CentralNic Group Go Team!

A CentralNic Group PLC (LON:CNIC) update on Team Internet confirms the turnaround in trading anticipated by management at the time of its acquisition. In addition, the company indicated that overall trading so far this year has been resilient. Shares trade at only 7x EV/EBITDA.

Strong growth: Matomy Media, which sold Team Internet to CentralNic on 24 December 2019, disclosed that from 1 January 2019 to 24 December 2019 Team Internet revenue was $74m and adjusted EBITDA was $12.3m (Period 1), up from $66.7m and $10.6m respectively in the 12 month period to 30 June 2019 (Period 2).

Turnaround confirmed: Team Internet’s revenue growth and margins reveal a sharp turnaround that validates management’s confidence at the time of the acquisition and may surprise sceptical investors. To assess growth we use monthly average figures to normalise for the different time periods compared. The monthly average revenue in Period 1 was $6.3m, 13% higher than in Period 2 ($5.6m). The growth is even more impressive after considering that the periods compared overlap across six months. Profitability was solid across the periods. Team Internet’s Adjusted EBITDA margin rose slightly to 16.6% in Period 1 from 15.9% in Period 2. 

Resilience: CentralNic also announced that it expects current trading for Q1 to be in line with market expectations. CentralNic’s trading should be relatively resilient. The company has a subscription revenue model, sells mission-critical products and the cost of its products are low.

Our view: CentralNic appears well positioned in the current environment and for accelerating growth. Team Internet has an increasingly dominant position in the domain name monetisation market as it invests in further growth. Despite its strong growth prospects, shares trade at only 7x EV/EBITDA. CentralNic plans to release its 2019 annual report and a Q1 2020 trading update in the week commencing 27 April 2020.

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