The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
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Thanks Rivaldo. I have this feeling that Team Internet will one day spin off it's online presence side of the business. That would wipe out it's debt and set it up perfectly going forward. Anyone else think this is a possibility?
Interesting that web hosting behemoth GoDaddy's shares have surged 40% since November "after the company smashed profit expectations in the third quarter, with earnings per share of 89¢, up 41% on a year ago":
Https://citywire.com/funds-insider/news/software-stocks-surge-up-the-ratings-as-top-investors-swoop-on-rally/a2434637
The latest view from Master Investor FYI:
"Team Internet Group (LON:TIG) – Outperforming Expectations
I will not bore you anymore with comments on this global internet solutions business, other than to state that Monday’s Trading Update for its 2023 year was very encouraging indeed.
Analysts Bob Liao and Carl Smith at Zeus Capital believe that it has extended its track record of upgrading and outperforming expectations.
They were impressed by the double-digit growth in both the Online Presence and the Online Marketing segments of the group’s business.
Looking ahead they believe that the company has strong long-term growth opportunities including international expansion, new partner development and vertical integration.
Their conclusion is that the group’s shares are very attractively valued.
Over at Edison Investment Research their analysts Max Hayes and Dan Ridsdale remarked that the group has made solid advances on all fronts.
They consider that the rating looks low given the company’s growth profile, diversity and growing track record.
The shares, which closed at 134.40p, remain a good Hold"
Doesn’t buying back shares at a low ish price gave a greater effect on capital appreciation, though? Increases EPS which in turns drives share price.
Agreed all looks to be going well at TIG at the moment. I have taken some profits on the back of this rise to reinvest elsewhere, but still holding on to the bulk of my shares. I’d like them to use free cash flow to reduce debt rather than buy backs / dividends though as I’m looking for capital appreciation rather then income from this investment.
Edison have now issued a new note, and make some interesting points:
(1) They "see scope for upside, particularly in Online Marketing, where we believe that click or revenue per 1,000 session rates are starting to stabilise while volumes continue to grow"
(2) Major events such as the upcoming US presidential election could drive advertising spend and upside to our forecasts"
(3) Team Internet reports launching more products than ever before and signing up a record number of new demand and supply side partners during FY23, which should also support growth"
They summarise:
"29 January 2024
Team Internet’s FY23 trading update confirmed that trading has remained robust with double-digit sales growth across Online Marketing and Online Presence. The total revenue and EBITDA margin were slightly ahead of market consensus and our forecasts, both of which were upgraded in November 2023. Estimated FY23 net debt of US$74m was lower than our US$80.9m forecast, with operating cash conversion reverting to close to 100%. We maintain our FY24 estimates, but these could prove conservative, especially if advertising spend recovers. At 4.8x FY24e EV/EBITDA and 6.4x FY24e P/E, Team Internet's rating looks low given the company’s growth profile, diversity and growing track record."
Also I presume that as net debt reduces by c$55m pa, according to Zeus, the equity component of the EV will rise to compensate for the debt part reducing, so a modest natural share price increase from that alone.
Very happy with the update today. I wonder at what point share buybacks cease to be the optimum use of capital, as the sp rises? And then how would the free cash flow be utilised? Reduce debt I guess.
The clue here is in the terrific cash flows, which will be recognised at some point. Plus such high recurring income.
Zeus Capital this morning note adjusted operating cash conversion being strong at around 100%.
They've raised their forecasts in line with the RNS, and now see 22.4c EPS last year rising to 25.1c EPS this year and 27.3c EPS next year.
They also see net debt falling this year to just $21.8m - and then a $33.1m cash pile at the end of next year.
So the shares trade at only 4.7x EV/ EBITDA 2024, 6.6x PE and a 15.6% FCFF yield.
In particular, "Online Presence peers trade at 8.9x EV/ EBITDA 2024 and Online Marketing peers trade at 7.3x, 85% and 52% valuation premiums to Team Internet".
Given the recent run-up there may have been some early profit-taking, but there could be a bigger rise this afternoon and subsequently as the market catces on to the huge value for sale here.
There you go just 1 % up. What a suprise
Good result again. I'm not confident though about a re rate. Market seems unwilling. These shares should be at least double where they are to bring growth levels in line with p/e
Excellent trading statement - and well ahead of consenus expectations.
For example, $835m revenues compares to Zeus's forecast of $825.3m, and $96m EBITDA compares to Zeus's forecast $91.8m.
Great news that both divisions are now delivering 14%-16% annual growth.
And "we anticipate that these (online and AI) concurrent trends will significantly bolster our performance and help us outperform in any cycle" is soothing to hear!
Borrowing would have been much reduced had it not been for $40m of buybacks, which given today's news will hopefully prove to have been good value.
TIG looks in very good shape. Perhaps this time the sellers have been drained and the share price can finally reflect the very positive outlook.
Fingers crossed for more of the same tomorrow
We expect to publish our audited annual report and accounts for the financial year ending 31 December 2023 on Monday, 18 March 2024. Prior to this, on Monday, 29 January 2024, we will release a comprehensive Trading Update. This update will highlight a record performance in Q4 2023 and FY 2023, demonstrating that the Group continues to trade at least in line with current market expectations.
Over 130p now , and more to come
IC view ,
With the shares trading on just 7.8 times predicted full-year earnings, there isn’t much to lose here. Buy.
Calculated the number of share bought back at c£32m - AR in 8 days - maybe a coincidence???
x.com/microbagman/status/1749801214047560039?s=20
I hope we have good run up to trading update end of month .
Https://kestrelpartners.com/news/
Should we get excited that Kestrel are buying stock? They are a private fund who buy shares in small caps, then put a member on the board. They are buying other companies too, for example increased in RCN today. Exploring the website indicates some others they hold too. If anything, they maybe able to broker a deal for another buyer. You could look upon Kestrel large holding as a negative, now it means that an approach from someone else is very unlikely. I follow a similar vehicle called Dbay who have near 29% in a couple of companies. They surprised me when they took Finsbury food private and kept it (due to the FCF). I think a company making cakes has limited growth compared to TIG, so I doubt this would be a sensible approach. Perhaps they could flip it by relisting it on the Nasdaq, I dont know. But if you follow stocks, Kestrel buying and having a board member is fairly normal and im not reading much in to it, other than a huge endorsement from some very skilled professional investors. Kestrel fund is not open to the public, so you could go and buy all of their holdings to replicate the performance..Also shows where the value zone is, if they are happy to buy under 1.20. I caught the bounce of 115 this week with a few extra but sold them today at 122. TIG is a good holding but im not expecting fireworks any time soon, the yield is low here and the SP growth is slow to come. A lot of the time, I forget I hold this and focus on other stocks.
Regardless of Kestrel I think the BB shares will get cancelled, though strange that they have not done so already. The alternative is that they work on increasing the share price and use the shares for an acquisition so long as they are valued at higher than they paid for them. Currently bought back 8% of the company.
A Rule 9 mandatory offer is required when a ‘potential offeror’ buys through 30%. The Panel will be consulted by the advisers to the party who triggers the 30% threshold if that has been achieved as a result of the total shares in issue reducing. In practice the Panel executive will ask the advisers if their client has an intention to make an offer in the foreseeable future and have the powers to hold them to whatever they say ie. if they say they have no intention to make an offer and buy more they could get their knuckles rapped and be forced to sell down. As a non-statutory body The Takeover Panel have extraordinary powers. In this case with some of the shares, Royde may not be able to control voting rights entirely so adding to the complexity. The main test here is intent. If the Panel had any inkling that Royde was intending to creep up to a significant level above 30% to acquire the shares in the market ‘cheaply’ ahead of a formal offer at a significant premium, they would act. I can say this with some certainty having been involved with cases in my youth. Pleased that someone is buying shares here as the market still does not appreciate the potential with TIG.
Or you could read the RNS of the share that you are invested in and find out if they are being held in treasury or cancelled.
Fark me ... AIM ... head slap emoji.
Also note that Royde will have good visibility of the trajectory of the buyback programme and the likely impact on % so if they don't want it to trigger then they could slow down their acquisitions ahead of completion to avoid reversing any back out.
Its a %, doesn't matter how it gets there, calculate to 30%.
Shares can be bought back and held in reserve if you like or they can be bought back and cancelled, if cancelled the % total will be affected.
I believe so but maybe should double check that, or they can sell sufficient shares to keep below 30% which I've seen before in that situation. It's the % held that matters rather than how they get there.
And what if the threshold is reached due to share buybacks increasing their % of voting rights rather than further market purchases? Still required to make an offer?