Tremor International Ltd (LON: TRMR)

Tremor International Ltd. is an FTSE AIM 100 listed company focused on digital advertising, including video, mobile, native, display technology, and connected TV. The Company was formerly known as Taptica International Ltd. TRMR is a worldwide leader in Video and Connected TV ("CTV") advertising, as it offers an end-to-end technology platform that enables advertisers to expand their reach.

On 24 February 2022, the Company will release FY21 financial results for the 12 months ended 31 December 2021.

Growth Prospects

• Strategic Partnerships: TRMR bolstered its end-to-end CTV capabilities for customers and recently announced a partnership with VIDAA to expand its US and international footprint. Moreover, it looks forward to evaluating additional strategic acquisition opportunities, making further investment in R&D, and increasing market share.
• Continued Growth in CTV: Due to a favourable industry shift towards programmatic buying, CTV had emerged as a key strategic focus for the Company. Meanwhile, the CTV revenues went up by around 115% during Q3 FY21 as compared to Q3 FY20.

Key Risks 

• Record UK Inflation: The annual rate of UK consumer price inflation reached 5.5% in January 2022, the highest since March 1992. Thus, it can adversely impact the London equities.
• Inflation Concern: Due to the inflationary pressure, the Bank of England increased the Bank Rate by 25 basis points to 0.50%. It can keep the equity market under pressure amid the rising US Dollar index.
• Wrong Strategic Choices: The failure of partner relationships could adversely impact the business in the near term.

Key Fundamental and Shareholders Statistics of Tremor International Ltd. 

Mithaq Holding Company is the most significant shareholder as it holds nearly 33.87 million shares as of 31 December 2021.             

Financial Update (for the third quarter ended 30 September 2021, as of 11 November 2021)

(Source: Company Filings)

• Financial Performance: TRMR recorded a strong financial performance and posted a revenue jump of around 55% during Q3 FY21, driven by its performance strengthened by significant programmatic activity.
• Operational Growth: The adjusted EBITDA jumped by 116% year-on-year in Q3 FY21 to USD 42.3 million.
• Strategic Focus: The CTV remained a key strategic focus for the Company as the industry continued to shift towards programmatic buying.
  

 Financial Ratios (H1 FY21)

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 22 February 2022, at 08:10 AM GMT, TRMR’s shares were trading at GBX 500.00, down by around 2.34% against the previous day closing price. Stock 52-week High and Low were GBX 870.65 and GBX 451.00, respectively.

On a daily chart, the stock price is sustaining between the lower Bollinger band and middle Bollinger band. Hence, there could be an uptick in the stock price in the near term. Also, the 14-RSI at around 42.19 indicates that the stock is approaching the oversold territory, which suggest trend reversal in the near term.

Over the last two years, TRMR’s stock price has delivered a positive return of ~186.50%, and it has outperformed the FTSE AIM 100 index (benchmark index) with a return of about 3.63% and FTSE All-Share Media (benchmark sector) with a return of around 9.31%.

Valuation Methodology: Price/Earnings Approach (FY22E) (Illustrative)

Business Outlook

Tremor demonstrated a robust financial performance as it continued to witnessed growth in CTV and Video spending. It has also expanded the partnership with Roster and achieved significant business wins to sustain the strong trading momentum. Moreover, the Company had anticipated FY21 full-year organic Contribution ex-TAC and Adjusted EBITDA growth of approximately 62% and 150%, respectively. The Company remained well-positioned to benefit from the resurgence in the global digital advertising industry. In a nutshell, the Company aimed to drive shareholders’ returns through a wide range of revenue streams and verticals.

Considering the solid fundamentals, positive industry dynamics, strong financial ratios, decent guidance, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Tremor International Ltd at the current price of GBX 500.00 (as of 22 February 2022 at 08:10 AM GMT), with lower-double digit upside potential based on 11.47x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios. 

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

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