Centralnic Share Discussion Threads

[rivaldo] 01/6/2021 12:08

Nice summary on Techmarketview:



"Tuesday 01 June 2021

CentralNic delivers a strong Q1

Internet domain name and web services provider CentralNic, continues to scale as it consolidates a highly fragmented market and expands its portfolio of online marketing services.

Total group revenue grew by 48% in Q1 to $84.4m (Q1 FY20 $56.9m). Organic revenue growth was also strong, up 16% (on a pro forma basis) to $85.3m (Q1 FY20 $73.5m) with profitability also improving with adjusted EBITDA increasing by 23% to $10.1m (Q1 FY20 $8.2m).

CentralNic’s ‘secret sauce’ is to look to rapidly build scale through multiple acquisitions and organic growth in areas that deliver high recurring revenue and high cash conversion. So far this year, it has completed the acquisition of SafeBrands, an enterprise domain management and online brand protection provider and the online marketing business Wando Internet Solutions. These are acquisitions that help expand its service offering well beyond the monetising of internet traffic to a wider suite of online marketing and monetisation solutions – all higher margin and faster growing.

Recent efforts have seen the expansion of a centralised back office taking away responsibility for things like Finance, HR and Product Development so the acquired businesses can focus primarily on sales – all designed to deliver improved organic growth via upselling and cross selling.

CentralNic’s strategy continues to deliver and with some added COVID bonus via the acceleration of online and eCommerce, the company has delivered a strong set of quarterly results. To put them into perspective, the business generated more revenue and EBITDA in Q1 than in the whole of FY 2018. Given all this progress CentralNic is expected to top $300m by the end of FY 2021."

[robsy2] 01/6/2021 11:25

Indeed. That is the fly in the ointment and could be for some time. Also a slight worry for me about whether they can keep the balancing act going re capital requirements for acquisitions, cash flow and happyish shareholders keeping the share price up. It must be so much easier to build a business like this if you have highly rated shares eg in the USA.
Also, being technically fairly ignorant i have no real feel for how future proofed their businesses are. I think they are but that is a pretty uninformed view.
I think these details explain the low rating.obviously as a holder i am backing them to do well.if so, the re-rating will follow.

[mcdougall1] 01/6/2021 10:55

I have to admit to being pretty underwhelmed when the results for the year ending December 2020 were announced on 26th April, mainly due to the fact that the operating profit was relatively low in comparison to the increases in revenues and gross profit.

I guess the operating profit was mainly impacted by integration costs and delayed payments for past acquisitions, so it was nice to see in the post period-end highlights of the Q1 results that the final EUR 0.8m of deferred consideration for the Team Internet acquisition was settled in April 2021.

I also thought the 16% of organic growth very positive.

My initial attraction to the company was the fact that it is a very cash generative business with recurring revenues. That has not changed, but to me this is a reminder that the lag from acquisitions and integration costs will eventually unwind.

[rivaldo] 01/6/2021 10:14

Cheers davebowler - although to be pedantic that's Zeus Capital's update, not Liberum's!

Zeus also conclude:

"Valuation

CentralNic is attractively valued against both direct and indirect peers. The company trades well below GoDaddy, its closest significant peer, but we are cognisant that it is listed on the highly valued NASDAQ market. Regardless, CentralNic also appears undervalued against UK managed services peers. CentralNic trades on a EV/EBITDA of 8.3x 2022 compared to a median of 13.9x for this peer group, despite offering growth on par with the peer median. We believe strong earnings performance should lead to multiples expansion while further accretive acquisitions could drive strong earnings growth. We expect these drivers should lead CentralNic shares to outperform over the medium term."

[davebowler] 01/6/2021 09:15

Zeus (corrected!);
Q1 update
CentralNic delivered strong revenue growth in Q1 that demonstrates management’s strategy to invest in staff, new products and systems is delivering returns. The Direct division has returned to growth (+13%), as hoped, and the Indirect division has accelerated organic growth to 13% from 7% in 2020. The Monetisation division continues to lead organic growth (+19%), has been diversified by recent acquisitions and renamed Online Marketing. Recent policy changes by Google and Apple could further boost growth for the division. We provide analysis and a division overview overleaf.

Strong results: Q1 Revenue, Gross Profit and EBITDA were $84.4m, $27.9m and $10.1m, respectively. On an annualised basis, Revenue and Gross Profit were 11% and 7% ahead of our full year forecasts while EBITDA was only 2% below. Given revenue growth, H2 seasonality and cost savings anticipated over the remainder of the year, CentralNic appears well placed to outperform our forecasts. However, at this early point in the year, we conservatively leave our estimates unchanged.

Strategy delivering returns: The results indicate to us that the company’s strategy of investing for growth is delivering returns. Management made significant investments in management, products and systems, which has accelerated Q1 organic growth ahead of our expectations (16% compared to our estimate of less than 7% for 2021). In particular, investment in value-added services in Direct and Indirect segments has accelerated growth and domain name sales have also accelerated. Both Direct and Indirect divisions accelerated growth to 13%.

The Online Marketing division continues to lead group growth, expanding 19% organically in Q1. Management has renamed the Monetisation division after recent acquisitions, Codewise and Wando, which expanded it beyond monetising traffic on dormant domain names to include online marketing and data analytics solutions. The Online Marketing division is well placed to accelerate growth after the recent banning the use of third-party cookies and identifiers by Google and Apple. We believe the policy changes could lead brands to divert online marketing budgets towards ads that do not depend on any cookies or identifiers, such as domain monetisation. We discuss this trend in greater details overleaf and provide an overview of CentralNic’s expanded Online Marketing division.

Strong cash conversion: Adjusted operating cash conversion was very strong at 163% (Q1 2020: 46%), primarily due to optimisation of working capital. Net debt fell to $79.0m (Gross debt of $122.1m and cash of $43.1m) from $85.0m at the end of 2020.

§ Valuation: Despite CentralNic’s strong growth prospect the company trades on only 8x EV/EBITDA, 11x PE and 9% FCF yield for 2022E..

[robsy2] 01/6/2021 07:54

Excellent summary. As you note , all the top line figures are really good. At this stage, it is all about having strong turnover, cashflow and EBITDA. The real profits come later once all the acquisition expenses have washed through.

This is a business generating good organic growth that is also growing fast by acquiring complementary businesses cheaply and efficiently.

I like their positioning. They have a very solid , cash generative core business of internet registration. This is an internet infrastructure business with very reliable income.

They can build the complimentary services onto the core business with captive customers.

The rating is too low here.

[rivaldo] 01/6/2021 07:26

Excellent Q1 results today - 48% revenue growth, a whopping 16% organic growth, and 23% EBITDA growth to £10.1m.

Net debt has reduced nicely on good cash flows and operating cash conversion.

CNIC again state they're trading nicely in line, but having made almost exactly a quarter of EBITDA forecasts in H1, with some H2 seasonality and the growth in revenues it's quite easy to see forecasts being beaten this year.

Very encouraging commentary too about how the ban of third-party cookies in Google Chrome and App Tracking Transparency in Apple will benefit CentralNic "as we provide an alternative to online marketers that is proven to be highly effective whilst respecting the privacy of internet users, putting us at the forefront of companies offering solutions for a more privacy conscious world".

There are again a number of adjustments relating to acquisition, restructuring and integration expenses which fall below the adjusted EBITDA line into non-core expenses, resulting in an overall reduced operating profit. I can see that some might not like these, but imo it's the performance of the core business going forward and cash generation which is important, and in this specific case it's the terrific rise in EBITDA which is all-important.

CNIC stand at a huge discount to sector comparators like GoDaddy etc, and trade on a current year P/E of only 12, falling to 10.6 next year.

Loads of upside here imho.

[rivaldo] 28/5/2021 09:58

Nice - a 500,000 share buy just reported at 88p....

The Q1 results are on Tuesday. The chart is looking rather encouraging now with a decent upturn and hopefully an upwards breakout coming.

And we already know that Q1 trading was nicely in line with expectations.

[robsy2] 26/5/2021 14:58

I've added a few more today ahead of the results. Fingers crossed.
R

[simon gordon] 25/5/2021 10:17

ShareSoc Webinar with CentralNic Group PLC (CNIC)

Date: 10 June 2021

Time: 4:30pm – 5:30pm

Format: Webinar

Presenters: Ben Crawford (CEO) and Michael Riedl (CFO)

Company Information: CentralNic (AIM: CNIC) is a London-based AIM-listed company which drives the growth of the global digital economy by developing and managing software platforms that enable businesses globally to buy subscriptions to domain names, run their corporate websites and emails, win customers online and monetise their internet traffic. Its core growth strategy is identifying and acquiring cash-generative businesses in its industry with annuity revenue streams, high cash conversion and exposure to growth markets and migrating them onto the CentralNic software and operating platforms.

CentralNic operates globally with customers in almost every country in the world. It earns recurring revenues from the worldwide sales of internet domain names and other services on an annual subscription or rolling contract basis.

[rivaldo] 14/5/2021 07:07

News of another domain management win, this time the prestigious one of .London.

After a long period of consolidation following a dramatic rise, it's about time for a re-rating here imho:

[bamboo2] 07/5/2021 15:03

Bought a few at 86.
Possible turn showing for 3/5/2021

[rivaldo] 07/5/2021 07:17

RNS - the AGM will be on 3rd June. However, it's worth remembering that the Q1 results will be announced on 1st June, so only three weeks to go.

We already know that the company's been trading nicely in line:

[robsy2] 06/5/2021 10:32

Thanks again Rivaldo. I am new here but IMHO it certainly looks compelling to me. It is all a bit stretched of course, but you've got to stretch a bit to reach up high!
Highly acquisitive companies are traditionally treated with a bit of suspicion but maybe worries are a bit unfounded here . They seem to be able to identify good acquisitions, execute well and become more solid and profitable as they add to their offering. Cash flow would appear to be a good measure of performance and cash flow is very good indeed.
It seems to have everything in place to continue to do well. A look at the research from Edison and the peer group valuation shows the extent of the undervaluation . It also shows the company as being almost vulnerable to takeover itself .That would not be my preferred outcome but it provides another reason to buy at this level.
A 200p plus broker price target is also bullish.

[rivaldo] 06/5/2021 09:52

Techinvest's new issue is now out, so it should be OK to post their Buy recommendation for CNIC from last month:

"The strong organic growth in 2020 demonstrates CentalNic’s resilience despite the economic crisis, and also the ability of management to execute on an accelerated buy and build strategy. New product launches and further integration activities will support revenue growth and margins going forward, and management report that additional opportunities are continually being assessed in what is a large, globally fragmented and growing market.

Moreover, as the company scales up rapidly, the underlying qualities of high recurring revenues (99% of revenue derived from sales of recurring products and services) and high cash conversion (106% on an adjusted basis in 2020) become increasingly meaningful. Net debt level looks comfortable given the strong cashflow from the business and expected contribution from recent acquisitions, and the recent investment in new senior managers and systems extends the scope of the operational base. The Wando acquisition also looks interesting and is essentially a vertical integration that provides CentralNic with a new platform and a profitable extension to its fast-growing monetisation business.

The shares made our list of 2021 New Year Tips at 87.25p. Continue to buy."

[rivaldo] 04/5/2021 12:43

For January CNIC are tenth globally for new domain name registrations for the month (from eighth in December) with 73,360 new registrations, and ninth in total .com registrations under management globally (unchanged from December) with just over 3m:

[rivaldo] 29/4/2021 15:31

Good to see buyers now paying the full 87p offer, and sells achieving a good premium to the bid price.

[rivaldo] 28/4/2021 11:21

It's certainly possible that CNIC could go for a dual listing in the USA, given that not only most of its competitors and the main sector investors are over there, but of course valuations are so much higher. We already know that CNIC are extremely undervalued on fundamentals compared to those competitors.

Equally likely is that CNIC gets acquired by the likes of GoDaddy. Given that CNIC must be highly complementary to GoDaddy's operations with most of its revenues historically outside the USA, I'd have thought that at some stage CNIC would be an attractive target - especially at the relative undervaluation.

[john09] 28/4/2021 09:21

Ok thanks

Was trying to figure out which company SCSW were mentioning on twitter cryptically the next Tremor wrt a us listing

[rivaldo] 28/4/2021 09:05

Two noteworthy big buys this morning at 85p totalling 973,440 shares. Perhaps an overhang is now clearing.

[rivaldo] 27/4/2021 10:07

Historically not that much, only around 15% from memory.

[john09] 27/4/2021 08:31

What proportion of CNICs revenue are North American out of interest ?

[rivaldo] 27/4/2021 08:29

The two 24,000 share transactions this morning are my using up my annual £20k ISA allowance and transferring some of my CNIC shares into my ISA. Managed to get a remarkably small spread - and just before the price moved up too!

[dicktrade] 26/4/2021 08:28

Rivaldo,
thanks for that, you are correct despite having a skim thru the text i missed
the important bit.
more good news.

Richard

[robsy2] 26/4/2021 08:12

Good spot Rivaldo. Very encouraging. This looks like a company executing well on it's plan , and going places with a low rating.