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CentralNic Group plc

CentralNic Group PLC Chinese Government approves .XYZ + Zeus Comment

CentralNic Group plc (LON:CNIC), a world leader in domain name and internet services, today announced that the most popular new generic Top Level Domain (new gTLD) ending .XYZ is one of the first domain endings to be accredited by the Chinese Ministry of Industry and Information Technology (“MIIT”), allowing businesses and individuals in China to use .XYZ domain names to host their websites.

CentralNic, which is .XYZ’s exclusive distributor, worked closely with .XYZ to put in place a customised technology platform that has been approved by both the global internet regulator ICANN and China’s MIIT – succeeding in securing .XYZ a ranking among the first batch of non-Chinese “not-COM” domains approved for Chinese citizens. MIIT-accredited .XYZ web addresses will be available via Chinese domain registrars from the 16th December 2016.

Ben Crawford, CEO of CentralNic Group PLC said: “I am delighted that our partner .XYZ has received its MIIT accreditation, .XYZ has always been the dominant new TLD, and China the biggest new TLD market. It’s an exciting moment that should see .XYZ grow even faster.”

.XYZ is actively sold through more retailers (“registrars”) than any other new Top-Level Domain name, and is already a multi-million seller in China, as Chinese citizens have obtained the .XYZ they wanted in anticipation of the MIIT accreditation.

Daniel Negari, CEO of .XYZ, said: “Accreditation in China is one of .XYZ’s most significant milestones to date. CentralNic has been an amazing back end partner of XYZ and went above and beyond its contractual requirements to help navigate through foreign policies and technical requirements.

“We look forward to our continued partnership with CentralNic to make .XYZ the go-to domain extension for every business and individual in China.”

Since its launch in 2014, .XYZ has dominated the new Top-Level Domain space. Representing one in four of all domains registered using new TLDs (in a field of 1200 new TLDs launched), .XYZ domains have been used by the gamut of websites from small businesses in emerging markets, through to Google, Mark Zuckerberg and the founders of Skype.

 

Zeus Capital said:

.XYZ domain one of first to receive accreditation for local hosting in China

CentralNic today announces that the .XYZ TLD, for which they act as exclusive distributor, has received official accreditation from the Ministry of Industry and Information Technology (MIIT) in China. What this means is that businesses and individuals in China can now use .XYZ domain names to host their websites locally. CentralNic worked closely with .XYZ to put in place a customised technology platform that has been approved by both ICANN (the global internet regulator) and MIIT, succeeding in securing .XYZ a ranking among the first batch of non-Chinese new gTLDs approved for Chinese citizens. MIIT accredited .XYZ web addresses will be available via Chinese domain registrars from 16th December 2016. The MIIT accreditation was a planned development for the group and is positive news in the context of one of the strategic objectives to increase recurring earnings. We are leaving our forecasts unchanged however we note that the approval opens up significant new opportunities for CentralNic to drive further domain growth within the large Chinese market. The Group continues to evolve at a pace and updated forecasts beyond FY17 will form part of the year-end updates expected in the Spring.

  • .XYZ remains the leading new gTLD with c.25% market share. .XYZ continues to rank number one in terms of domain sales with c.6.7m. Whilst the benefit has not translated into material earnings yet, due to heavy discounts, there are now significant volumes of domain names that will be up for renewal within the next 12 months. Although the scale of renewals is unknown (we conservatively assume c.10% renewal rates), of the 6.7m .XYZ domains, for every 1% that renew, CentralNic receives over £0.1m in EBITDA based on current renewal prices. CentralNic also remains firmly established as the number one Wholesaler of new TLDs globally with c.32% market share or 8.8m domain names.
  • Valuation. CentralNic is trading on an EV/EBITDA of 6.3x to Dec 16 falling to just 3.9x to Dec 17, and P/E of 13.3x to Dec 16 falling to 9.8x. This compares very favorably with the peer group, which includes Verisign and GoDaddy, which is trading on an average FY1 EV/EBITDA of 13.2x and P/E of 28.5x. Given the growth prospects of the business, coupled with the strong operating cash flow characteristics, the impressive track record being built by management via successful acquisitions and the diversification of the business we feel the shares offer investors a value opportunity given the industry backdrop. CentralNic’s listed peers are typically capitalised in the billions of dollars.