CentralNic Group - Digital model delivers resilient growth

CentralNic’s H120 interims show revenue growth well ahead of our estimates (US$111.3m vs US$99.1m), with adjusted EBITDA marginally ahead (US$15.1m vs US$14.6m), driven by strong growth in the Indirect and Monetisation businesses, supported by the acquisitions completed in FY19. The group also delivered like-for-like organic growth of 18% in H120. The fall in gross margin from 40% to 32% reflects the change in business mix due to the strong performance of Indirect + Monetisation vs Direct (SME + Corporate), rather than margin pressure. Management reconfirmed its confidence in the full year results, noting a strong M&A pipeline and continuing organic growth. Accordingly, we have raised our FY20 revenue estimate by c 8% to US$218m from US$202m, while paring back gross margin expectations (new: 32.5%, old: 33.0%) and EBITDA margins (new: 14.1%, old: 15.1%). The valuation continues to look attractive.