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Https://masterinvestor.co.uk/equities/centralnic-group-are-these-shares-too-cheap-after-profit-update/

"CentralNic Group – are these shares too cheap after profit update?
By Mark Watson-Mitchell 27 April 2022

Last Monday’s Q1 2022 Trading Update and Outlook report from this global internet platform group was a very strong pointer of even better times ahead.

This operator really is a money machine, and it would be totally wrong to ignore its potential over the next few years.

What is more its shares look very undervalued, especially considering the high-priced rubbish elsewhere in the market.

Yet another Profits Upgrade

Even though the group has only just completed its first three months of its trading year, its management is confident enough in materially upgrading market estimates for the rest of the year – which in turn bodes very well for the next few years as well.

It appears that the company’s Online Marketing division has helped to boost the numbers. Particularly the company is doing well from the benefits in gaining market share while it is in market trend for advertising solutions which identify and refine consumer purchasing intent, without third party cookies.

“While the Directors are cognisant of the current global macro-economic environment, they now have confidence that the group will materially exceed the most recent market expectations for the year.”

The company has had a very strong start to the year, with organic growth year-on-year reaching a record 51%, helping it gain market share in a growing market.

It is well worth noting that the group has upgraded revenue guidance six times and EBITDA four times since the start of last year – to my knowledge that is unique in our market.

The Business

Just to remind you what CentralNic does as a business.

The group, which was set up in 1996, operates through two main divisions – Online Presence and Online Marketing.

It drives the growth of the global digital economy by developing and managing online marketplaces allowing businesses globally to buy subscriptions to domain names for websites and email, to help monetise their websites, and to acquire customers online.

The company provides the essential tools for businesses to go online.

Its services include hosting domains, reselling domain names, the building of internet websites, security certification for websites and, of course, their monetisation.

The company’s Online Presence segment also provides computer software channels, as well as strategic consultancy and related services.

The Online Marketing segment offers advertising placement services for domain name owners, content website operators, and e-commerce website operators.

It also provides social marketing, search engine marketing advertising, and display advertising services.

Both Organic and Acquired Expansion."

Https://martinflitton1.wixsite.com/privatepunter/post/enteq-getting-set-for-saber-27-04-22

Cheers - I missed that rather important RNS!

Https://www.investegate.co.uk/inspired-plc--inse-/rns/holding-s--in-company/202204120913351035I/

So Gresham House bought that huge chunk of BGF's shares - they're now up to 29.72% (from 22.54%), so can barely buy any more without bidding for INSE!

That's a pretty big vote of confidence. And ties up almost a third of the shares in safe hands.

It's not often you see a growing cybersecurity company on almost a single-digit P/E (OT : although SYS are also similarly under-rated at present!).

A poster elsewhere has noted that Berenberg have a 380p price target:

"Berenberg see momentum building, 380p price target. 'potential significant upside'"

Cenkos have also issued a new note this morning - they say fair value is at 200p+.

They've raised this year's forecast to 13.7p EPS, and see a £6.8m cash pile at the end of this year. They conclude:

"Fair value lies at 200p+. Excellent delivery and the prospect of returning project work bodes well for FY23E and beyond and is not being recognised in the share price. A rating of sub-5x EV/adj EBITDA in FY23E is anomalous and fair value for such a business with a cash positive balance sheet in our view lies over 200p. Buy"

Great coverage of Berenberg's Buy note here:

Https://www.proactiveinvestors.co.uk/companies/news/980590/centralnic-is-accelerating-amid-more-diversified-adtech-landscape-broker-980590.html

"CentralNic is accelerating amid more diversified adtech landscape - broker

Many investors find CentralNic Group PLC (AIM:CNIC) a difficult company to understand, said Berenberg, or are sceptical of the future of the online ‘ad-revenue bonanza’.

But with growth accelerating in the first quarter of 2022, the AIM-listed company is tapped into trends that offer the potential for cash generative growth for several years, the analysts at the company’s house broker said, reiterating a share price target of 250p.

“We would argue that the growing network effects of the group’s advertising marketplace, along with a requirement for alternative approaches to targeted advertising (with the abolishment of third-party cookies), will allow the business to do quite well in the medium term,” the broker said.

Thinking about these network effects in the context of an undemanding low-teen growth forecast over 2022-2025, which the analysts expect CentralNic “to easily outperform” given that it has delivered a circa 23% organic top-line compound growth rate over the past two years, the valuation of around 11 times forecast earnings or roughly a 9% free cash flow yield for the shares “seems very cheap”.

Berenberg upgraded its forecasts for revenue, adjusted EBITDA and adjusted diluted EPS by circa 10%, 8% and 1% for the current year.

“The penetration of digital advertising as a percentage of total ad spend is clearly growing, but what is more interesting is that US advertising as a percentage of GDP has dropped by circa 30% over the past two decades to just under 0.95%,” the analysts said, citing reports by McCann and Benedict Evans.

“Some of this drop is because digital advertising is cheaper and more efficient, and this is why we think digital advertising dollars are here to stay, benefitting companies such as CentralNic.”

Rather than the ad revenue spend come to an end, the company should benefit from a more diversified AdTech landscape, they added, noting that every software vendor from Uber, Spotify and Netflix collecting acres of personal data to allow for more targeted advertising on their platforms.

As a result, they expect digital ad spend across multiple channels to be more diversified in the future, with the platforms outside of the walled gardens of Google and Facebook growing relatively faster.

The IAB’s 2021 Internet Advertising Revenue Report published in April showed ad revenues on search, social media, digital video and digital audio grew 33%, 39%, 51% and 58% respectively.

“A more diversified adtech landscape benefits a marketplace model such as CentralNic’s, which continues to add more sources of traffic and destinations of traffic both organically and via acquisitions.”

Zeus Capital have issued a new 10 page note today following the Capital Markets Day and site visit.

They have a 110p valuation, and summarise as follows:

Https://zeuscapital.co.uk/log-in/research-portal-login/#/portal/zeus-capital

"Key takeaways from the Capital Markets Day and factory site visit:

Factory expansion and new manufacturing strategy - Over the past year Surface Transforms has installed major equipment (e.g., furnaces and CNC machines) and restructured factory processes with the aim of producing much higher volumes in a continuous (versus batch) process. Already the lead time to produce a finished brake disc has been reduced from nine months to one month. Through the remainder of this year, installation and commissioning of final equipment, and implementation of processes to support continuous production, will be completed.

Revenue opportunities – In part, Surface Transforms is meeting existing demand - from OEMs who have already adopted carbon ceramic technology for performance, weight, and environmental reasons, and who wish to have dual supply. But also, the Group is driving wider market adoption by providing a superior product and, ultimately, targeting a lower pricing point. As we have discussed previously, we calculate the current market size at c.£300m globally p.a. but potentially rising to multiple billions, with a focus on fitting carbon ceramic discs on higher priced vehicle models which have not yet converted from iron rotors.

Cost pressures and margins - We believe our assumptions on gross and net margins are prudent and reflect potential cost pressures from accelerated hiring of employees across the business, and higher materials and energy usage. Surface Transforms has several cost efficiency plans in place which will help mitigate current pressures. Margins should also naturally start to benefit from economies of scale, as production ramps up.

Refreshed Board - Ian Cleminson (Executive Vice President and CFO of NASDAQ-listed Innospec - IOSP) has just been appointed independent NED. The Group now has three high profile, experienced, newish, or new NEDs: alongside the existing senior team. Governance structures and experience levels are now more appropriate for the next phase of growth.

Zeus valuation - We use DCF modelling to assess a valuation for Surface Transforms. Our approach is prudent on input costs, working capital, capex requirements and the discount rate applied. Our valuation is 110p, approximately double the current share price."

Progressive Equity Research have increased their forecasts to 11.9p EPS for last year, and to 14.1p EPS for this year (from 13.8p).

They summarise:

"The CEO’s comments strike a confident and enthusiastic tone, confirming
that progress has been made with both new and existing clients, and
pointing to the company’s growth trajectory. Shearwater looks to be
delivering and moving to a revenue growth path, and more positive news
on contracts or guidance could well see the market valuation metrics move
to reflect this."

Https://progressive-research.com/company/shearwater-group-plc/

CAPD's investee company PDI were up 13% overnight on impressive drilling results at Bankan.

Most importantly, there was this juicy news re an "aggressive drilling campaign over next 12 months":

"The Company....following a competitive tender has awarded a new drilling contract to Capital Drilling, with a minimum of four diamond drill rigs expected on site in the near-term delivering a significant ramp-up in drilling activity."

Https://www2.asx.com.au/markets/company/pdi

Looks like an excellent second acquisition in the last three weeks. Orchard Computers made £2.1m revenues and £0.3m EBITDA last year, so at a £1m purchase price in cash it's pretty cheap - plus Orchard has 56% recurring revenues and will be immediately earrnings-enhancing.

Https://uk.advfn.com/stock-market/london/sysgroup-SYS/share-news/SysGroup-PLC-Acquisition-of-Independent-Network-So/87918574

The trading update is out - revenues and EBITDA well ahead of expectations......

Https://uk.advfn.com/stock-market/london/shearwater-SWG/share-news/Shearwater-Group-PLC-Year-End-Trading-Update/87918587

EBITDA will be a MINIMUM of £4.2m, compared to £3.8m forecast by Cenkos, which I'm guessing will give rise to around 12.5p historic EPS.

SWG would appear to be in rude health, winning new customers, having the security of a £5.6m cash pile, and a very bullish outlook:

"We have returned to a revenue growth trajectory, underpinned by a strong financial position, and we remain excited for what the future holds."

Loads of upside here from a current year P/E in single digits based on 13.8p forecast EPS to March'23.

ACSO are one of three companies presenting at 6.00 on Thursday evening - free registration:

Https://event.webinarjam.com/register/126/ox7r5unp?j=1075411&sfmc_sub=207590540&l=86_HTML&u=63169045&mid=100009383&jb=69

Edison have issued a new note and increased their EBITDA forecasts by 9%.

They now forecast 15.5c EPS this year, rising to 17.3c EPS next year, i.e 12.2p EPS rising to 13.6p EPS.

They don't have a specific target price, but note the "compelling" value given almost a single-digit P/E at 126p for the current year, let alone going forward:

Https://www.edisongroup.com/publication/51-organic-revenue-growth-in-q122/30810/

"Valuation: Growth at a reasonable price

On our updated estimates, CentralNic trades on an FY22 P/E of 9.7x and on 7.3x FY22 EV/adjusted EBITDA, markedly below its peer group. It has a seven-year revenue CAGR of 73%, putting it in the top 50 fastest growing technology
companies in Europe (FT, 2022). At these levels, CentralNic’s shares appear to offer a compelling proposition, with our upgraded estimates implying 40% revenue growth for FY22, with recurring revenue products contributing over 99% of total gross revenues and strong cash generation, with cash conversion of over 100%."

An encouraging lunchtime presentation from TST. Highlights in no particular order:

- the strong Q1 trading is "ahead of original budget". IM played down the market uncertainty mentioned in the results, noting that this is already "baked in" to WH Ireland's new forecasts of 5.5p EPS this year, rising to 6.7p EPS and then 8.4p EPS
- margins for Q1 are "considerably higher", having risen from 50% to 62% in the last four 6-month periods
- he's expecting "strong progression" in EPS, PBT etc (see above)
- software development fees have gone from almost nothing to £268k last year, and are already at £184k for this year after just one quarter
- a number of new products and product enhancements and additions lined up for this year
- the new products have greater software inclusion, so higher recurring revenues and higher margins
- lots of pilots are underway for fleet expansion roll-outs
- TST can sustain annual double-digit top line growth from the existing businesses
- TST could have £3.5m net cash in two years time. They're hoping to obtain Court approval in the next few months, enabling either share buybacks or special payouts to shareholders
- TST are "in a good place"

FNX were tipped as a Buy in Momentum Investor as follows in their April issue - since the new issue is now out it should be OK to copy this:

"Fonix, the UK provider of mobile payments and messaging services, announced strong first half results. Total payments volumes (TPV) grew 12% to £138m with record levels of business in November and December. Gross profit as a percentage of TPV increased from 4.7% to 5.1% as it moved away from relatively low margin TPV from voice services. Gross profit increased 20% to £7m driven by 18% growth from mobile payments and 43% growth from mobile messaging. Good cost control meant EBITDA increasing 20% to £5.5m.

Fonix has continued investing in its platform to expand internationally including better functionality for multi-currency reporting and automatic direct-to-consumer refunds, which can fuel expansion into transport and ticketing.

FinnCap forecasts EPS of 7.9p this year ending June and 8.8p in FY'23, dropping the prospective P/E to 19.7 and 17.7. Its price target is 230p, implying 20x FY'23 EV/EBITDA. I am a buyer."

Excellent new coverage in the Daily Mail:

Https://www.thisismoney.co.uk/money/investing/article-10751195/SMALL-CAP-SHARE-IDEAS-Rising-energy-bills-set-boost-Inspired.html

"SMALL CAP SHARE IDEAS: Rising energy bills and ESG concerns set to boost business energy consultant Inspired

By John Harrington, Proactive Investors For Thisismoney.co.uk
Published: 14:15, 25 April 2022 | Updated: 14:15, 25 April 2022"

Conclusion:

"If the company executes well on its foray into ESG Dickinson thinks annual revenues for the division, currently running at around £1million, could increase by 2026 to between £10million and £15million.

The Software Solutions comes across as a nice-have rather than growth driver, but it 'provides the privacy software that underpins our technology-enabled service,' Dickinson said.

Opportunities for further acquisitions in fragmented markets add to the investment case, argues broker Peel Hunt, which has a price target for the stock of 25p.

The shares currently trade at 15p, having recovered from a low of 11p in March 2020 – the month in which the West woke up to the Covid-19 threat.

More recently – August 2021 - the shares hit 21p but concerns over failing energy supply companies have knocked sentiment.

'What normally happens in these situations is that the customers need us more than ever,' Dickinson said, referring to companies needing to find a new supplier when their existing one goes bust.

'They need us to sit there and help them navigate through those difficulties and for us to be able to help find new energy supplies for them, in which case … we'll mitigate a lot of that risk.

As for Inspired itself, 'We need to kind of make sure everyone's clear as to where our business sits,' Dickinson admitted.

This year's volatility has added to the company's experience in dealing with risks, both for its customers and its own business.

And where its business 'sits' is potentially on the threshold of a huge opportunity to help customers navigate the energy crisis and meet increasingly stringent ESG requirements."

WH Ireland today introduce a fair value of 120p for TST - the EV/EBITDA is just 2.7:

"Full year results in line with expectations; positive start to FY 2022E

Touchstar is a supplier of mobile data computing solutions and managed services to a variety of industrial sectors. This morning, the group has released a strong set of results for the year to 31 December 2021, in line with our expectations and demonstrating positive progress against key strategic targets. While revenue increased by 3.7%, EBITDA rose by an impressive 25.5%, principally driven by a higher proportion of recurring software sales that led to a 750bps rise in the gross margin.

The balance sheet remains strong with £2.4m net cash at year-end, and the order book at year-end end stood at a healthy £646k. On the back of the results, we have left our FY 2022E earnings expectations unchanged, while we introduce FY 2023E and FY 2024E estimates for the first time.

The shares trade on an FY 2023E EV/Revenue multiple of just 0.6x, EV/EBITDA of just 2.7x and PER of 11.9x. With approaching 40% of revenue now derived from recurring software contracts, we believe there is the potential for the shares to re-rate as the strategy continues to be successfully executed.

Ascribing a 1.0x FY 2023E EV/Revenue multiple to the shares would imply fair value at 120p."

The results are out and show a company definitively on the up.

TST have a £4.4m EV (net of the £2.38m and rising cash pile), and made a £341k PAT (uo from £87k) - or a £233k PBT before the R&D tax credit.

The 38% and increasing recurring income, which the City loves, is another big plus.

TST had a "strong" Q1, tempered slightly by a hesitancy in April for obvious global reasons, but are still confident of "growth in revenue and EBITDA continue in 2022".

TST are considering buybacks and dividends, but with the holding company having negative reserves from prior year losses it should be a simple matter to get a Court ruling to utilise the £1.1m share premium account and pay up dividends from subsidiaries to get the reserves into positive territory.

Very happy to continue holding here.

Berenberg have today reiterated their 250p price target - I've had to top up my already large holding with some more today. Bonkers cheap imho:

Https://www.defenseworld.net/2022/04/25/centralnic-group-loncnic-stock-rating-reaffirmed-by-berenberg-bank.html

Given 3.3p historic EPS - and that during the pandemic - plus a new earnings-enhancing cyber-security acquisition, with further acquisitions on the agenda, it's easy to see SYS catching people's eyes at some point soon with it being on a single-digit P/E at 28.5p.

Here's a direct link:

Https://martinflitton1.wixsite.com/privatepunter/post/sysgroup-shares-look-good-value-g4m-headwinds-24-04-22

Zeus value CNIC at 195p on a DCF basis after this morning's upgrades.

They've "conservatively" upgraded their forecasts by 11%, but note that if they were to annualise Q1's growth and adjust for the VGL acquisition then EBITDA would rise by 29%......

They now forecast almost 13p EPS for this year, which puts CNIC on a single-digit P/E. And that's for the current year, let alone going forward. Crazy.

They summarise:

""CentralNic released a very strong Q1 trading update, which drove the board to materially upgrade full year outlook even at this early stage of the year. The company further accelerated trailing twelve months organic revenue growth through Q1 to c. 51% (2021: 39%). Outperformance was again largely driven by the Online Marketing division, which continued to benefit from market share gains and market trends towards advertising solutions that can identify and refine consumer purchasing intent without third party cookies.

CentralNic now expects full year results to be materially above consensus expectations. Given macroeconomic uncertainties ahead, we conservatively upgrade our revenue by 11% to $573.4m from $516.1m and Adjusted EBITDA forecast by 11% to $67.0m from $60.5m. However, we see further earnings upside in lieu of negative scenarios: If we simply annualise Q1 preliminary EBITDA and adjust for the VGL acquisition, we estimate EBITDA would reach $78m, equal to a 29% upgrade. However, even based on our conservative forecasts, CentralNic shares trade at only 7x 2022 EBITDA, 10x P/E and 11% FCFF yield."