CentralNic Group plc (AIM: CNIC), is the global internet platform which helps online consumers make informed choices.
It is also one of my stock naps for the next year or so.
The company is a fast-growing London-headquartered software company which helps online consumers make those informed choices through privacy-safe and AI-based customer journeys that convert general interest internet users into high conviction buyers.
It also operates a leading network for the automated distribution of domain names and associated services.
Since its IPO in 2013 it has delivered an incredibly impressive 78% CAGR (compound annual growth rate).
It has done that through a combination of organic growth and by acquiring and integrating cash generative businesses in its industry with annuity revenue streams and exposure to revenue markets.
In addition, the group provides domain name services worldwide.
Online Presence and Online Marketing
It operates through Online Presence and Online Marketing segments.
The Online Presence segment provides tools for businesses to go online, such as reseller, registry operator, registry service provider, retail, and computer software channels, as well as strategic consultancy and related services.
The Online Marketing segment offers advertising placement services for domain name owners, content website operators, and e-commerce website operators. It also sells domain names to registrants.
Recent Results
The year to end December 2022 saw the group report a 77% increased revenue of $728.2m ($410.5m), of which its organic revenue grew 60% (39%).
It adjusted EBITDA was some 86% better at $86.0m ($46.3m) lifting its adjusted earnings up 70% to 20.01c (11.80c) per share.
The year also saw the group reduce its net debt by 30% to $56.6m ($81.4m)
At the time of announcing those results in late February this year CEO Michael Riedl stated that:
"I am absolutely delighted with CentralNic's performance in 2022, achieving record revenue and profit, despite the challenging macro-economic environment. This remarkable achievement stands as a testament to the exceptional business portfolio our team has successfully built.
Moving forward, we shall continue to exhibit the same level of discipline and efficiency as we accelerate our product rollouts, launch strategic partnerships, and enhance our scalability. Our unwavering focus on innovation and operational excellence will be the cornerstone of our success.
Whilst early into the new financial year, we anticipate 2023 will see yet another year of robust growth and shareholder returns. We remain committed to delivering outstanding value to our shareholders, and we are confident of another successful year.
Those results were the combination of record organic growth with the earnings accretive acquisitions made in 2022.
Brokers Views – a value of 279p a share
Analyst Bob Liao at Zeus Capital considers that the company’s shares are underrated, trading at the bottom of its peer range while delivering strong growth and earnings performance.
He reckons that the current valuation is at odds with the substantial cash generation that his brokerage is forecasting.
For the current year he estimates $771.8m revenues, $91.8m EBITDA and 20.7c in earnings.
For next year his figures indicate a revenue of $818.4m, $97.3m EBITDA and 22.1c per share in earnings.
Liao suggests that the group’s strong growth is set to continue and that its outstanding growth and track record of earnings outperformance are not factored into the shares’ low multiples.
Max Hayes and Katherine Thompson at Edison Investment Research take the view that CentralNic is now at critical mass, with its business positioned for sustained growth.
For the current year their estimates are for $833.7m revenues, $94.4m EBITDA with 20.0c earnings.
The 2024 period, they reckon, could report $909.6m sales, $103.0m EBITDA and earnings of 22.1c per share.
The analysts have fixed an implied share price value of 279p a share.
Recent Insider dealings – seller has now stopped
By the way one of the Non-Executive Directors of the company has recently been a big seller. He has a beneficial interest in Erin Invest & Finance, which now owns 13.9m shares, representing 4.84% of the group’s equity.
And that is after Erin sold off 1.8m shares @ 120p each last Thursday.
CentralNic on Friday made a statement regarding the disposals by Erin:
"Erin Invest & Finance considers itself a long-term holder in CentralNic and has notified the company that it has no intent to sell any further shares in the foreseeable future."
My View – these shares are ‘as cheap as chips’
Next Monday we should see a very interesting AGM Trading Update being announced and at the same time the group will be reporting on its first quarter trading.
I have the view that there is so much more to come from this company – its management has clear views on where it wants to go and how to progress its overall prospects.
I also feel that we could be getting another share buyback programme in the short term.
Having already stated that I have made CentralNic group one of my ‘star picks’ for 2023, its shares at just 123p currently only capitalise the company at £355m, which is far too under-priced a level to be missed.
Up to 150p then 180p and above are my predictions for the shares this year.
(Profile 12.07.21 @ 89p set a Target Price of 110p*)