Centralnic Share Discussion Threads

[rivaldo] 29/7/2021 06:47

Cheers Tole, that should bring in further interest today.

Mark Watson-Mitchell's 18 to 20 times earnings target would give a share price range of 155p to around 172p - not far off Berenberg's new 180p target.

[tole] 28/7/2021 20:30

https://masterinvestor.co.uk/equities/small-cap-round-up-featuring-centralnic-journeo-safestyle-uk-and-more/CentralNic Group (LON:CNIC) – strong second quarter gives encouragement, a purchase for any growth portfolioOn Monday of this week, this global internet services group announced a very positive first-half trading update.It appears that the company, which derives significant recurring revenues from selling domain names and providing services, saw its Q2 revenues rise strongly.A 63% jump in revenue to around $174m is anticipated by the company. The reason that its revenues are reported in dollars reflects the group's totally global business spread.That in turn leads its broker and NOMAD Zeus Capital to anticipate $348.4m of group revenues for the full year to end-December.Their analyst Bob Liao reckons that there will be profit upgrades before the year end. He currently has EBITDA estimates for this year showing $41.4m against $30.6m last year, worth some 10.4c per share in earnings.Over at Edison Investment Research its analysts Richard Williamson and Russell Pointon are expecting to upgrade their estimates after the interim results are announced on Tuesday 31 August.Interestingly, they are currently going for only $323.4m of revenues this year, with $39.5m of EBITDA and $26.7m of pre-tax profits, worth 9.93c per share in earnings.I will just let the analysts fight it out between themselves – for my part I am convinced that this £222m capitalised group has significant and strong revenue and profits growth ahead of it over the next few years.Its shares at just 96.5p are trading at less than 13 times current-year earnings – that is far too low a rating, especially considering the valuations that the market puts on other less strong groupings who do not have anywhere close to 99% annual recurring revenues.I would have thought that 18 to 20 times earnings would be closer to a proper value for these shares. I have already predicted that they will trade at 125p/150p within the next couple of years – so take your own view now and decide whether they are going into your growth portfolios.

[simon gordon] 27/7/2021 18:15

This segment from page 115 of the Berenberg note looks to be the jackpot potential - be nice if it came off:

Upside to the base case

● Small relative to the market: On a pro-forma basis in FY 2020, the size of the Online Marketing segment is just c$156m or less than 0.5% of its computed TAM. Even if the business were to grow at 20% CAGR for the next 10 years, it would still be less than 2% of the TAM.

● Domain ads have high click-through ratios: Domain ads have a much higher clickthrough ratio than other digital ads because the traffic is of higher quality (as explained earlier). Naturally, advertisers like to use this as a source of traffic. Hence we believe that the Online Marketing segment of CentralNic can grow much faster than the global adtech spend.

[mcdougall1] 27/7/2021 16:38

25% organic growth in Q2 21 is very encouraging.

[rivaldo] 27/7/2021 15:39

Brief new interview with the CEO - she means mean well ahead of market EXPECTATIONS.....



"CentralNic Group PLC (LON:CNIC) Ben Crawford, the chief executive officer joins Proactive London's Katie Pilbeam to discuss their full-year expectations with revenue to be well ahead of market resources after a strong second quarter.

As Crawford explains, revenue for the first six months of 2021 should be around US$174mln and adjusted underlying earnings (EBITDA) should be around US$20mln, with the group seeing growth across all of its revenue lines.

Both the digital subscriptions products and privacy enabled online marketing technologies are performing well with a significant investment in resources, restructuring and new business."

[rivaldo] 27/7/2021 13:46

Cheers Tole. At the current 97.3p midprice the forward P/E is just 12.2 based on Edison's 10.94c EPS (7.99p EPS) forecast for next year.

[tole] 27/7/2021 13:18

https://www.edisongroup.com/wp-content/uploads/2021/07/CentralNic-Group-Sustained-growth-benign-outlook.pdfCentralNic has continued to trade strongly, both during lockdown and afterwards. Benefiting from its FY20 investment programme, the company delivered 9% organic growth in FY20, 16% in Q121 and now 25% organic growth in Q221, with contributions from all business lines. As a result, management expects to deliver revenue for the year 'well ahead' of market expectations, with profits 'in line' with consensus. As investment normalises, management expects future periods (we interpret this to mean FY22 and beyond) to benefit from increasing operational leverage. CentralNic's shares trade on an undemanding FY21e EV/adjusted EBITDA of 9.9x and P/E of 13.5x, which does not appear to reflect the growth the group delivered over lockdown in FY20 or its future prospects. We intend to review our estimates with the H121 results due on 31 August 2021.

[diesel] 27/7/2021 07:51

Riv, noticed after I posted that, CNIC are in the AIM market so I was talking bolxxxxs.
That said, I’m sure fund managers will be running the rule over this one.

[robsy2] 27/7/2021 06:43

I read it! Super detailed analysis. Very encouraging.

[rivaldo] 26/7/2021 22:54

Diesel, good spot re CNIC's likely promotion to the FTSE Small Cap index in September - another milestone which would push the share price forward.

[lomax99] 26/7/2021 16:02

Thanks for posting.

[rivaldo] 26/7/2021 15:44

Many thanks Simon, appreciated. That's my night time reading sorted for the next couple of days :o))

[simon gordon] 26/7/2021 14:59

Berenberg note - 22/6/21:

[diesel] 26/7/2021 13:13

On a slightly different tack, the present mcap will put them in the small cap index come Sep 1, that could mean inclusion in small cap funds.

[lomax99] 26/7/2021 13:12

Stockopedia comment:The public markets are littered with empire-building companies that have grown in scale, diluted shareholders over time, and ultimately destroyed value. That would be my concern here. The company has undoubtedly expanded, but has this benefitted equity owners?But then, on the other hand, it looks like there is a fair chance of continuing to surprise to the upside given the gap between broker forecasts and the company's own guidance. Talk of operational leverage is important. Is Centralnic at a point where ongoing expansion will see a rapid swing from net losses to profitability?Through the recent years of losses, operational cash generation has been more robust - but then it spends a lot on capex, so free cash flow to shareholders has been depressed.The group notes a 'significant investment programme' that will plateau. This should hopefully drive organic growth in future and should also see profits rise over the next couple of years as the programme winds down.I'm neutral on the stock for now but this update suggests Centralnic warrants a closer look. There have been a lot of acquisitions here, so digging into those acquisitions and the capital allocation skills of the management team is required.But trading momentum is strong and the price to sales ratio has fallen dramatically over time due to the static share price. Brokers forecast an uptick in profitability on what look to be prudent revenue estimates. So on valuation grounds it is far more interesting now than it has been in the past.---Basically will the investments be shown to have been warranted, and create added value for shareholders....

[simon gordon] 26/7/2021 12:26

Hopefully, it's all teeing up for 2022. Cookie changes could potentially accelerate Online Marketing and all the investment on systems, building a cohesive corporation and new products starts to come through more powerfully to the bottom line. Wouldn't be surprised if they do another bolt-on before year end, it's in their DNA. Berenberg is the first non-paid brokerage to cover them, maybe the City will take a little more notice with them pushing the story and the top line showing some growth.

[rivaldo] 26/7/2021 10:59

Ali47fish, Zeus Capital are of course the house brokers, so they don't give a target price or Buy/Hold/whatever recommendation. Although you can sense from their narrative what they would say if they did.....

Berenberg recently initiated coverage with a Buy and a 180p target price. Today's excellent update should at the least reinforce that stance, but being a much bigger pan-European house their research isn't available to PIs on Research Tree etc.

[deanowls] 26/7/2021 10:24

I think they need to be pushing the ARR metric to get a few more people interested here.

[ali47fish] 26/7/2021 09:53

dave not crisp comment from Zeus-no tip- have i missed something?

[robsy2] 26/7/2021 09:50

Nice read.

[martindjzz] 26/7/2021 09:02

I had never heard of CentralNic until reading the recent "money making machine" article and bought in on 16th July. Given the patience needed by long term holders here I was not expecting anything to happen quickly but sometimes you get lucky.

[rivaldo] 26/7/2021 08:40

Zeus Capital have raised their revenue forecasts by 15%, and "conservatively" left their profit forecast unchanged "as the company continues to invest for growth".

They conclude by anticipating profit upgrades later this year:

"Valuation:

CentralNic’s organic revenue growth is accelerating and we see this
potentially leading to profit upgrades as we approach the end of the year.

Furthermore, we expect more of top line growth to translate to profit growth as
the company’s investment levels plateau in future years. As a result, we see an
increasingly strong profit growth profile for CentralNic. This outlook is not reflected in its earnings multiples, which appear to assume marginal growth.

Shares trade at only 9x our conservative 2021 EBITDA estimates and 8% FCF
yield."

[diesel] 26/7/2021 08:27

I think the share price has been held back by the levels of debt brought about by the acquisition programme, the cash generation plus the hint that acquisitions have plateaued will change the proposition to nervous investors.