CNIC tipped on Master Investor - part 228 Apr 2022 11:13
"The group’s core growth strategy is in identifying and acquiring cash-generative businesses in its industry with annuity revenue streams and offering exposure to growth markets before migrating them onto its own software and operating platforms.
The recently oversubscribed equity Placing and tap bond issue has shown significant institutional following and approval of the management’s strategies.
This group has been extremely sensible in its acquisition policy, while its organic push has been more than impressive.
It is now a market leader in two high growth markets – digital advertising and domain name management.
ARR growth continuing apace
Both divisions generate reliable revenue streams based upon subscription income and from serving a diversified customer base.
And you know just how much I love to see annual recurring revenues (ARR), so too do all Finance Directors that I know. It makes for high income visibility upon which cashflow can be predicted and thereby enable operating leverage, especially for an acquisitive group.
Edison Investment Research state that the group’s revenue recurring products contribute over 99% of total gross revenues, while its cash conversion rate is over 100%.
Broker’s View
Analyst Bob Liao at the group’s NOMAD and joint broker, Zeus Capital, has upped all of his estimates.
He now goes for $573.4m of revenues for this year, EBITDA of $67.0m, a pre-tax profit of $54.2m and earnings of 16.5c per share.
For next year, assuming no further acquisitions are made between now and the end of 2023, which is totally unlikely, Liao goes for $607.3m revenues, EBITDA $72.3m, $60.6m pre-tax profits and 17.8c in earnings, which easily covers a dividend of 0.8p per share.
For 2024 he estimates $643.4m revenues, $76.1m EBITDA, $64.8m profits, 19.1c earnings and a 1.8p per share dividend.
The group will be announcing its Q1 interim report on Monday 23 May, which is when we could expect another Update on its current year prospects.
Its half-year report will be due in July.
That leaves plenty of scope for further upgrades
My View
I really like this group – as I stated earlier on – it is ‘a money machine’.
It is totally undervalued, trading on just 10 times its price-to-earnings ratio estimated for 2022.
That rating should be at least 50% higher, if not a great deal more.
Zeus Capital suggest that its valuation is 195p a share, compared to last night’s closing level of 125.50p.
That closing price was subsequent to over 5.1m shares having been traded on the day, and that was in excess of twelve times the average daily dealing volume.
That was also more than the highest level of last year, when on 7 September a large stake changed hands.
These shares are for buying, and even for adding if you are already a holder – that is because they are destined to soon break above 153.77p, which was their peak of last November.
Ignore this company at peril to your portfolio – yes
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