Centralnic Share Discussion Threads

[robsy2] 13/12/2022 09:49

Thanks Rivaldo
That is interesting and bullish. When Ben presented I often thought he looked a bit knackered and wondered what time zone he was in.
He did an excellent job and I wish him well. Sounds like Michael is the perfect replacement.

[rivaldo] 13/12/2022 09:37

The news certainly seems to have been well received.

Looking good chart-wise now too. Hopefully just the start given CNIC's huge undervaluation relative its sector comparators.

EDIT - interesting post elsewhere from DaddyAIM:

"Spoke with some brokers, Ben is quitting because he has been doing this job from Dubai/Australia so the hour shift was tough and he wants to spend time with his family. On a side note, if the company was performing poorly and CEO would leave, you might think it's a sinking ship. That’s not the case with CNIC as operational momentum remains strong.

Michael is an ex PE guy and is the 'brain' behind the M&A for the Online Marketing segment. He also joined in 2009, at the same time as Ben thus knows the Online Presence segment/industry very well.

Buy Back: always positive but the new CEO wants to send a message to investors "shares are cheap". Brokers told me they target 1 to 1.5% shares outstanding so would result in a c. £4m outflow from Investing cash flows.

STRONG BUY"

[sphere25] 12/12/2022 11:21

Break out watch and just a fascinating Bull-Bear ding-dong to watch with the price remaining firmly in a range as Bulls and Bears debate as to why the price doesn't break higher out of the range.

Initial reaction to the news today - the market sees it as a net positive. This isn't the normal reaction for a CEO leaving who has delivered financial growth and shareholder value. Even if the company is trading slightly ahead, the CEO would be the bigger factor, and the market would normally mark down the price. There can be significant mark downs on a CEO who has delivered too.

Not only are they coming in here to buy to bid the price up near 5% early on, but the buying is significant with a notable 3.2m already exchanged, without delayed prints. CNIC can have substantially lower volume on news (particularly this early in the day), and as most CNIC holders and traders will have noted, the sellers in size preventing the breakout are usually congregated at that 135p mark. They sit there lobbing in size with icebergs galore to prevent any break out from the trading range.

Overall on this this initial move, losing the vision of a CEO who has delivered appears to be slightly more than offset on slowing down, keeping debt sensible, allowing cash to flow to pay down debt, and not doing anything too excitable with a buyback to boot.

Perhaps that is the right approach in this challenging macro environment. Clearly many will disagree and still sell because of the CEO, in adopting what looks like a more conservative approach, at least for the near term.

Mentioned CNIC before, in that it is a trading share. The market hasn't been confident enough to break higher out of the trading range due to the macro climate, concerns on debt and also the risk of further debt fueled acquisitions, particularly at a time which will no doubt go down as one of the most perilous and challenging in history.

The bulls will disagree on some of these for sure and highlight the cash generation, but debt is a big market focus, particularly in a macro environment full of so many issues, and where we just don't know how much of a balls up central plankers have made.

The debt (especially if they had dived in with a big new acquisition) comes into play if things were to deteriorate and earnings downgrades were to happen. Also note the constant upgrading of earnings, and how the market has almost ignored these, with the price continually meeting sellers at the current price points to stop any break out higher.

The market has also taken the price down to the 110p level numerous times so the market is signalling a great deal of apprehension on the bearish points too. Furthermore, in light of the low multiple versus the growth and constant upgrades, it would have otherwise comfortably broken higher out of the range rather than enduring this persistent ding-dong range bound battle. The charts often paint the picture of the story.

The interesting thing today is that the buyers have come in to buy in a much more vigorous way to try and clear key resistance marks in a bid to take control of these key levels at 135p-137p. This is as good a test as I have seen of the key breakout levels. That is not to say it is absolutely going to breakout here, but there are some tentative positive signs.

There are still some sizable blocks being lobbed into the market with e.g. the 500k @ 136.25p so it does look like the buying needs to continue to pick up to cause the breakout. Kestrel have been buying in decent size so it might be them picking up more.

Despite this, it still hasn't been enough to cause the break higher, but the moves of late (post the sellers looking for liquidity in late November) are certainly more bullish with dips toward 125p and a brief flash type crash getting gobbled up very quickly. This compares with the past where the price would have continued down with little resistance at all, so worth keeping an eye on.

Ultimately, if the market can overcome the loss of the CEO in being more comfortable with a less racy approach, then those debt risks will have receded. The macro is clearly still in play and will come to the fore even more now.

Judging from the economic forecasts and major indices moves, there is no severe downturn expected, not even close. The market is pricing in a milder downturn. IF that is the case and inflation and rates aren't worse than expected, CNIC have already shown they can perform and could continue to perform next year.

I just don't know how all these aggressive rate moves play out and how sticky inflation will be. Judging by previous forecasts from the professional central plankers, it is hard to trust their forecasts.

If the forecasts play out (or are close) with no hard landings or bigger downturn, CNIC will eventually break higher. It looks like earnings forecasts will be upgraded again next year, and if no big sell down in the market (even if it is benign and range bound with no major bullish moves either), that stability could provide the platform for a substantial re-rating higher.

So even though I don't have faith in central plankers, taken a few to hold in the hope (hope...ay ay ay) that the markets are right and the macro isn't going to deteriorate substantially.

It is nigh on impossible to not trade this share too (that will never change!), but there has been so much bullish earnings momentum here and the market has been buying bigger of late, so it does make you wonder if sellers might get cleared here soon.

There is certainly plenty of food for thought for all market participants.

Now let's pray the central bozos in charge haven't got it even more wrong!

Bozos!

All imo
This opinion is prone to being substantially wrong as well as just wrong
DYOR

[alter ego] 12/12/2022 09:50

Don't understand people who want to see a bid (post 2392). You don't get rich by selling growing stocks by selling early to grab a quick profit. You get rich slowly by giving companies time to reach their potential.

[johndoe23] 12/12/2022 09:34

Level 2 looking very positive this morning. Pleasing to see share price respond to the surprise of Ben Crawford departing but positive news overall

[someuwin] 12/12/2022 09:26

All sounds very amicable and positive - from Twitter...

Ben Crawford @_BenCrawford_

"I have made the difficult decision to make my 14th year at CentralNic PLC my last, and to take retirement. I wish to thank everybody who played a role in the extraordinary success of the company."


"I am happy to hand over the role of CEO of CentralNic Group PLC to Michael Riedl, who has served as my CFO and close partner for the past four years. I wish him and CentralNic (in which I remain a shareholder) every success."


"My heartfelt thanks to all who worked for, worked with and supported CentralNic from its humble beginnings, through its IPO, 21 acquisitions and outstanding growth - from $2M in revenue to $750M with 60+% organic growth this year."

[doobz] 12/12/2022 09:02

Looks well postponed now to finally break out, pressure is definitely mounting against any sellers.

[tradertrev] 12/12/2022 08:27

Bought a few more at 134.5. Personal view only, but I think institutional investors are more likely to warm to the new focus on shareholder returns and the new management team.

[diesel] 12/12/2022 08:22

Never like sudden departures. Share buybacks seem to be in vogue is it the best way to enhance shareholder value?

[sportboyslima] 12/12/2022 07:54

When you are valued at such a low level highly accretive acquisitions are hard. Multiple small acquisitions is hard to get really right. Takes a lot of time to identify and integrate. Acquisitions for the sake of it never a good route. Would love to see them attract some bidders next year. No reason why not.

[hydrus] 12/12/2022 07:40

Fair point Robsy - presumably though M&A won't stop completely but just the pace of it might slow as the company pays down all debt quickly and then uses surplus for share buyback.

[rivaldo] 12/12/2022 07:38

Great minds think alike Hydrus :o))

I suspect you're right about Kestrel exerting their power. IMO this is a good move, and probably a hiatus in M&A for a short period which will as you say demonstrate CNIC's huge cash-generating ability.

CNIC has always been a likely takeout candidate, and this approach will potentially bring that outcome closer whilst also demonstrating the shareholder value here.

[johndoe23] 12/12/2022 07:36

Be interesting to see how the share price reacts to the news this morning.

[robsy2] 12/12/2022 07:29

Disappointing. I don’t see M&A and value creation as incompatible, quite the opposite.
What a loss.

[hydrus] 12/12/2022 07:12

Ditto Rivaldo!

[hydrus] 12/12/2022 07:12

Looks like a disagreement about company strategy has led to Crawford being ousted, albeit seems reasonably amicable as he comments in the RNS. Other Board members perhaps wanted to slow down a bit on acquisitions? I wonder if Kestrel have been pushing for this and been buying shares to put themselves in a position of strength. I expect they want to demonstrate just how cash generative this business really is, perhaps to potential suitors? Trading is clearly very good and sounds like will be another beat or already upgraded announcements.

[rivaldo] 12/12/2022 07:11

Well well.....looks like Ben's M&A-fixated approach lost support from the directors.

Now we have a transition to maximising shareholder value, with Ben making way as CEO to the current CFO, and the old FD becoming CFO.

Good to see it's relatively amicable, with Ben being thanked and commenting positively.

The prioritisation of debt reduction - and the start of share buybacks - could bring a sharp re-rating assuming that's what the markets have been waiting for.

Plus we're told today that trading is "at least" at the top of constantly upgraded expectations with continued strong trading.

Exciting times!

[yf23_1] 09/12/2022 16:25

0.5m at 125 then later 2* 0.5m at 130, possibly taking out the 125 stock which is why the price is rising ?

[jeanesy] 08/12/2022 15:33

Some large trades today

[rivaldo] 07/12/2022 12:16

The December issue of Techinvest is just out, so it should be OK to copy the Buy tip for CNIC from November's issue:

"CentralNic
129.5p (CNIC; AIM)

In a trading update for the third quarter, CentralNic has reported continued momentum with 66% organic growth, resulting in an upgraded outlook for the full year. For the nine months ended September 30, the company expects to report net revenue of at least US$127m and adjusted EBITDA of US$61m. These figures represent growth of 49% and 89% respectively on the same period last year. Organic growth for the trailing twelve months is estimated at circa 66%, driven primarily by growth in the Online Marketing Segment. Cash increased to US$83m (equivalent to 29.3p per share) at the period end from US$63m a year earlier.

Separately, CentralNic announced that it has agreed to acquire Intellectual Property Management, a California-based domain name management business for an enterprise value of US$7.6m in cash, subject to customary adjustments for net cash and working capital. The purchase price is settled from existing liquidity reserves. The agreed purchase price represents 2.8x unaudited revenue and 7x adjusted EBITDA for fiscal 2021, and the acquisition will be immediately earnings accretive. CentralNic expects the acquisition to provide better coverage and increased market share in the North American market as well as synergies from streamlining procurement and operations.

CentralNic’s Online Marketing Segment continues to win market share as a result of the ever-increasing demand for online customer acquisition services that are privacy-safe. This is the key factor driving strong organic growth in the business. Cash generation remains strong and debt levels continue to fall, allowing CentralNic to consider further acquisitions of a similar scale to Intellectual Property Management. We rate the shares a buy."

[basem1] 06/12/2022 10:28

A regency capital tip of the year for 2023 No affect on the price though.

[diesel] 02/12/2022 15:38

3 trades same time and price totalling 1.2mill buy, probably one buyer, maybe we’ll see an RNS?

[jeanesy] 30/11/2022 14:17

They can buy the next lot even cheaper now if they want some more.

[rivaldo] 30/11/2022 10:45

Another whopping buy from Kestrel, this time £447,000 of shares at £1.336p.

They now own 22.55% of CNIC:

[boadicea] 29/11/2022 23:53

I assume those commenting here on the deficiencies of the balance sheet which evidently reveals a MO that they do not much like, are also fully aware of the fact that it changed significantly on 31st October with the refinancing of the former Euro bond arrangement -
"The SFA comprises of a USD 150 million term loan ("TL") and a USD 100 million committed revolving credit facility ("RCF") and provides a notable reduction in borrowing costs to the Group. Funds from the TL have been used to fully repay CentralNic's EUR 126 million senior secured bonds as well as repay drawings under the Group's previous revolving credit facility. CentralNic's new RCF is available for general corporate purposes, including M&A."

NIC's finance arrangements tend somewhat towards those adopted by many PE buy-outs but on a more modest scale and certainly well within the realms of prudency, a factor illustrated by the ability to obtain the advantageous terms of the deal outlined above.
Since the start of the current FY, receivables have risen by $22m and payables by $42m a net cash 'saving' of $20m. However, cash has actually risen by over $27m at the same time that borrowings have fallen by about $11m, a net gain of (27+11-20)= $28m.
In addition it appears to have spent rather more (~$87m) on acquisitions than it has raised in additional equity (~$54M, translated from sterling at $1.20).
Taken together, there appears to be somewhere in the region of $60m of underlying cash flow over 9 months unless someone can point to a significant error in my back-of-envelope figures.

So I check this against the brokers figures (variously quoted by others above) and see e.g. Hydrus mentioning $71m estimate for the year. My own 9 month figures would suggest that is a slight underestimate and expect nearer $80m - so possibly room for another upgrade.

Businesses actually run on cash, whatever other theoretical or fanciful figures appear in the assets column, many of which can be written off with little practical effect.