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A well-attended virtual CMD highlighted the continuation of attractive market dynamics within the Group’s core Data Privacy segment, as well as offering insight into PIA integration progression and the Group’s product roadmap. The launch of the Kape’s customer dashboard further improves customer experience (‘CX’), providing an easy-to-use interface and attractive upsell/ cross-sell optionality. We have taken the opportunity to introduce FY’22E forecasts on the back of the CMD, with strong customer retention and in-market consolidation improving the competitive landscape. FY’22E sales of $150m (FY’20E: $123m) are forecast to deliver adj FCF of $39m (FY’20E: $19m), generating a FCF yield of 8.4% in FY’22E. The Group has a number of levers for outperformance against conservative forecast KPIs.
Companies: Kape Technologies
One Media's strong H1/20A financial performance is testament to the resilience of its business model and the market in which it operates. The Group generated material top line growth (+28%), driven through both organic channels (+9%) and acquisitions (+19%), whilst improving its margin profile. This financial strength culminated in the recommencement of its cash dividend policy. One Media trades at a discount relative to its peer group, our fair value per share scenario analysis and DCF valuation. We reiterate our Buy recommendation.
Companies: One Media Ip Group
Blackbird plc* (BIRD.L, 19.25p/£64.7m) | Mirada plc* (MIRA.L, 92.5p/£8.2m) | Tern plc* (TERN.L, 10.75p/£29.0m) | Checkit plc (CKT.L, 39.5p/£24.5m)
Companies: BIRD MIRA MIRA TERN CKT
Capital markets day a potential catalyst; Buy
What’s new: Since 27 April 2020, when OnTheMarket started offering new “welcome contracts” almost 500 estate agent branches have signed up, with each business owner receiving welcome shares and over 60% either listing exclusively with OnTheMarket or on a “one other portal basis“.
This was another very good year for MMX, with a comfortable beat of forecasts as management continues to execute its strategy of improving both the ‘quantum and quality’ of its revenue base. The one-off brokered sales (many from .vip in China) are steadily being replaced by rapid growth in new registrations of a much wider range of gTLDs and growing renewal revenue, all automated through the global registrar network – but more in Europe and the US. Group revenue jumped 25% YoY, assisted by strong new sales across the portfolio, the launch of a new brand protection product, and a FY (an extra five months) of the ICM acquisition while the outsourced platform model is keeping the cost base relatively flat so margins and profits are rising. MMX ended the year with $6.6m net cash and will revisit the intended maiden dividend in September, after the pandemic subsides. Given its automated business model and the switch of business and leisure online, this global issue may well be beneficial to MMX. However, with the current level of uncertainty in the global economy, we place forecasts Under Review.
Companies: Minds + Machines Group
What’s new: OnTheMarket plc (65% agent-owned and has almost 40% of independent UK estate and letting agents as shareholders) has released its January 2020 results revealing:
+ 32% rise in average branches listed to 12,497 (over 8,000 paying at year end; over 9,000 paying on 31 May 2020);
+ 12% rise in advertisers during FY20 to 13,364 (31 May 2020: 13,605);
+ 49% rise in mobile site traffic or portal visits to 237m;
+ 75% rise in average monthly leads per advertiser to 96.
A potential disposal, reasonable trading through Q2E and a pick-up in activity from a Google led re-ranking of XLMedia's websites could create the scenario for a material re-rating of the stock. While our forecasts and recommendation remain Under Review, we can see strong potential catalysts for share price advancement.
Cello Health (CLL.L): Recommended Cash offer
Companies: Cello Health
Warren Buffett once said that as an investor, it is wise to be ‘fearful when others are greedy and greedy when others are fearful’. Fear is not in short supply right now.
Companies: OPM ALU ANCR BLV CONN CRC STU GATC HAT LEK MMH MCB MWE NXR NTBR NOG PAF PEG RFX SRC TEF TEG TPT VTU WYN XLM
The Coronavirus pandemic is a human tragedy of vast proportions – as well as the terrible human toll, COVID-19 has led to economies across the globe going into physical lockdown and financial freefall. Entire populations are adapting to the “stay at home” edict, to safeguard the vulnerable – and some of these changes will lead to long-lasting or perhaps permanent changes in the way we live or work. This note describes some of our client companies whose business models are well adapted to these changes, or who might see a change in long-term structural demand.
Companies: AMO BGO FDM GAMA KAPE LOOP TERN ZOO
We believe last month was the bottom for the share price. Trading may deteriorate in Q2 as flagged but the fundamentals of the market XLMedia is selling into have not changed that much. There's certainly nothing in the price for the US opportunity and the balance sheet is rock solid.
Tremor’s AGM statement shows that Tremor was delivering on its strategy and on course to achieve FY20 revenue of $425m in Q1. However, the impacts of COVID-19 on the advertising industry led to a challenging Q2 20, with Tremor’s revenue falling with the market to be c40% below Tremor’s FY20 plan. In response, management have moved quickly to reduce FY20 opex by over $23m vs budget, and positioned Tremor’s platform to respond to a rebound in demand. There are encouraging signs for H2 20, but visibility continues to be low and Tremor is not giving guidance for FY20. We consequently introduce revenue and EBITDA ranges for FY20 and FY21, and place our estimates at the mid-point for FY20. To then highlight that Tremor’s platform can rapidly rebound, we move our previous FY20 forecasts to FY21. This reflects that we believe that Tremor’s investment case remains compelling, and even on our lower case FY21 EBITDA of $35m, Tremor is trading on 5x EV/EBITDA vs ad tech and AIM peers on >10x.
Companies: Tremor International
4imprint’s order volumes are starting to recover as the US economy reopens. The company has been diligent at updating the market and the latest update shows order levels improving towards 50% of prior year, having dipped as low as 20% in early April. Cash conservation measures are having the desired effect and the group still had $28.1m cash (with lease debt only) at the end of May, despite having paid out $9.4m as a one-off lump sum into the pension scheme as scheduled. Based on assumptions over the speed and extent of the recovery but in the absence of formal management guidance, we have reinstated provisional forecasts.
Companies: 4Imprint Group
What’s new: OnTheMarket is extending its “COVID-discount” which was due to expire on 25 July for a further 2 months to 25 September 2020.
The discount will remain at 33% for the first month and will be 20% for the second month. These discounts will be given to all OnTheMarket agent customers who are paying on full-tariff listing agreements.
While revenues will be impacted in the short term, the Group will continue to conserve cash through the careful management of costs.