very interested to hear your view on this adam - as we have had war of words over this historically with you being ardent in saying that their communication in terms of what they do is completely fine. more interesting as you have long been invested. |
 I've been quiet since the results but given my bullish comments on here over the last couple years, I should say that I'm now out. I'd sold 1/3 of my position at 192p previously but now sold the rest.
The main reasons are:
- the Shinez performance in H1 was shocking, and if there is/was some strong seasonality they should have mentioned it as it appears as though they had the wool pulled over their eyes and paid a huge price
- if I take their H1 performance and adjust to include a full period contribution from Shinez then I can just about see them making the bottom end of the revenue guidance range (depending on growth in H2), but equally can see them missing it. In terms of hitting EBITDA guidance, last year they made around 7m more in H2 than in H1 and repeating that delta gets you to around 100m and then you need to add a full 6m Shinez. Their cost control is generally good so I can see them just about hitting the low end of the range again (105m), but there's not huge margin for error and if gross margins weaken further, they might well miss. If H2 EBITDA = H1 and you only get 2*1.2=2.4 from Shinez, you're at 95.6, so c.10% below the range
- whilst it doesnt bother me too much, the company's ability to explain their business is a real problem for lots of investors which reduces appetite for the stock...which in turn bothers me greatly! I wasnt able to make the IMC call however the first section of the deck is really weak in explain what they do. I don't think there is anything underhand in what they do, and the cash generation shows that, plus and I think the CEO is straight and honest...but enough investors want to know the nuts and bolts of businesses which they're in and TIG's comms doesnt do that
- lastly, I've become increasingly uneasy with using EPS pre-amort of internally generated intangibles. Amortisation of that type is akin to depreciating fixed assets. I'm happy with adjusting for amortisation of acquired intangibles, but ones which the company is investing in regularly do need to be included in EPS. That increases the PE by 2x-3x.
I think the cash generation of the business is still decent however with the murkiness of the above I could see the price being more likely to drift down further to say 120p-130p rather than bouncing to 170p-180p. I'd look at it again in that range as the risk/reward balance would be better and FCF yield attractive.
Best wishes for those staying in.
Adam |
This is a brutal brutal sell off now.
Thought 150 might hold…
Only good news is at least it’s back in good value territory! |
For me they need to stop the share buy back and also stop the dividend payout.
The money saved can be reinvested in improving the business and solid future investments/acquisitions. Putting the money into the business |
never nice to say this...but i am convinced the real falling off a cliff here is due to the mgmt. presentation yesterday. it was not good...the messaging was badly communicated, there was a lot of long pauses and loss of train of thought, and ultimately there seemed to be very little confidence. if you were tuning in for the first time yesterday, there is absolutely no way you would have a clue about what the business does.
the decline in RPM, which was significant, was probably the most concerning bit aside from Shinez performance.
at the end of the day, if you have leverage and are doing buybacks, any acquisitions need to significantly outperform from the word go.
i guess there is seasonality with Shinez but I have to say I was pretty taken back by the figure of what it would have generated through the H1 period vs. its level of earnings last year. doesn't make sense to me and really hope this isn't the start of something more significant going wrong.
TIG needs a very strong H2. |
Interesting that yesterday Berenberg INCREASED its target price to 220p (from 205p): |
What hope of a bid? |
Indie.., absolutely! There are two stories here and little concrete evidence to support either. I did manage to reduce my holding a tad at the 200 level but didn’t expect this.
Holding the rest for now, probably a mistake. |
I'm trying to make a case to buy back in if things settle but I can't. Slowing growth, squeezed margins, a share buyback with no cancellations, murky financial reports, not to mention the purchase of a potentially underperforming Israeli company. This last point could be the biggest roadblock to finding new investors considering the track record of shady Israeli companies delisting from AIM and the current troubles in the Middle East (whatever your viewpoint may be). Fundamentally its a trust issue now, do you or do you not trust management. Its been a fun ride. GLA. |
So where to from here? A drift back to 140, a possible support level, or was the sell off over done and we’ll see a gradual recovery? |
https://domainnamewire.com/2024/08/12/team-internet-group-posts-single-digit-growth/ |
Seems the fall was due to growth concerns. |
.........Coverage of the conversion funnel: Scope for vertical integration With the acquisition of Shinez, Team Internet now has a presence at each stage of the e-commerce conversion funnel, from the initial raising of awareness and brand building, then building and qualifying interest, right through to setting up the transaction: ◼ Awareness: Shinez provides solutions for helping advertisers raise awareness and build their brand, and is paid on a pay per (1,000) view (PPM) basis. ◼ Interest: Tonic determines a consumer’s interests through its double qualification process, then directs well-qualified leads to advertisers, being monetised on a pay per click basis (PPC). ◼ Sale: at the sharp end of the funnel, Vergleich provides comparison sites to enable consumers already considering a purchase to compare and evaluate products or services, being paid on a per transaction (PPA) basis, often a percentage of the purchase price or in Vergleich’s case a percentage of the total basket size. Exhibit 4: Coverage of the e-commerce conversion funnel Discover Awareness Inspire Brand build Interest Inform Evaluate Sale PPM (Pay per 1000 views) Est Range c$0.5-$2.0 PPC (Pay Per click) Est Range PPC $50-120 (per 1000) Team internet ave $88 in LTM to H124E Reward/ Incentivise PPA (Pay per action) Large range – typically as a % of purchase price or total basket size Source: Edison Investment Research, Team Internet . This coverage of the funnel opens up a number of opportunities for vertical integration, essentially capturing a greater proportion of the value chain in connecting buyers to advertisers. These include delivering ad inventory to the Shinez sites using Tonic, or even selective placement of VGL transaction sites where it is seen not to conflict with the platforms’ advertiser customers. Given Shinez’s high volume, but low transaction value, the successful addition of higher-value PPC or PPA revenues on only a small proportion of volume should generate meaningful revenue synergies. |
Edison -
Team Internet’s H1 earnings showed resilience despite continued headwinds in online marketing. Going into the typically seasonally stronger H2, we expect the company’s initiatives in product innovation, vertical integration and international to increasingly influence growth and margin expansion. At 8.8x FY24 earnings, Team Internet continues to trade at a significant discount to peers on our unchanged earnings estimates. We believe this rating remains attractive given the company’s track record, prospects and cash generation. Year end Revenue (US$m) EBITDA (US$m) PBT* (US$m) EPS* (c) DPS (p) EV/EBITDA (x) P/E (x) Yield (%) 12/22 728.2 86.0 64.3 14.7 0.0 5.6 14.6 N/A 12/23 836.9 96.4 77.6 22.5 2.0 5.6 9.5 1.2 12/24e 939.2 110.2 91.0 26.3 2.3 5.6 8.2 1.3 12/25e 1037.7 119.5 101.8 28.3 2.5 5.6 7.6 1.5 Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. Earnings resilience despite headwinds H1 gross revenues of $409.7m (+3% y-o-y) were essentially flat excluding $10.7m from Shinez, acquired 29 April. A weak adverting market continues to suppress Online Marketing, particularly Search, but as this is the lowest gross profit business, net revenues (gross profit) grew 7% y-o-y at $97.7m, with gross margin expanding by 80bp y-o-y. EBITDA expanded by 4% to $46.6m. Net debt was $109.9m, reflecting the Shinez acquisition and operating cash conversion at 87%. However, with cash conversion expected to normalise close to 100% in H2 and no share buybacks scheduled, we expect net debt to reduce to $66m by year end. This includes the payment of an inaugural interim dividend of 1p. On track, strategic initiatives coming into play Our P&L estimates are essentially unchanged from the net revenue/gross profit level and below, with gross revenue pared back by c 4.5%, more in line with consensus. While we do not expect a near-term recovery in click rates, events such as the Olympics and particularly the US elections should support the online advertising market into the seasonally stronger H2. Key strategic initiatives should start to have an impact in FY25. These include vertical integration initiatives, such as including Tonic or Vergleich ads on Shinez content, the expansion of Vergleich beyond Germany and new product launches as well as competitive and efficiency initiatives in Online Presence. Valuation: Discount looks unjustified Team Internet trades at an EV/EBITDA multiple of 6.0x and a P/E of 8.2x with a 14% free cash flow yield. On a fundamental basis, we believe that this remains too low for a business with Team Internet’s track record, prospects and cash generation. The group’s rating is a c 45% P/E ratio discount to ad-tech peers of the online marketing business and a 47% discount to the online presence peers (albeit a small subset). A recovery in online advertising, accretive M&A and/or a resumption of buybacks could drive EPS upside. |
Fair enough. Let's see how they address it
I've long thought that the way to get a multiple rerating here is to maximise on transparency. Hardly any investor will look at their accounts or the way they describe their business and say its very clear. The problem is, if anything I find it to be getting more complicated, rather than less!
Hopefully the management or advisors can add more clarity and precision
Eric |
This is the way that acquisitions work - within the regulatory framework there are ways in which costs and revenues can be adjusted so as to fall within pre or post-acquisition accounting. Now, it may also be that H1 Shinez trading was worse to some extent than last year, so that should be addressed.
However, TIG have definitively stated that they WILL meet expectations this year.
So let's not miss the forest from the trees - even despite a challenging advertising click price environment, TIG are increasing margins, increasing visitor sessions and meeting expectations. |
How does this make any sense. TIG were talking about how they only paid 4x 2023 EBITDA. And today we learn that the half year's EBITDA has been miserly which unless the second half is incredible, does not make this look like a good value acquisition. Or at worse, something has gone wrong in the first half of the year (surely they'd know about it?)
"Shinez were only acquired on 26th April, so their H1 contribution is immaterial. If I were TIG, I'd have ensured that Shinez front-loaded their pre-acquisition results split with as many costs as possible."
I think at a minimum, this is something they're going to have to explain at results presentations.
Eric |
That's what the one-liner contributors were saying at 40p, then 70p, then 120p, then 140p. Etc.
Encouraging that Zeus say the following:
"We estimate Team Internet needs to grow Adjusted EBITDA by only 3.4% organically yoy in H2 2024 to meet our full year Adjusted EBITDA estimate of $105.4m, assuming Shinez’s Adjusted EBITDA contribution is flat across 2024.
Valuation: Team Internet remains the cheapest company in the Zeus Smallcap Technology index based on its 2025E P/E of 7.7x (Zeus estimates). Its other 2025 ratios are also highly attractive at only 5.4x EV/EBITDA and 14.9% FCF yield."
They summarise as follows:
"The company grew Adjusted EBITDA by 4% and Adjusted EPS by 12%, accelerated by
share buybacks, and improved gross and Adjusted EBITDA margins. Organic revenue
growth for TTM accelerated slightly to 9%, driven by Online Marketing. The Online
Marketing division grew visitor sessions over the TTM, more than offsetting falling click prices in an ongoing tough market. The Board also intends to declare an interim dividend of 1.0p per share, marking its first interim dividend.
Going forward, Team Internet expects to meet full year market expectations driven by product innovation, vertical integration and international expansion. With the acquisition of Shinez in April, Team Internet now provides marketing platforms to support the consumer journey from awareness (Shinez) to consideration (TONIC) to conversion (VGL). Over time, the company plans to further integrate and supplement the platforms to realise further synergies. Despite this strong medium-term outlook, Team Internet’s shares trade on the lowest PE in the Zeus Smallcap Technology Index." |
Cheap for a reason.Zeus state that "Team Internet remains the cheapest company in the Zeus Smallcap Technology index based on its 2025E P/E of 7.7x (Zeus estimates)" |
A good, solid H1 from TIG overall, confirming again that they expect to meet expectations.
Zeus's forecast is for 28.5c EPS this year, with a 2.2p dividend, so TIG are extremely cheap on this basis.
Shinez were only acquired on 26th April, so their H1 contribution is immaterial. If I were TIG, I'd have ensured that Shinez front-loaded their pre-acquisition results split with as many costs as possible. So (1) I'm rather unsurprised that Shinez' mostly pre-acquisition H1 EBITDA is less than inspiring (!), and (2) I trust TIG's management to deliver on their aim to leverage Shinez for further growth via Tonic and VGL - they've always delivered on such promises to date.
The initial drop today has already partially reversed. No doubt there were the usual traders who for some reason have to bet on pre-results run-ups (I can't believe many of these make much of a living!). Also some may have been flustered by the increase in debt due to the Shinez acquisition etc. This is more understandable, but given that $31.4m cash from operating activities was generated in H1 alone then it won't take long for debt to be cleared. And Zeus's forecast is for net debt to reduce hugely to $61.7m by the end of this year.
Zeus state that "Team Internet remains the cheapest company in the Zeus Smallcap Technology index based on its 2025E P/E of 7.7x (Zeus estimates)". |
Agreed. Stinks. I'm out. |
Shinez - acquired for $43m up front with potentially another $12m of contingent consideration
In 2023 it did gross revenue of $111m and $10.4m of adjusted EBITDA
First half of 2023, we find out today in the small print that it only did $1.2m of adj. EBITDA:
"If the acquisition had been made on 1 January 2024 the contribution to the Group's results, for the six months ended 30 June 2024, would have been revenues of USD 39.3m, adjusted EBITDA of USD 1.2m and a profit after tax of USD nil, including amortisation of acquired intangibles."
So the current year EV/EBITDA paid on annualising the first half was 18x... I'm not sure there should be such significant second half seasonality for Shinez?
Eric |
can someone explain why th share price is retracing- zeus note is fair |
Cavendish -
Team Internet Group Strong H1, FY24E & FY25E forecasts reiterated H1 24 results show net revenue growth of +7%, adjusted EBITDA growth of +4% to $47m, proposed interim DPS of 1.0p, and a positive outlook with the Board confident that the group will meet market expectations for FY24. At this point, we reiterate our FY24E and FY25E revenue, adjusted EBITDA, EFCF, and net debt, and we expect that any improvement in the macro environment will drive upside to our revenue forecasts, which would gear strongly to adjusted EBITDA and cash. At 190p, TIG is trading on 12-month forward multiples of only 6x EV/EBITDA with +13% EBITDA growth and EFCF yield of 12%, which compares to Cavendish T40 peers trading on 13x 12-month forward EV/EBITDA with +10% EBITDA growth and EFCF yield of 5%. We reiterate our 350p target price, and look forward to strong operating and financial momentum through FY24, further updates on shareholder returns, and attractively valued acquisitions. H1 24 results H1 24 revenue growth of +3% to $409.7m reflects trailing twelve month (TTM) organic revenue growth of +9%, with +9% in Online Marketing and +8% in Online Presence. H1 24 Online Presence revenue growth of +6% yoy to $97.2m demonstrates the division benefitting from the H1 Online Marketing growth of +3% yoy to $312.5m reflects continued pressure on pricing in the currently challenging advertising market, and +$10.7m of Q2 revenue from the April 2024 acquisition of Shinez. Adjusted EBITDA growth of +4% yoy to $46.6m shows continued control of operating costs, and the Shinez acquisition contributed +$0.1m of adjusted EBITDA. Following the initial cash consideration of $31.8m for the acquisition, $12.6m of share repurchases, and $7.2m of dividend payment, H1 net debt DPS of 1.0p. We reiterate our FY24E and FY25E forecasts outlook that the Board is confident that the group will meet market expectations for the FY, at this point we reiterate our FY24E and FY25E revenue, adjusted EBITDA, EFCF, and net debt, which are +1-5% ahead of consensus. The acquisition of Shinez offers the potential for upside as management integrates the operations, with the acquisition enhancing diversifying , and creating cross-selling opportunities. The strengthened platform can then capitalise on an improving macro environment with stronger ad pricing, and we expect that any revenue upside to our forecasts would gear strongly to adjusted EBITDA, EFCF, and shareholder returns. Strong organic and inorganic growth from a robust marketplace platform As we explain in more depth in our initiation, TIG is capitalising upon the complementary opportunity for its Online Presence and Online Marketing divisions. Following investment over the past three years, the group is primed to benefit from platform economies of scale, which can be accelerated by its proven ability to acquire companies at attractive multiples, generate cost savings, and drive cross-selling. Its strong cash generation provides excellent scope to reduce net debt, expand shareholder returns, and/or fund future M&A. |
Zeus-
Solid H1 results in a challenging market, interim dividend proposed
The company grew Adjusted EBITDA by 4% and Adjusted EPS by 12%, accelerated by share buybacks, and improved gross and Adjusted EBITDA margins. Organic revenue growth for TTM accelerated slightly to 9%, driven by Online Marketing. The Online Marketing division grew visitor sessions over the TTM, more than offsetting falling click prices in an ongoing tough market. The Board also intends to declare an interim dividend of 1.0p per share, marking its first interim dividend. Going forward, Team Internet expects to meet full year market expectations driven by product innovation, vertical integration and international expansion. With the acquisition of Shinez in April, Team Internet now provides marketing platforms to support the consumer journey from awareness (Shinez) to consideration (TONIC) to conversion (VGL). Over time, the company plans to further integrate and supplement the platforms to realise further synergies. Despite this strong medium-term outlook, Team Internet’s shares trade on the lowest PE in the Zeus Smallcap Technology Index.
H1 results: Team Internet grew Group gross revenue by 3% to $409.7m, gross profit by 7% to $97.7m, Adjusted EBITDA by 4% to $46.6m and Adjusted EPS by 12% to 10.7 US cents, accelerated by share buybacks. The Board intends to declare an interim dividend of 1.0p, subject to bank approval. This marks the Group’s first interim dividend and follows a 2023 dividend of 2.0p.
Slight acceleration in organic growth, driven by Online Marketing: Group organic gross revenue growth rose slightly to 9% for the trailing twelve months ended 30 June 2024 (TTM 2024) from 8% in TTM March 2024, driven by Online Marketing organic gross revenue growth accelerating to 9% for TTM from 7% in TTM March 2024. Click prices (RPM - revenue per thousand sessions) declined by 12% for TTM, but this was more than offset by TTM visitor sessions rising 16%. Online Presence organic gross revenue growth moderated to 8% for the TTM from 14% in the TTM to March 2024 due to tougher comparisons when the division began implementing price increases. The number of processed domain registration years decreased by 3% in in TTM 2024, offset by the average revenue per domain year rising by 13%.
Margin improvements and cash generation: Both Online Marketing and Online Presence increased H1 gross margin yoy. Online Marketing/ Online Presence gross margin rose to 33.6%/ 20.8% from 32.0%/ 20.3% a year ago. Group Adjusted EBITDA margin increased slightly to 11.4% from 11.3% a year ago. Net debt would have fallen by $15.8m over the half, if we exclude acquisition payments ($31.8m), share buybacks (12.6m) and dividends ($7.2m). Adjusted operating cash conversion was 87% compared to 96% a year ago due temporary working capital timings. As a result, net debt at the end of H1 2024 was $109.9m, implying $48.0m of net cash generation required to meet our year end forecast of $61.9m. The company expects cash conversion to improve significantly in H2 2024.
In line outlook: Team Internet expects product innovation, vertical integration, and international expansion to allow the company to meet market expectations for the full year. We estimate Team Internet needs to grow Adjusted EBITDA by only 3.4% organically yoy in H2 2024 to meet our full year Adjusted EBITDA estimate of $105.4m, assuming Shinez’s Adjusted EBITDA contribution is flat across 2024.
Valuation: Team Internet remains the cheapest company in the Zeus Smallcap Technology index based on its 2025E P/E of 7.7x (Zeus estimates). Its other 2025 ratios are also highly attractive at only 5.4x EV/EBITDA and 14.9% FCF yield. |
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