Member Info for Edgeofvalue888

Guys, how have people concluded that the loss of confidence in Ben by the Board was due to Ben's fixation with the M&A strategy? The explanation given to Brokers about Ben wanting to spend time with family sounds like an attempt by Mgmt/the Board to reassure investors that CNIC's isnt a burning platform. That would be reasonable for a normal CEO transition, but not one where the CEO is replaced effective immediate effect.
Could it not be due to other factors? Board loss of confidence in a CEO is most likely due to hiding/concealing of information from the Board. Given the guidance and share buyback announcement at the same time as the CEO change, I'm guessing its not due to a hidden bomb on the balance sheet, or operational issue, but probably Ben having unauthorized conversations with some potentially interested acquirers of CNIC... He after all, would have the most to gain from a take private transaction.
The risk of a blow up in one of its subsidiaries/recent acquisitions would be more serious, but paraphs less likely

I do really like this Company. It certainly appears to be shaping up to make itself into something quite special, but it’s on a journey, rather than being the finished article just yet.
One thing to comment on is that the forecasts that the Company have guided the brokers to are ridiculously conservative. From recollection I think the business is already run-rating more then next years forecast EBITDA in one of the research notes I read. So lots of sand bagging in the broker numbers (and future earnings upgrades), but I’m sure the insto buy siders are on top of this

The biggest question mark on value in my mind is what multiple should you put on the Online Monetisation business given it’s super normal growth but also it’s Google customer concentration exposure? The implied multiple based off the current share price is ridiculously low if we apply a 9-12x multiple to the Online Presence segment

It’s shares also have a terrible liquidity problem which will prevent some investors looking at it, it’s also not helped being listed in the UK. probably would benefit from a top tier US technology focused corporate broker coming on bored who could get new instos warmed up ahead of its next equity raising which would diversify the register.
Taking a step back, its also quite complex to explain what it does exactly (especially online marketing ) and still suffers from the perception that it’s a bunch of sub scale businesses tacked together through m&a without any scale market leading businesses to focus buy-side analysts on. I think this is gradually changing overtime as they integrate the various m&a targets into their central tech platforms, which is improving business quality. Management also need to clearly articulate the mitigants to the Google customer issue, and get on with shrinking that exposure quickly (by growing revenue sources from other customers)

… suspect they have been hit by the worse then expected google result, especially the read across for outlook for online ad sales

I assure you I wasn’t intending to selectively present any evidence one way or another …
It’s not clear to me who is the gate keeper ‘owning’ the end-customer/eye-ball… if it’s an aggregator who is directing end user traffic to CNICs platforms for monetisation, then it strikes me that they could potentially direct this traffic to other competitor platforms for monetisation if they wanted to (eg if someone built a better monetisation engine) , or maybe they could even build their own monetisation engine for this traffic using their own software engineers … in this case it wouldn’t matter that their are 3-4m end customers…
the traffic generated by CNIC own sites (owned or managed) sold to 3rd party advertisers for monetisation intuitively feels lower risk…
im struggling to peel off the next layer of onion to understand how much concentration risk CNIC is really exposed to…
Keen to chat with anyone who’s done the deep dive on this and is open to sharing thoughts

The online presence business is highly diversified, but the online marketing division is not…
See note 6 of the Annual Report (pg70)…” one customer represents more than 10% of revenue amounting to USD 208m” (out of US 410m FY’21 revenues)…

On first look these look pretty solid
- 9m YTD organic growth of 66%
- implied quarterly revenue/gross profit/adj EBITDA of 190m; 45m; 22m
This suggests the online marketing business continues to grow organically at above 100% vs pcp in latest quarter, with a slight acceleration qoq

Management now expect to materially exceed top end of analyst guidance for full year (they have quoted current consensus of 630m revenue and 73m EBITDA for -FY22 - interesting that they did provide guidance vs top end of the analyst range like they have in the past)
They completed their refinancing which will save them sone cash, although a lot of the margin saving looks to be rated up by increase in base rate
Looks like they are run-rating 88-90m EBITDA as a group which means it’s trading around 4.7x run-rate EBITDA…. Not bad for a company growing organically at 66%

Only gray cloud is this this extreme growth in their online marketing segment is likely amplifying the already eye wateringly high customer concentration risk in the online marketing segment

Agree that CentralNic looks exceptional cheap on conventional metrics (sub 6x run-rate EBITDA), it’s certainly not without risk. It’s main fragility is that over 50% of its turnover, and 2/3rds of its Gross profit, and 100% of its EBITDA comes from one customer in its monetisation division (see the revenue note in its annual report). Clearly their is ‘better mouse trap’ risk here and is also why CNIC only pays 4-5x for its monetisation acquisitions… However, given momentum in the business, increasing scale and cash generation available for reinvestment in new products as well as the market opportunity in monetisation, chances are it will grow and the concentration risk might reduce over time