CentralNic Group Plc

CentralNic Group PLC (CNIC) is a London, the United Kingdom-based developer and operator of software platforms, which owns one of the world's pioneering registry service providers, CentralNic Ltd. The 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 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 News
On 4^th July 2019, the company announced the settlement of its EUR 50 million senior secured bond issue, the placement of which was declared on 24^th June 2019, occurred on 3^rd July 2019.

On 1^st July 2019, CentralNic Group Plc of the UK planned to acquire Hexonet GmbH, a Homnurg-based internet portal operator, for a total consideration of EUR 10 million.

Trading Update (as on 24^th June 2019)
First four months of 2019 had been robust and management, therefore, expect full-year 2019 results to be ahead of market consensus. In the four-months ending 30^th April 2019, the company revenues stood at $33.8 million, an increase from the corresponding period of the last year. EBITDA increased to $5.4 million against the previous year same period data. On 30^th April 2019, net debt, excluding prepaid charges was $7.4 million. The group has changed its reporting currency to US dollars for 2019, as announced on 26^th September 2018.

Financial Highlights (FY2018, £’000)

(Source: Final Results, Company Fillings, LSE)

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 per cent from £21.4 million in FY17, excluding premium domain sales, to £42.7 million in FY18. Gross profit increased by 69 per cent to £19.7 million, while operating loss during the year was £2.7 million, against a profit of £1.9 million in 2017. Adjusted EBITDA, helped by growth in revenue, increased by 66 per cent to £7.0 million as compared with the financial year 2017 of £4.2 million, while overall Adjusted EBITDA Margin, reflecting lower margin Key drive business, diluted slightly to 16.3 per cent. Loss after taxation was £4.9 million, against profit after taxation of £1.0 million in 2017, while basic loss per share was 3.82 pence, versus earnings per share of 1.07 pence in 2017.

Share Price Performance

Daily Chart as at 16^th July 2019, before the market closed (Source: Thomson Reuters)

On 16th July 2019, at the time of writing (before the market close, GMT 10:25 AM), CNIC shares were quoting at GBX 60 and remained flat against the previous day closing price. Stock's 52 weeks High and Low is GBX 68.50/GBX 45. The company's stock beta was negative 1.09, reflecting negative correlation as compared to the benchmark index.

Valuation Methodology


Conclusion
The company 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 was first listed, its revenues increased 14-times from £3.1 million to close to £42.7 million in FY2018.
Based on the above factors and supported by valuation done using the above method, we have given a “Speculative Buy” recommendation at the closing price of GBX 60 (as on 15th July 2019) with single-digit upside potential based on 10x NTM EV/EBITDA (approx.) on FY19E EBITDA (approx.).

OptiBiotix Health PLC

OptiBiotix Health PLC (OPTI) is involved in the development and research of microbiome modulators mainly in the United Kingdom. It’s headquartered is based in York, the United Kingdom and also a life sciences company. The group is differentiated into three core screening platform namely OptiScreen, OptiBiotics, and OptiBiome.

Recent News
On 3^rd July 2019, the company announced that its subsidiary ProBiotix Health Limited had engaged in a non-exclusive license agreement with Tenshindo for the use of Lactobacillus plantarum LP_LDL® in cardiovascular food supplements in Japan.

On 25^th June 2019, the company declared the appointment of GPSL (goetzpartners securities Limited).  GPSL will offer financial advisory services to the company including investor support services and sector-specific equity research.

On 28^th May 2019, the group had announced the appointment of Stephen Prescott as Chief Executive Officer (CEO) of its wholly-owned subsidiary, ProBiotix Health Ltd.

Financial Highlights (FY2018, £)

(Source: Final Results, Company Website)

The company’s reported revenue increased to £514 thousand as compared with the financial year 2017 of £191 thousand. The majority of this income was generated in the H2 FY2018 with the increase in the number of agreements started to generate revenues. The operating loss decreased by £628 thousand to £1,499 thousand against the corresponding period of the prior year 2017 of £2,127 thousand. In the financial year 2018, the loss for the period was £1,893 thousand. From continued operations, basic loss per share stood at 2.33 pence as compared to the previous year 2017 profit per share of 2.43 pence. At November 30, 2018, the group had cash in the bank of £1.33 million.

Share Price Performance

Daily Chart as at 16^th July 2019, before the market closed (Source: Thomson Reuters)

On 16th July 2019, at the time of writing (before the market close, GMT 12:35 PM), OPTI shares were quoting at GBX 76.08 and reduced by 1.19 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 133.25/GBX 61.42. The company’s stock beta was 1.50, reflecting higher volatility against the benchmark index.

Conclusion
The company is in the development phase. The company rely on its cash balances and fundraised from the stock market for all the operational tasks. The profitability margins have remained negative in FY18. The company operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors.

Keeping in mind the weak financial performance, we recommend the investors to “Avoid” taking fresh positions at the current price of GBX 76.08 (before the market close).
 
 
*All forecasted figures and peers have been taken from Thomson Reuters.
*The Speculative Buy recommendation is also valid at the current price as of July-16-19.

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