simon gordon] 05/3/2021 09:39

Morning Rivaldo,

Like you say Google have been indicating this change for a while but the markets only woke up to it this week. Suppose it's souring sentiment. Does the latest Zeus note mention the Google change?

[rivaldo] 05/3/2021 09:36

Hi Simon. Looks like the market is making a mountain out of a molehill to me. This has been in the works for a while now. For CNIC's monetisation sites RPM (revenues per thousand) rates have been rising fast in the last year, and should continue to thrive as the global economy gets back to normality post-pandemic.

Above all, CNIC would hardly have spent so much money and time acquiring domain monetisation companies recently, given that everyone knew what was likely to happen, if it were likely to affect them adversely.

[saucepan] 05/3/2021 09:10

fwiw: 80p failed; I am out.

[simon gordon] 05/3/2021 07:01

Any insights on whether Google's changing cookie policies will impact any of CNIC's divisions, be it bullish or bearish?

CNBC - 4/3/21:

What Google’s latest cookie announcement means for top ad-tech stocks, according to analysts



Vox - 4/3/21:

Google is done with cookies, but that doesn’t mean it’s done tracking you

A third-party cookie ban won’t hurt the search giant’s healthy first-party data ad business.

[saucepan] 04/3/2021 14:32

I still hold my reservations about CNIC, but this seems a fairly low risk entry point. I have gone long with a tight stop. I agree support at around 80p needs to hold, but I think the odds are good. It seems an obvious level for buyers to step in. I cannot be the only one thinking that way.

[shanksaj] 04/3/2021 09:49

Sinking feeling here. At least, looking at the chart there is support round about 80p with a rising trend.

[rivaldo] 03/3/2021 11:31

New interview with the CEO, sounding positive as ever - good to know the recent bond issue was so easily and heavily oversubscribed, and that their patented technology (SSL Parking) has done so well.

Plus the pipeline of acquisitions remains strong, with CNIC already working with most potential targets so they know those companies inside out:

[diesel] 02/3/2021 11:17

Reasonable arguments all round...recently bought into this on the basis that they are buying up profitable business in a safe and growing market sector. Growing at this rate is messy and the trick will be integration, reduction in overheads where their are overlaps but most importantly cross selling. All this will take time, meanwhile they are building a major business to play on the world stage.

[d024912] 02/3/2021 10:40

I hate moaning but I have to say that I like some other posters, was disappointed by these results. I wanted to see debt being addressed and not increased. I too think paying Libor + 7% is expensive but maybe that is the going rate? (I don't know). I understand that it is fuelling CNIC growth and allowing it to get companies at a good? price and maybe in 1 -3 years time it will pay off big time and CNIC shareholders will do very well. (Also I want to see a net profit, old fashioned thinking). I'll have a look at the annual report and make my decision about next steps. At the moment I feel I'm paying the director's wages (maybe I am being unfair) and I temper that thought when There are many tech companies that are loss making for so long and then boom! I don't want to moan, I decided to buy CNIC 18 months ago, I like the company and their CEO and strategy and I hoped I would have seen a stronger performance by now. Oh well I will review CNIC performance when the annual report comes out and decide then what to do.

Funnily enough CNIC results came out on the same day as Warren Buffet's letter to shareholders. (hxxps://berkshirehathaway.com/letters/2020ltr.pdf) I wish CNIC would communicate like that. Apologies if I am being unfair to CNIC.

[rivaldo] 02/3/2021 08:43

Good summary on the respected Techmarketview:



"Monday 01 March 2021
CentralNic scaling rapidly

Full year results from internet domain name and web services provider CentralNic, show the impact of its acquisition-led growth strategy, increasing revenue by 121% in 2020 to $241.2m (FY19 $109.2m). Profitability also grew significantly with adjusted EBITDA up by 71% to $30.6m (FY19 $17.9m). Organic growth was also decent and shows how resilient the “Internet Business” has been to COVID, with revenue increasing by 9% and adjusted EBITDA by 4%.

Since its IPO CentralNic has grown aggressively through a series of international acquisitions to become very much a “house of brands” in the domain services space (see here, here and here). The firm has consolidated a number of businesses in a highly fragmented market and now has more than 45m domains using at least one of its platforms (c.13% of domains worldwide). The trick is then to monetise these domains by layering on a diverse range of monetisation services, again bought in via acquisition, such as online marketing tools, advertising or brand protection. The revenue split now between domain name sales and domain name monetisation is roughly 50/50, almost all (99%) recurring.

Whilst success requires a healthy pipeline of suitable acquisitions that can be consolidated quickly and at low cost, it also needs the identification of an ever-greater range of services that clients want to buy. CentralNic has identified future revenue streams in areas such as hosting, social marketing, cybersecurity and brand protection and has already started the new year with a couple of significant deals. Here SafeBrands adds online brand protection to the portfolio whist Wando offers expertise in the fields of social marketing, display advertising and search engine marketing (SEM). Given its track record we can expect more deals of this nature in the pipeline."

[rivaldo] 01/3/2021 22:42

If net debt is manageable - which it easily is given (a) CNIC's very high recurring revenues and (b) the lovely cash flows arising from annual subscriptions paid in advance - then debt should be utilised to grow the business.

Which is why there are likely to be further earnings-enhancing acquisitions soon - because there is still good headroom available for CNIC.

At some point I agree that CNIC will have to pause for breath and prove it can deliver debt reduction from organic cash flows, but that point has not yet been reached.