Tremor International Ltd (LON: TRMR)

Tremor International Ltd. is an FTSE AIM 100 index 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.

Growth Prospects

• Impressive Collaborations: TRMR had added 42 new US supply partners during Q4 FY21 across growth verticals in sports, entertainment, and lifestyle. Meanwhile, the Company had collaborated with VIDAA, a subsidiary of Hisense, for exclusive global access to Automatic Content Recognition ("ACR") data which begins on 01 May 2022
• Share Buyback Programme: The Company had announced its intention to return excess cash of USD 75 million through the implementation of a share buyback programme commenced on 01 March 2022 and will continue until 01 September 2022.

Key Risks 

• Wrong Strategic Choices: The failure of partner relationships could adversely impact the business in the near term.
• Record UK Inflation: British inflation hit a 30-year high of around 6.2% during February 2022, which may cause a further interest rate hike.
• Ukraine Tension: The mounting concern over the Russian invasion in Ukraine can continue to weigh on the equity market.

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 Highlights (for the year ended 31 December 2021, as of 24 February 2022)

(Source: Company Filings)

• Top-Line Business: The top-line revenue grew by around 61% during FY21 and increased by around 26% during Q4 FY21.
• Profitability: On the profitability front, the Company has witnessed a favourable turnaround from reporting an operating loss during FY20 to delivering an operating profit for FY21. Furthermore, the total comprehensive profit came out to be around USD 70.6 million during FY21.
• Net Retention Rate: The Company’s customer net retention rates reached 150.3% during FY21.

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 29 March 2022 at 08:14 AM GMT+1, TRMR’s shares were trading at GBX 598.00, down by around 0.33% against the previous day closing price. Stock’s 52-week High and Low were GBX 870.65 and GBX 451.00, respectively.

On a daily chart, the stock price is sustained above the 50-days simple moving average of GBX 538.66 and 100-days simple moving average of GBX 556.31. Hence, there could be an uptick in the stock price in the near term. Also, the MACD line has given a bullish crossover against the signal line.

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

Business Outlook

TRMR had shown resilient financial performance during FY21 as it reported record adjusted EBITDA and initiated USD 75 million share repurchase program. Moreover, TRMR expects to report a Contribution ex-TAC (“traffic acquisition costs”) of at least USD 73 million and adjusted EBITDA of approximately USD 33 million during Q1 FY22. However, the supply chain disruptions had limited the advertising activity during Q4 FY21 in certain verticals such as automobile manufacturing and would continue to adversely impact during Q1 FY22 as well. In a nutshell, TRMR has expected to benefit from the anticipated ongoing resurgence in the global digital advertising industry and remained confident in the medium- to long-term prospects.

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

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 598.00 (as of 29 March 2022 at 08:14 AM GMT+1), with lower-double digit upside potential based on 12.69x 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 decisions should be made depending on the investors’ appetite for 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 is subject to the factors discussed above.

Note 3: Target Price refers to a price level that 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.

Note 4:  Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

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 the 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 unfavourable movement in the stock prices.

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