Investors beware!
There are always people in the know, when you are not.
And they take advantage of that knowledge, to the disadvantage of shareholders.
So it was last Friday when the shares of Team Internet Group (LON:TIG) fell back from the 138p level at which some 202,911 shares were traded the day before.
They closed the week at 119.20p, on the back of more than five times the previous day’s volumes, with some 1,126,407 shares dealt on the day.
By the way, the average daily trade runs at around 424,512 shares.
Today’s Reaction To Poor Q3 Results
This morning the global internet services group declared its unaudited results for the nine months to end-September – they were not good.
Despite revenues actually increasing by just 1% to $615.1m ($611.7m), the group’s pre-tax profits decreased by 9% to $18.3m ($20.0m), with earnings per share increasing 7% to 16.83c.
Adjusted operating cash conversion fell from 95% to just 91%, but with net debt increasing to $99.7m ($74.1m end-2023), which included some $13.8m spent on share repurchases.
Management Comment
CEO Michael Riedl stated that:
"Team Internet has delivered a resilient performance in our core businesses within a dynamic market environment and the Group is poised to maintain record levels of profitability.
Although our recent acquisition has not yet contributed to EBITDA, I am confident in its strategic value to our long-term objectives.
In contrast, our Comparison business, created from the acquisition of VGL Publishing AG, has grown significantly, demonstrating the success of our acquisition strategy.
Our focus is now more than ever on realising synergies through strategic integration, enhancing value across the sum of the parts of our established assets and accelerating Shareholder returns.
With our ongoing commitment to innovation and operational excellence, we are well-positioned to return to higher growth in profit and cash flow."
Analyst Views
Analysts Bob Liao and Carl Smith, at Zeus Capital, lowered their estimates, stating that:
“Revenue and profit growth slowed in Q3 due to recent acquisition, Shinez, experiencing reduced demand from key partners and Team Internet’s core business seeing continued decline in ad pricing.
Whilst the company is repositioning Shinez towards gradually improving profitability, we conservatively lower our estimates for this business to break even for FY24 and FY25 and reduce core business growth, prudently assuming continued pricing headwinds.”
For the current year to end-December they now look for revenues of $843m ($837m), with adjusted EBITDA of $97.0m ($96.4m), lowering earnings to 22.7c (23.2c) but increasing the dividend to 2.2c (2.0c) per share.
For 2025, they see $852m sales, $98.1m EBITDA, 24.5c earnings and 2.4c per share in dividend.
The analysts conclude that:
“Based on updated Zeus estimates, Team Internet still generates significant and growing EBITDA and free cash flows whilst trading on a P/E of only 6.3x FY25.
Its other FY25 ratios are also highly attractive at only 4.5x EV/EBITDA and 15.7% FCF yield.”
In My View
Perhaps the market whispers that Michael Riedl should stop flying around the world getting specific photo opportunities have a basis of sensible thought.
Also, those whisperers still find it hard to understand why the group should borrow so much money to spend on buying-in its own shares at what proves to be totally the wrong price.
My view is that this group continues to be a ‘money machine’ that is substantially undervalued at the current 100p, after hitting 94p at one stage this morning.
As I write there have been some 1.696,208 shares traded by mid-morning.
I am convinced that they will recover, probably after the knowing ‘shorters’ have covered their positions.
Comentarios