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CentralNic: A platform business, looking to scale

CentralNic’s capital markets day (CMD) on 24 June 2020 introduced the divisional management team and provided insight on each of the three key segments as they will report in FY20: Indirect (Wholesale, Registry); Monetisation (Team Internet); and Direct (Retail, Corporate). We have picked out what we believe are the four key themes from the CMD: FY20 performance, COVID-19 and seasonality; organic growth; M&A; and, pulling it all together, the benefit of scale. CentralNic continues to trade on an FY20 EV/EBITDA of 9.1x and a P/E of 15.8x, a material discount to its peer group, with our DCF indicating further share price upside. M&A could bring CentralNic’s multiples down further.

Investment case: Market leader in growth markets

CentralNic operates in a growing low-value, high-volume technology-enabled global market (total addressable market c US$30bn) where clients typically pay annual subscriptions upfront (c 100% cash conversion). Customers tend to be very sticky, and the longer they stay, the stickier they become (92% repeat revenues). CentralNic operates a leveraged ‘buy and build’ model, with organic growth supplemented by M&A, offering domain registry and related internet services to SMEs and corporates (it is the number two domain-name reseller globally).

CentralNic Group Plc (LON:CNIC) provides registry services, distribution, and strategic consultancy for new TLDs, ccTLDs and SLDs.

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.