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Edison Investment Research Limited
 London, UK, 18 June 2020 Edison initiates coverage of CentralNic Group (CNIC) With four acquisitions in FY19, CentralNic is a leading buy and build player in the domain name space, focused on consolidating a fragmented market. It offers a broad range of internet services, including reseller services, where it is the number two provider globally, as well as internet services to corporates and SMEs. Supported by underlying organic growth (6% company estimate), CentralNic has grown at a revenue CAGR of 69% from 2014-19 and has attractive cash flow dynamics with near 100% cash conversion and 92% repeat revenues. Q120 was in line with expectations and management has yet to see a material impact from COVID-19. The company is valued on an FY20 EV/EBITDA of 9.0x and a P/E of 12.4x, a 65% discount to its peer group, with our DCF indicating further share price upside. M&A should bring CentralNic's multiples down further.  Despite an impressive historical growth track record (five-year revenue CAGR of 69%), being a resilient business with 90%+ recurring revenues and offering a proven management team with significant M&A experience, CentralNic continues to trade at a material discount to its global peers. Its shares trade on an FY20e P/E of 12.4x, a 65% discount to our global peer group, with our DCF highlighting further upside. As CentralNic consolidates a fragmented market of sub-scale, cash generative business, we expect M&A to bring multiples down further.
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