CentralNic Group plc (LON:CNIC) announced that trading year to date is above expectations. We upgrade our 2022 revenue and EBITDA forecasts by 15% and 4%, respectively. The company announced two small but earnings accretive and synergistic acquisitions. CentralNic continues to build strong momentum, which we believe is not reflected in the company’s low valuation multiples.
Trading ahead of expectations: The company announced that its strong growth in 2021 has continued into 2022, with revenue growth YTD materially ahead of the consensus expectations for the full year (6%-22% range). CentralNic’s organic revenue growth was c. 37% in 2021.
Already upgrading: Despite the early stage of the current financial year, CentralNic Group believes full year performance should be at or above the high end of market expectations. We upgrade our revenue and EBITDA forecasts by 14% and 4%, respectively, from $410.0m and $49.5m to slightly above the top end of consensus (top end: $468m and $51.0m). We also upgrade 2021 estimates that we previously planned to upgrade at the full year results on 28 February. We increase 2021 revenue and EBITDA by 7% each from $385.2m and $42.5m to $410.9m and $45.3m, respectively.
Online Marketing powers into 2022: Strong growth YTD was driven largely by Online Marketing, which is able to source, qualify and deliver high conversion traffic to advertisers without the use of cookies. Apple’s removal and Google’s planned removal of support for third-party cookies in their browsers is likely diverting companies away from advertising that depends on third-party cookies and towards privacy-focused products and services like CentralNic’s.
Strategic acquisitions: CNIC has entered into agreements to acquire Fireball Search GmbH and the .ruhr Top-Level Domain (TLD) for a total consideration of €0.6m in cash. Combined historical revenue and EBITDA for both acquisitions are c. €0.2m and c.€0.1m respectively. The acquisitions are expected to be immediately earnings accretive. Fireball is a long-established and well-recognised search engine in Germany powered by Bing. Fireball provides new traffic sources for CentralNic’s Online Marketing division to monetise. .ruhr is the domain address for c.50 cities around the river Ruhr in Germany and consisting of c. 5m inhabitants. .ruhr currently has c.10k domain names registered, which CentralNic will migrate from its existing service providers to be more economically managed internally.
Strong buying opportunity: Today’s strong trading update after recent share price weakness creates a strong buying opportunity, in our view. CentralNic Group’s share price has fallen c. 7% since the beginning of the year, leaving valuation at only 10x EBITDA and 14x PE 2022 despite a continued string of earnings upgrades.
