CentralNic (CNIC:AIM) 133.4p

Loss to date: 6.7%

Original entry point: Buy at 143p, 25 November 2021

CentralNic (CNIC:AIM) continues to shift from its core and historic domain name services to online advertising and marketing, with this part of the business delivering significant organic growth opportunities, margin uplift and attractive M&A prospects.

First-quarter results were driven by rampant growth on this side of the business, where organic revenues jumped 83% year-on-year $71.6 million, making it almost twice the size of its longer-in-the-tooth domain names and website management arm at $39.1 million, up 7% organically.

The online marketing division saw 54% growth in the number of user sessions to one billion as well as from a 105% increase in revenue per thousand sessions to $98.20. This is an important number, analysts at Berenberg believe, acting as a proxy that indicates how valuable advertisers find the company’s marketing solution, so a higher value implies advertisers are finding high conversion internet traffic using this solution.

That the share price has flatlined this year tells us more about the possible impact on its online marketing business if recession does bite. However, with M&A opportunities aplenty, and cost synergies extracted from each deal, a price to earnings of about 12 times 2022 forecast earnings looks too cheap.

SHARES SAYS: We continue to believe CentralNic shares will reward investors willing to show patience. 

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