CentralNic has made a small acquisition of SafeBrands, an online brand protection software provider and corporate ISP based in Paris, for a cash consideration of up to €3.6m (0.9x FY19 revenue). €3m is payable upfront and €0.6m will be paid subject to meeting FY20 performance objectives. SafeBrands operated at close to break-even in FY19. Separately, CentralNic has also reorganised its Corporate division, rebranding it as the Enterprise division. Based on our estimates, the company trades on an FY21e P/E multiple of 15.8x and 9.8x FY21e EV/adjusted EBITDA. We expect earnings-accretive M&A to bring multiples down further as CentralNic consolidates a globally fragmented market of sub-scale, cash-generative businesses.
Companies: CentralNic Group Plc
Further media reports that Dr Martens, the British Boot brand is planning an IPO on the LSE. It is currently owned by PE group, Permira who is expected to sell down its stake at the IPO. March 2020 YE the group had revenues of £672m and EBITDA of £184m. Deal size TBC. Upon Admission to AIM, Nightcap will acquire The London Cocktail Club Limited (the "London Cocktail Club"), which is an award winning independent operator of ten individually themed cocktail bars in nine London locations and one location in Bristol. Offer TBC Due mid Jan. HSS Hire Group, HSS.L transfer from Main to Aim. Mkt Cap c. £70m. Recently raised £52.6m. Leading supplier of tool and equipment for hire in the United Kingdom and Ireland and has provided equipment hire services in the United Kingdom for more than 60 years, primarily focusing on the B2B market. Due 14 Jan. VH Global Sustainable Energy Opportunities plc, a closed-ended investment Company focused on making sustainable energy infrastructure investments, today announces intends to launch an initial public offering of shares on the Official List (Premium) of the Main Market of the London Stock Exchange. Due by Early Feb.
Companies: IUG CBP KAT APP RST DIS NICL BOKU CNIC HE1
CentralNic’s Q320 results highlighted that the group is on course to meet management’s FY20 financial expectations, supported by organic growth and underpinned by a successful M&A strategy. Ytd revenue increased by 118% to US$168.5m, driven by contributions from the transformational acquisitions made in H219. Adjusted EBITDA increased by 68% to US$22.1m. On a pro forma basis, the group recorded organic revenue growth of 17% y-o-y, 10% growth in gross profits and 4% growth in adjusted EBITDA. Adjusted net debt stood at US$80.9m (adjusted for the US$36m cash payment for Codewise made in October). The company trades on an FY21 P/E multiple of 13.1x, which appears highly conservative for a group that has delivered a 69% revenue CAGR FY14–19 as it consolidates a globally fragmented market. We maintain our estimates.
9M 2020 ended September results confirm CNIC’s acquisition and growth strategy. The company delivered high pro forma sales growth with steady divisional gross margins. CNIC is investing in new products and integration activities to improve long-term growth and margins and expects current year results to be in line with management’s expectations. Acquisitions have added significant value and the company is assessing a strong pipeline of further opportunities. CNIC is well positioned to acquire at attractive valuations, improve target company operations and deliver synergies.
CentralNic announced the closing of the Codewise acquisition and that the company continues to trade in line with market expectations. We make no changes to our forecasts, which remain at the top end of consensus range. We formally publish our previously estimated consolidated forecasts, where we show over 20% earnings accretion in 2021E and 2022E. We expect ongoing investments to enhance growth opportunities for the group.
CentralNic has announced the conditional US$36m asset-based acquisition (payable in cash on completion) of one of Team Internet’s closest competitors, Codewise, a domain monetisation business based in Poland. Based on the year to 30 June 2020, the deal values Codewise at 0.60x historical sales (US$60.3m) and 4.9x adjusted EBITDA (US$7.4m). The deal is being funded by way of a share placing, with CentralNic having placed 40m shares (21% of the equity) at 75p per share (a 6% discount to the 10 September closing price), raising gross proceeds of £30m. Assuming a year end completion date, we estimate that the deal will be materially (c 18%) EPS enhancing in FY21. The acquisition is highly complementary to the successful Team Internet acquisition, completed in December 2019, building CentralNic’s technology base and market share in domain monetisation, diversifying its client base and strengthening the group’s development capability and senior management team.
CentralNic has agreed to acquire Codewise, which consists of Zeropark, a monetisation business similar to Team Internet, and Voluum, a complementary online marketing SaaS provider. CentralNic is consolidating and market at attractive valuations, delivering synergies and improving target company operations.
Overview: Zeropark operates a marketplace for domain name investors seeking monetisation and marketers seeking traffic. Voluum provides a SaaS marketing platform that helps SMBs track and analyse traffic sources, campaigns and performance data to optimise advertising campaigns. Codewise generated revenue of $60.3m and Adjusted EBITDA of $7.4m in the LTM ended June 2020.
CentralNic’s H120 interims show revenue growth well ahead of our estimates (US$111.3m vs US$99.1m), with adjusted EBITDA marginally ahead (US$15.1m vs US$14.6m), driven by strong growth in the Indirect and Monetisation businesses, supported by the acquisitions completed in FY19. The group also delivered like-for-like organic growth of 18% in H120. The fall in gross margin from 40% to 32% reflects the change in business mix due to the strong performance of Indirect + Monetisation vs Direct (SME + Corporate), rather than margin pressure. Management reconfirmed its confidence in the full year results, noting a strong M&A pipeline and continuing organic growth. Accordingly, we have raised our FY20 revenue estimate by c 8% to US$218m from US$202m, while paring back gross margin expectations (new: 32.5%, old: 33.0%) and EBITDA margins (new: 14.1%, old: 15.1%). The valuation continues to look attractive.
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Kape has issued a trading update for what was a very productive year for the Group and in which it exhibited a strong trading performance. Revenue for FY 2020E is expected to be at the top end of the expected range while Adjusted EBITDA is ahead of guidance. We increase our estimates by 1% and 8% respectively to be in line with the anticipated outturn for the year. It now has around 2.5m paying subscribers across its core markets of North America and Europe. Kape also completed the integration of Private Internet Access (PIA) ahead of schedule and launched new products, including its privacy suite. Kape expects to increase R&D spending further in FY 2021E to build on the successful additions to its product range and customer experience. With good momentum going into FY 2021E, the Group continues to demonstrate its ability to drive customer numbers and retention through the execution of a clear strategy for meeting the growing demand from consumers for digital privacy and security solutions.
Companies: Kape Technologies Plc
Reach plc today provides a strong Q4 trading update highlighting upgraded FY’20E AOP expectations of £130m-£135m ahead of consensus (cons: £124.3m) and record growth in Digital. Digital sales growth has recovered strongly since Q2, accelerating to 25% y/y (Q3: +13%; H1: -1%) benefitting from both higher traffic through implementation of Group engagement initiatives and yield recovery as advertisers in CV19 impacted verticals return. Print circulation revenue decline moderated to 11.7% y/y in Q4 (Q3: -12.6%), a significant deceleration from the -18.2% y/y in H2 and modestly better than our H2 forecasts. Continued focus on audience engagement, the quality of audience data and insights, and further extension of locally focused digital content we see driving further gains online, with Digital sales still on track to double on a four year view. We are upgrading forecasts, increasing FY’20E sales, AOP and adj FCF by 2%, 6% and 5% respectively, with upgrades filtering into future periods. A 17% FY’21E FCF yield sits well in advance of global peers (3%-7%), with a 10% FCF yield generating an intrinsic valuation of 315p/share.
Companies: Reach plc
Kape has announced the launch of its CyberGhost Privacy Suite solution, for Windows initially, which it had trailed in its July Capital Markets Day. The suite provides online users with a comprehensive protection solution which combines Kape’s market leading privacy and software products, providing a strong data privacy and system security offering to consumers on a global basis. The Group is also launching a password manager and an end-to-end encryption service for cloud-data. These launches represent the fruits of the collaboration between Kape’s complementary acquired businesses. In particular, we expect the undertaking to further improve user engagement and retention, driving revenue and profit into the long term.
Tremor has announced that December trading materially exceeded its prior estimates, as its platform’s momentum has continued to accelerate since its last update on 30 November. Tremor now expects FY20 revenue and EBITDA to be in the range of $404-408m for revenue (from $390-400m), and $58-60m for EBITDA (from $50-52m). This leads us to upgrade our FY20 and FY21 revenue forecasts by +2-3% to $406m and $479m, and upgrade our FY20 and FY21 EBITDA by +16% and +10% to $59m and $68m. As Tremor’s platform benefits from strong operational gearing, this drives upgrades to EPS of +28% in FY20 and +16% in FY21. Our net cash then increases by $11m in FY20 to $96m, and despite including $10m of buyback in FY21, our FY21 net cash increases by $12m to $117m as we partially unwind conservative working capital assumptions. This is the fourth upgrade to our Tremor forecasts since COVID-19 impacted the advertising market and Tremor in Q2 20, and Tremor subsequently adopted a prudent approach to its FY20 guidance. We continue to mirror this conservatism in our FY21 EBITDA of $68m, which compares with H2 20 EBITDA of $57m, and our FY21 EBITDA includes additional investment as Tremor looks to gain share within a market growing at over 20% pa. From p9 we also highlight that Tremor is demonstrating the same trends as its US ad tech peers Magnite, PubMatic, and The Trade Desk, with each forecasted to see +15-35% organic revenue growth and +10-60% organic EBITDA growth in FY21, as they focus on expanding in connected TV. However, Tremor is trading at a major discount to its US peers on all metrics, such as FY21 EV/EBITDA of 9x vs 41x, 29x and 104x, and at a discount to the finnCap Tech 40 on 17x with +9% EBITDA growth. As Tremor continues to deliver and exceed expectations, we do not expect that its current valuation will be sustainable due to market or external interest, and we upgrade our target price to 800p based on 20x FY21 EBITDA.
Companies: Tremor International Ltd.
Cornish Metals (TSX-V: CUSN) intends to list on AIM. The Company is proposing to raise £5 million by way of private placement of new Common Shares (the "Fundraising") to advance the United Downs copper-tin project. The Company expects that Admission will become effective in February 2021. The Company's Common Shares will continue to be listed and trade on the TSX-V in Canada. Further media reports that Dr Martens, the British Boot brand is planning an IPO on the LSE. It is currently owned by PE group, Permira who is expected to sell down its stake at the IPO. March 2020 YE the group had revenues of £672m and EBITDA of £184m. Deal size TBC. VH Global Sustainable Energy Opportunities plc, a closed-ended investment Company focused on making sustainable energy infrastructure investments, today announces intends to launch an initial public offering of shares on the Official List (Premium) of the Main Market of the London Stock Exchange. Due by Early Feb. Moonpig, the digital greeting card company, is planning an IPO with a potential valuation of £1bln, according to multiple media reports. Further details expected to be announced over the next two weeks.
Companies: ZPHR PANR PRSM SENS CYAN G4M ITX CRCL FEN ZIN
Today‘s statement highlights several positives, firstly that H2 revs to December are expected to be higher than in H1 (£7.3m), so importantly indicates that trading conditions have improved since the first lockdown. We also note that high margin ‘Distribution revenue‘ (royalty income on ZIN‘s back catalogue) outperformed in Q4 and helped achieve this sequential growth. Zinc also updates the market on a key client win - none other than Amazon and in-so-doing, ZIN will break in to a new market with Amazon Audible. Key points here: ZIN is clearly evidencing how it‘s now a more cohesive and flexible company following 2020‘s re-org and what‘s more, we see this as a first step in ZIN potentially becoming a trusted partner of Amazon. i.e. this relationship evolve to include video content production in due course! Beyond Amazon, we also learn that Tern TV has won a number of recommissions and also that the new Zinc Communicate division had a strong Q4 and won three new contracts to produce short form video for brands and corporate partners. Here, the objective is similar to that with Amazon – grow internationally and access new customer types i.e. diversify beyond a historic focus on UK PSB‘s. As a consequence of this new business momentum (and previously flagged strong new biz pipeline) FY21 revenue visibility has increased from £4.1m (last reported) to £9.3m today. On top of this, ZIN has £5m of pipeline at an “advanced stage“ and £15m “in engaged discussion“. Put all these together and we start to understand how Zinc could be working towards a profitable 2H21. We caveat this however with a level of uncertainty due to lockdown 3….what is clear however – Zinc is making unquestionable progress in its turnaround and notwithstanding Covid.
Companies: Zinc Media Group plc
Kape has announced that it has raised gross proceeds of $115.5 million through a significantly oversubscribed placing and retail offer of 59.2 million shares at 150p and will use $72 million of the proceeds to buy out the two major vendors of PIA, the transformational deal which the Group completed at the end of 2019. The remaining $43.5 million will be used to strengthen the Group’s balance sheet as it looks to select further acquisitions. There is an additional tax-related cash benefit of around $50 million over 15 years that is now available to Kape following this change to the PIA deal structure. This seems an intelligent way of removing any potential share overhang while also adding further to the group’s M&A firepower. Kape will cancel the shares which it acquires from the vendors and will not issue the vast majority of the deferred shares. With trading still robust and guidance unchanged, we make no alteration to our underlying business assumptions. Our EPS estimates reflect the changes to the shares in issue, both existing and prospective.
With an improving outlook for advertising spend, The MISSION should see a good bounce in revenues in FY21. Initiatives such as MISSION Made, launched in October, should help drive efficiency, with increasing use of shared central resources and a careful eye on costs also set to lead a rebound in margin. The financial outcome will partially be determined by revenue mix, with the group exposed to high-performing segments, such as tech and pharma, as well as areas with greater COVID-19 related issues, such as property and events. There are no changes to our forecasts at this stage. The group’s valuation remains well below that of peers.
Companies: Mission Group Plc
Edison Investment Research is terminating coverage on De La Rue (DLAR) and Walker Greenbank (WGB). Please note you should no longer rely on any previous research or estimates for these companies. All forecasts should now be considered redundant.
Companies: De La Rue plc
Upon Admission to AIM, Nightcap will acquire The London Cocktail Club Limited (the "London Cocktail Club"), which is an award winning independent operator of ten individually themed cocktail bars in nine London locations and one location in Bristol. Offer TBC. HSS Hire Group, HSS.L transfer from Main to Aim. Mkt Cap c. £70m. Recently raised £52.6m. Leading supplier of tool and equipment for hire in the United Kingdom and Ireland and has provided equipment hire services in the United Kingdom for more than 60 years, primarily focusing on the B2B market. VH Global Sustainable Energy Opportunities plc, a closed-ended investment Company focused on making sustainable energy infrastructure investments, today announces intends to launch an initial public offering of shares on the Official List (Premium) of the Main Market of the London Stock Exchange.
Companies: PMI RMM SUN BOIL ITM TRMR MLVN 88E IME ANP
Kape has enjoyed a good first half of 2020 both in terms of operational progress and financial performance. Revenues increased 97% to $59.0 million (H1 2019: $29.9 million), a 12% increase on a pro-forma basis. The interim results reflect the Group’s continuing success in integrating its Private Internet Access (PIA) acquisition while growing subscriber numbers – now just shy of 2.4m in total - across the businesses. The focus on customer lifetime value is evident in the marketing spend and investment in new product development. Kape remains on track to meet previous guidance for the full year and expects to deliver synergies from the PIA deal at the top end of the mooted range. We believe that the Group has good revenue visibility and it continues to maintain a high level of user retention at 80%. We make no changes to estimates other than to reflect a higher amortisation charge. In our view, the interim results show that Kape continues to display the drive and capacity to meet the growing needs of consumers for digital privacy and security products in a rapidly evolving marketplace.
Tern plc* (TERN.L, 8.0p/£24.1m) | Corero Network Security (CNS.L, 8.25p/£40.8m) | Eagle Eye Solutions Group plc (EYE.L, 288p/£86.9m)
Companies: TERN CNS EYE
Mirada plc* (MIRA.L, 72.5p/£6.5m) | Osirium Technologies plc (OSI.L 19p/£3.7m) | Corero Network Security plc (CNS.L, 11.0p/£54.7m) | Tern plc* (TERN.L, 7.7p/£23.2m)
Companies: MIRA OSI CNS TERN
Kape has today announced the successful, heavily oversubscribed raise of $115.5m from a mix of new and existing shareholders. The raise has been undertaken at a share price of 150p/share representing an 2% discount to prior close, and exceeds the initially targeted raise of $100m. $72m of the proceeds will be utilised to buy-out issued and eliminate deferred shares due to legacy founders of Private Internet Access (‘PIA’) which was acquired in Nov’19. The remaining $43.5m will be held for acquisition and R&D investment. We note that PIA’s executive team (CEO, CTO and COO) who joined Kape alongside the acquisition last year are all remaining in the business, with PIA’s founders only nominally involved post acquisition. The benefits to Kape are three-fold: 1) the raise increases liquidity within the shareholder register; 2) Kape is acquiring founder shares at 145p/share, an 3% discount to the price of the raise; and 3) the beneficial tax structure created at acquisition shifts to Kape shareholders (as opposed to PIA founders) creating a c.$50m cash benefit to Kape recognised linearly over 15 years. Updated forecasts for FY’21E generate FCF of $28.2m, representing a 7% yield.
Mirada plc* (MIRA.L, 85p/£7.6m) | Two Shields Investments/BrandShield plc (TSI.L, 0.11p/£4.9m - pre-proposed placing, acquisition and share consolidation)
Companies: Mirada PLC (MIRA:LON)BrandShield Systems plc (BRSD:LON)