This report is an updated version of the report published on 24 May 2022 at 08:43 AM GMT+1

Tremor International Ltd

Tremor International Ltd (LON: TRMR) is an FTSE AIM 100 index listed Company focused on digital advertising, including video, mobile, native, display technology, and connected TV.

Investment Rationale for Valuation – Speculative Buy at GBX 480.00

• Q1FY22 Highlights: The company reported impressive performance during the quarter, driven by customer adoption of Data-Powered End-to-End Technology and Business Platform. Adjusted EBITDA grew by a robust 22% in Q1FY22 to US$33.6 million, compared to Q1FY21.
• Strong Balance Sheet: The Company ended the period with a net cash position of US$370.8 million as of 31 March 2022. In comparison, it was in US$367.7 million net cash at the end of 2021.
• Share Repurchase: The Group launched US$75 million share repurchase program on 01 March 2022.
• Technical Indicator: The price of the stock recently has crossed the 20-day MA trend line from downwards and is sustaining above it, indicating bullishness in prices in the near term.  

Key Risks

• Business Risk: The company is prone to the risk of supply chain and economic disruption which can impact its target key market segments.   
• Inflation Risk: Inflation has been reported at 40-year high levels of 9% in April 2022 and can affect input prices thus impacting profitability.  

Financial Highlights (for the three months ended 31 March 2022, as of 17 May 2022)

(Source: Company Website)

• Revenue: Revenue grew by 14% to US$80.9 million in Q1FY22, compared to the prior corresponding period.
• CTV Spend: Connected TV (CTV) spending grew by 21% to US$46.2 million in Q1FY22, compared to the prior corresponding period.

One Year Share Price Chart

(Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22E)  

Conclusion

The company is optimistic on its future prospects, expected to be driven by industry catalysts in H2FY22, including the FIFA World Cup and Additional Advertiser Spend Associated with the U.S. Mid-Term Election Cycle. It anticipates achieving the following guidance levels –

(Source: Company Website)

The stock made a 52-week high and low of GBX 870.65 and GBX 400.00, respectively.

Based on the decent fundamentals, strong balance sheet & margin profile, optimistic 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 closing market price of GBX 480.00 (as of 23 May 2022) with lower double-digit upside potential based on 9.62x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

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.

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.

Note 5: ‘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 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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