Centralnic Group

Centralnic Group PLC (CNIC) is AIM-listed developer and operator of software platforms, which owns one of the world's pioneering registry service providers, CentralNic Ltd. The London-headquartered company is a leading provider of tools required to create websites, use email and secure business online, and it provides web presence services to customers in over 250 countries. The group offers registry services, distribution, and strategic consultancy for new TLDs, ccTLDs and SLDs, and generates revenue from the sale of internet domain names and hosting on an annual subscription basis. The company’s operations are differentiated in three operating segments: Reseller, Small Business and Corporations. Benjamin Crawford is the Chief Executive Officer of the group.

Recent Development
On 20 May 2019, the company announced that it had entered into a conditional agreement to acquire TPP Wholesale, Australasia's leading domain name and hosting reseller platform, marking the third acquisition in twelve months, continuing its industry consolidation strategy and expansion into key markets globally. The deal worth AUD $24m will be an extension in Australia and New Zealand of CentralNic's largest business unit and would provide the next step as a rapidly growing global consolidator in the recurring revenue domain name industry.

Financial Highlights (FY 2018, in £m)
Lower one-off income from premium domain name sales and the full year effect of the 2017 acquisition of SK-NIC led to a growth in the revenue of 100% from £21.4m, excluding premium domain sales, to £42.7m. Gross profit increased by 69% to £19.7m, while operating profit during the year was £2.7m, against £1.9m in 2017. Adjusted EBITDA, helped by growth in revenue, increased by 66% to £7.0m (2017: £4.2), while overall Adjusted EBITDA Margin, reflecting lower margin KeyDrive business, diluted slightly to 16.3%. Loss after taxation was £4.9m, against profit after taxation of £1.0m in 2017, while basic loss per share was 3.82 pence, versus earnings per share of 1.07 pence in 2017.

Valuation Methodology
Method:  Price/Earnings Approach (NTM)


 Share Price Commentary
 
Daily Chart as at June-17-19, before the market closed (Source: Thomson Reuters)
 
On 17 June 2019, at the time of writing (before the market closed, GMT 2:35 pm), CNIC shares were trading at GBX 65.02, down by 1.48 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 68.00/GBX 45.00. The company's stock beta was -1.05, reflecting negative correlation as compared to the benchmark index. Total outstanding market capitalisation was around £112.70 million.

Conclusion
CentralNic serves more than 250,000 small businesses in nearly every country in the world with domain names and value-added services, and in 2018 it made its most important step forward to date in its plan to build a global domain name and web services provider. The acquisitions undertaken by the company completed its transition to a virtually pure play recurring revenue business and effectively doubled its size. Because of a clear focus on growth markets and acquisitive and organic expansion, its global presence continues to expand rapidly, and in the five years since it first listed, its revenues increased 14-times from £3.1m to close to £42.7m.

Based on the decent financials and supported by the valuation done using the above method, we have given a "SPECULATIVE BUY" recommendation at the closing price of GBX 66 (as on 14 June 2019) based on 16.50x NTM Price/Earnings (approx.) on FY19E Earnings per share (approx.).
 

 Live Company Group

Live Company Group PLC (LVCG) is a United Kingdom-based, AIM-listed live events and entertainment company, which operatesleading global kids’ education and entertainment brands. The company’s operations are differentiated in two operating segments: product & content sales, and tours, events, shows, licences and content rental fees.

Financial Highlights (FY 2018, in £)
Driven by the expansion of activities, with 34 shows and events held in 2018 compared to 18 in 2017, revenues from continued and discontinued activities increased by 178% in 2018 from £1,928,000 in 2017 to £5,351,000 in 2018. EBITDA from continuing activities, excluding the loss from the newly acquired Bright Bricks entity, was £333,000. Against the loss per share from continuing activities of 11.3p, the company improved to a loss of 3.8p per share. Net assets increased to £10,627,000, driven by consolidation of Bright Bricks.

Share Price Commentary
 
Daily Chart as at June-17-19, before the market closed (Source: Thomson Reuters)
 
On 17 June 2019, at the time of writing (before the market closed, GMT 2:30 pm), LVCG shares were trading at GBX 54.40, down by 5.21 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 105.00/GBX 40.10. The company's stock beta was 0.31, reflecting less volatility as compared to the benchmark index. Total outstanding market capitalisation was around £40.50 million.

Conclusion
The group is seeking to move more towards a partnership-based approach to its events and will continue to produce touring models which appeal to families and customers. The company is also creating customised corporate commissions to launch new products and engage customers and new audiences and will help to continually seek new opportunities to increase and diversify its revenue streams. However, the company faces several operational, strategic and financial risks as it is still in its early stage of development, with the growth of the revenues difficult to predict, despite substantial investment in the development of its content and the pipeline. It will be imperative for the group to maintain & develop its business and stay competitive with its pricing as future growth and prospects will depend on it.

Based on the headwinds faced by the company, we have given a “WATCH" recommendation at the closing price of GBX 57.5 (as on 14 June 2019), while we look for any upcoming catalysts.
 
*All forecasted figures have been taken from Thomson Reuters.
*The Speculative buy recommendation is valid for the current price as covered in the report (as on 17th June 2019).

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