Team Internet Share Discussion Threads

[rivaldo] 29/1/2024 12:35

Most of the buybacks have been transacted at anywhere from 114p to the 120p's from memory, with some in the low 130p's and a few at the start in the 150p's. So overall this can be deemed to have been a winning strategy at the current share price, particularly as the odds are for the share price to advance nicely from here given the trading ahead of expectations once again.

Edison have now issued a new note, and make some interesting points:

(1) They "see scope for upside, particularly in Online Marketing, where we believe that click or revenue per 1,000 session rates are starting to stabilise while volumes continue to grow"

(2) Major events such as the upcoming US presidential election could drive advertising spend and upside to our forecasts"

(3) Team Internet reports launching more products than ever before and signing up a record number of new demand and supply side partners during FY23, which should also support growth"

They summarise:

"29 January 2024

Team Internet’s FY23 trading update confirmed that trading has remained robust with double-digit sales growth across Online Marketing and Online Presence. The total revenue and EBITDA margin were slightly ahead of market consensus and our forecasts, both of which were upgraded in November 2023. Estimated FY23 net debt of US$74m was lower than our US$80.9m forecast, with operating cash conversion reverting to close to 100%. We maintain our FY24 estimates, but these could prove
conservative, especially if advertising spend recovers. At 4.8x FY24e EV/EBITDA and 6.4x FY24e P/E, Team Internet's rating looks low given the company’s growth profile, diversity and growing track record."

[adamb1978] 29/1/2024 11:33

Redwing

You're stating the multiple but stating *what you think* is the reason for that multiple being where it is.

My view on why its trading where it is stems from their recent past.

If you go back over hte last 5-6 years the company has grown rapidly via multiple acquisitions, issuing piles of shares and making it difficult to see the run-rate financials and difficult for people to be clear on whether value is actually being created.

It takes a while for anyone or any company to shift reputations and you only do that by showing that you have changed your ways. Therefore TIG needs to show quarter after quarter that its created value, and the best way to do that is through its cash generation. Its been doing that for 3-4 quarter now and just needs to carry on with that.

It terms of use of that cash: buybacks and debt reduction are probably the two best uses in my view, largely because I dont think a high yield will boost the share price and I dont think they should do large MA& given my above comments.

I might be wrong, just like you might, but there is no way to prove whether either one of is us right....but to state that debt level is definitively, absolutely, categorically the reason for the multiple, just is going too far.

Adam

[redwing1] 29/1/2024 11:23

Also, I seem to recall a change of senior management at Team Internet and a commitment to paying down debt and focusing on organic growth rather than acquisitions. What happened to that?

[boadicea] 29/1/2024 11:23

While the effective cash return on our own shares is well ahead of the interest ocst of our debt which is expressed in depreciating currency it makes excellent sense to buy in our own shares.
Holding them in Treasury is merely an option for future transactional use without the delay of authorising an increase in capital.

[redwing1] 29/1/2024 11:17

I can tell you exactly why I know that the market dislikes the amount of debt, Adam. The shares trade on an EV/EBITDA multiple of 4.7x, a p/e 0 6.6x and a fcff of 15.6%, which are all way lower than their peer group. Also, the share price barely budges any time they announce strong results/upgrades.

Instead I ask you how you think that these shares don't move higher with all this good news and excellent cash flow? If you want to think it is simply mispricing on AIM then that is your prerogative, but I see it as big red flag.

[adamb1978] 29/1/2024 10:17

Redwing

So much to disagree with there:

"One thing I don't like is use of the cashflow to buy back shares....The market had already expressed its dislike of their high levels of debt"

How do you know what 'the market' disliked? Did the market tell you?


"Instead they go down the route of trying to prop up the share price with a huge share buyback (and look how well that worked!)"

How do you know where the share price would have been without the buyback? What we do know is that without the buy back there wouldnt have been one very large buyer in the market for the last year, so the balance of sellers/buyers different and would have meant a lower share price


"The fact that they didn't makes me suspicious."

Can you comment on what you think they are buying shares back with if they're not generating cash?


Adam

[redwing1] 29/1/2024 10:07

Hard to disagree, Rivaldo. However, something still doesn't feel right. One thing I don't like is use of the cashflow to buy back shares. The market had already expressed its dislike of their high levels of debt and so the sensible move would have been to focus entirely on paying down debt with those supposedly great free cashflows. Instead they go down the route of trying to prop up the share price with a huge share buyback (and look how well that worked!) Had they actually paid down debt over the last two years and were now sitting on net cash then the shares would almost certainly have re-rated. The fact that they didn't makes me suspicious.

[rivaldo] 29/1/2024 09:45

Agreed Adam. The clue is in the terrific cash flows, which will be recognised at some point. Plus such high recurring income.

Zeus Capital this morning note adjusted operating cash conversion being strong at around 100%.

They've raised their forecasts in line with the RNS, and now see 22.4c EPS last year rising to 25.1c EPS this year and 27.3c EPS next year.

They also see net debt falling this year to just $21.8m - and then a $33.1m cash pile at the end of next year.

So the shares trade at only 4.7x EV/ EBITDA 2024, 6.6x PE and a 15.6% FCFF yield.

In particular, "Online Presence peers trade at 8.9x EV/ EBITDA 2024 and Online Marketing peers trade at 7.3x, 85% and 52% valuation premiums to Team Internet"

[adamb1978] 29/1/2024 09:13

Think they just need to continue executing. The figures are/were excellent, combining growth with margin improvement and cashflow.

Sometimes you just need to be patient

[74tom] 29/1/2024 09:08

This share is truly hilarious. Must be nearly a dozen 'ahead of expectations' RNS's now and yet the market remains uninterested. I can't wait to see the reaction if / when they miss!

A ticking time bomb IMO.

[deanowls] 29/1/2024 09:06

If they use the money they have paid off contingent liabilities to pay down debt this year the shares will rerate as the business case will be seen to have matured.

[adamb1978] 29/1/2024 08:09

Yes, very good announcement Rivaldo.

$49m FCF given that they spent $66m on the discretionary things mentioned, but debt only increased $17m. Will be interesting to see how they balance those capital decisions this year, but the FCF gives them optionality. Considering the market cap here is £344m, that FCF yield is outstanding.

Good also that gross margins strengthened in Q4. Based on my figures, gross margins were 23.1% in Q4 up from 22.0% in Q3. Their measure of EBITDA margins were up to 52% in H2 too....so repeating those improved margins for the full year should improve cashflow further.

Last thing I like was the CEO calling out the recent changes with Google/cookies/data privacy. If TIG can keep growth in double digits alongside improving margins and cash generation this could really re-rate...

[rivaldo] 29/1/2024 07:34

Excellent trading statement - and well ahead of consenus expectations.

For example, $835m revenues compares to Zeus's forecast of $825.3m, and $96m EBITDA compares to Zeus's forecast $91.8m.

Great news that both divisions are now delivering 14%-16% annual growth.

And "we anticipate that these (online and AI) concurrent trends will significantly bolster our performance and help us outperform in any cycle" is soothing to hear!

Borrowing would have been much reduced had it not been for $40m of buybacks, which given today's news will hopefully prove to have been good value.

TIG looks in very good shape. Perhaps this time the sellers have been drained and the share price can finally reflect the very positive outlook.

[adamb1978] 28/1/2024 18:08

Diesel

Treasury = cancelled for the purpose of anything which you care about. For EPS, dividends and are other measure, its the same.

I have no problem with them paying down debt rather than some of the share buyback capital. They're making about 10m FCF per quarter from memory so either or some combination is good with me.

re using capital to grow the business: the current CEO has brought in quite high hurdles for M&A, which isnt a bad thing as over the last few years it arguably wasnt there.

Adam

[diesel] 28/1/2024 15:52

Not sure I favour buybacks right now, I’d rather see investment in growing the business or reduction of debt..it could be argued that they are using borrowed money to buy back their own shares. Also what difference would it make if the shares they have bought were cancelled and not put into treasury?

[adamb1978] 28/1/2024 10:57

As posted before, with any share there will a certain % of the register which will sell at different price levels, though its obviously impossible to know what that is. Therefore the recent firming of the price reflects the consistent buying back of shares and at some point you need to pay a higher price. THe day after day buying of shares by the company eventually exhausts the volume of wiling sellers.

So to the question about, yes I think another large buyback will force the price higher. You could argue that, similar to what we've seen recently, the share price would go higher gradually though relentless buying of shares, or perhaps it could be quicker if the typical investor sees another, say, £30m buyback announced and says ok, now with that new buyback my view of fair value is [x]% higher.

Only question about another large programme is that will need shareholder approval if they've exhausted the current authority. AGM might not be til April, in which case they could announce their intention to do another buyback, but wouldnt be able to begin it til the AGM (unless they snuck another general meeting in before)

[ggrantsu] 28/1/2024 10:32

had almost forgot about buybacks...i think that will determine reaction tomorrow. wouldn't be surprised if they announced another large programme of them...surely that would drive a significant re-rate here?

[adamb1978] 27/1/2024 20:40

Yes, we know the figures on Monday should be good. Impossible to guess how a share price will react.

In terms of what I'm interested in on Monday:

- financials (obviously) esp cashflow
- any comments about increased dividend or planning to seek shareholder approval for another buyback slug beyond the £30m
- would love it if there was some guidance, but they haven't done so historically so not expecting any

[ggrantsu] 27/1/2024 11:35

All going to have to say our prayers and hope that 1) at least in line means a solid best and 2) the stock reacts differently vs all the other beats this company has achieved…been many times it’s released strong numbers and tanked.

Encouragingly…momentum has been goo recently, so let’s pray we can all make some money come Monday!!

[elsa7878] 26/1/2024 19:13

We expect to publish our audited annual report and accounts for the financial year ending 31 December 2023 on Monday, 18 March 2024. Prior to this, on Monday, 29 January 2024, we will release a comprehensive Trading Update. This update will highlight a record performance in Q4 2023 and FY 2023, demonstrating that the Group continues to trade at least in line with current market expectations.

[hsduk101] 26/1/2024 17:35

Any idea when their next expected statement/results?

[adamb1978] 25/1/2024 23:28

Kestrel wouldnt sell on the cheap if there was an offer. Nice to see some upwards momentum!

[gswredland] 25/1/2024 18:03

I have been here a while and this has been disappointing.
Be good to have a bid but this has been mooted a while

[boadicea] 25/1/2024 15:06

Test passed - Will it hold?

At least it is swimming against the tide today and 3 month high.

[diesel] 25/1/2024 13:27

Looks like weve broken out of the downtrend, we’ve been in since Oct, 130 will be another test…