CentralNic Group — Strong growth going largely unrewarded

Team Internet Group (AIM: TIG)

Last close As at 19/04/2024

GBP1.39

0.20 (0.14%)

Market capitalisation

GBP360m

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Research: TMT

CentralNic Group — Strong growth going largely unrewarded

After a strong H121, management expects CentralNic to deliver revenue and profits for the year ‘at least at the upper end of market expectations’. Following its FY20 investment programme, the company delivered 20% y-o-y organic growth in H121 – 16% in Q121 and 25% in Q221, with all business lines contributing. Reflecting continuing strong growth, we have raised our FY21 and FY22 revenue targets to US$350m and US$379m, respectively, while adjusted EBITDA rises slightly to US$41.1m and US$45.2m. On our revised estimates, CentralNic’s shares trade on an undemanding FY21e EV/adjusted EBITDA of 10.0x and P/E of 12.9x, well below its web services and online marketing peers, despite its FY15–20 revenue CAGR of 78% and our estimate for current year growth of 45%.

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Written by

TMT

CentralNic Group

Strong growth going largely unrewarded

Interim results

Software & comp services

1 September 2021

Price

103.0p

Market cap

£236m

£1.38/US$

Net debt (US$m) at 30 June 2021

83.8

Shares in issue (excluding 22.4m shares held in employee benefit trust)

228.8m

Free float

49%

Code

CNIC

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

6.2

15.7

12.6

Rel (local)

4.1

13.1

(8.5)

52-week high/low

103p

73p

Business description

CentralNic Group is a leading global domain name services provider, operating through three divisions: Reseller (number two globally); Corporate; and SME. Services include domain name reselling, hosting, website building, security certification and website monetisation (added at the end of 2019).

Next events

Q321 trading update

December 2021

FY21 trading update

January 2022

FY21 results

April 2022

Analysts

Richard Williamson

+44 (0)20 3077 5700

Russell Pointon

+44 (0)20 3077 5757

CentralNic Group is a research client of Edison Investment Research Limited

After a strong H121, management expects CentralNic to deliver revenue and profits for the year ‘at least at the upper end of market expectations’. Following its FY20 investment programme, the company delivered 20% y-o-y organic growth in H121 – 16% in Q121 and 25% in Q221, with all business lines contributing. Reflecting continuing strong growth, we have raised our FY21 and FY22 revenue targets to US$350m and US$379m, respectively, while adjusted EBITDA rises slightly to US$41.1m and US$45.2m. On our revised estimates, CentralNic’s shares trade on an undemanding FY21e EV/adjusted EBITDA of 10.0x and P/E of 12.9x, well below its web services and online marketing peers, despite its FY15–20 revenue CAGR of 78% and our estimate for current year growth of 45%.

Year end

Revenue (US$m)

Adjusted EBITDA* (US$m)

PBT*
(US$m)

EPS**
(c)

DPS
(c)

P/E
(x)

12/19

109.2

17.9

16.1

9.24

0.0

15.4

12/20

241.2

30.6

19.8

10.57

0.0

13.4

12/21e

350.1

41.1

27.8

11.01

0.0

12.9

12/22e

378.8

45.2

30.9

11.40

0.0

12.5

Note: *Excludes impact of share-based payments, share option expense, foreign exchange charges and non-core operating costs. **FY21e and FY22e EPS figures reflect 228.8m voting shares in issue.

H121 results: Strong top-line growth

H121 gross revenues increased 57% y-o-y to US$174.7m, with net revenues also rising 57% to US$55.2m, a gross margin of 31.6%. Adjusted EBITDA rose 36% to US$20.5m, with margins falling to 11.7% (H120: 13.6%), reflecting the increasing contribution from the lower margin Online Marketing segment. H121 adjusted EPS rose to 5.74 cents (H120: 4.45 cents). Adjusted operating cash conversion was 126%, with net debt falling marginally to US$83.8m at 30 June 2021. As at 30 June 2021, the group’s gross debt totalled US$123.3m, with cash of US$39.5m.

FY21/22 estimates revised upwards, FY23 introduced

We have increased our FY21 revenue estimate by c 8% to US$350m. Assuming higher sustainable organic growth of 8%, we have raised FY22e and FY23e revenue estimates to US$379m and US$409m, respectively. Gross margins rise from 32% in FY21e to 33% in FY22e and FY23e. Our FY21e adjusted EBITDA rises from US$39.5m to US$41.1m, at the top end of current consensus, with FY21e margins in line with H121 at 11.7%. We assume adjusted EBITDA of US$45.2m for FY22e and US$48.8m for FY23e, with a slight rise in margins to 11.9% for both years, benefiting from the anticipated operating leverage.

Valuation: Market-leading growth, marked discount

Whether we compare it to web services or online marketing, CentralNic continues to trade at a material discount to comparators. The web services peer group trades at P/Es of 26x for FY21 and 20x for FY22. We estimate that CentralNic will deliver 45% sales growth in FY21, meaning it offers among the strongest growth in the group and yet trades on an FY21 P/E multiple of 12.9x and an FY22 P/E multiple of 12.5x. CentralNic’s discount to the online marketing peers is even more marked.

H121 interim results

Strong top-line growth, margins lower on business mix

CentralNic continued to trade strongly in H121 and, as a result, management expects to deliver revenue and profits for the year ‘at least at the upper end of market expectations’.

H121 gross revenues increased 57% y-o-y to US$174.7m (H120: US$111.3m), with net revenues also rising 57% to US$55.2m (H120: US$35.2m), a gross margin of 31.6%, which is flat year-on-year (H120: 31.6%). Adjusted EBITDA rose 36% to US$20.5m (H120: US$15.1m), with margins falling to 11.7% (H120: 13.6%), reflecting the increasing contribution from the lower-margin Online Marketing segment, which makes up 55% of gross revenues and 47% of net revenues. H121 adjusted EPS rose to 5.74 cents (H120: 4.45 cents).

In terms of reconciliation between H121 adjusted EBITDA (US$20.5m) and operating income (US$4.7m), the principal elements were: US$1.7m of depreciation (H120: US$1.0m); US$8.3m amortisation of intangible assets (H120: US$5.4m); US$5.1m of non-core operating expenses (H120: US$2.8m), primarily related to M&A and the bond tap issue; a US$1.0m foreign exchange gain on the outstanding bond (H120: loss of US$0.4m); and US$1.7m of share-based payment expenses (H120: US$2.7m) related to acquisitions. This resulted in CentralNic reporting an H121 loss after tax of US$1.5m (H120: a loss of US$3.1m).

Adjusted operating cash conversion was 126%, with net debt falling marginally to US$83.8m at 30 June 2021, from US$85.0m as at 31 December 2020 (31 March 2021: US$79.0m), despite the two acquisitions of SafeBrands and Wando in H121 for US$11.1m, together with the settlement of the final US$1.7m tranche of deferred consideration for Team Internet. The group completed a €15m bond tap issue in February 2021 at 104.5% of nominal value, taking the total outstanding bond value to €105m (of which €80m is hedged against the dollar). As at 30 June 2021, the group’s debt totalled US$123.3m, with cash of US$39.5m.

FY20 investment helps to deliver 20% H121 organic growth

CentralNic has highlighted that it continued to trade strongly, both during lockdown and afterwards throughout H121. Benefiting from its FY20 investment programme, the company delivered 9% y-o-y organic growth in FY20, 16% in Q121 and 25% organic growth in Q221, with all business lines contributing. Management reported 20% y-o-y organic revenue growth for H121.

FY20 investment included streamlining group operations, unifying the group IT infrastructure and central corporate services, investment in people, as well as streamlining the internal supply chain. The company rolled out software tools (eg G-suite, Salesforce, Jira, Confluence, HiBob, Zendesk and Tableau) and invested in CentralNic’s shared functions, building out the teams in new products, finance, people, development and integrations, and a single procurement function for domains and other microservices.

Staff costs have been elevated in H121 following three acquisitions completed since 30 June 2020, together with new hires recruited to accelerate organic growth. Growth in staff has slowed as CentralNic’s team approaches its optimal size.

Segmental analysis: Online Presence, Online Marketing

CentralNic is combining the Direct and Indirect segments (domain name sales and value-added services) and will be reporting on this new segment, Online Presence, alongside Online Marketing in the future.

Online Presence: growth in domain name sales accelerated, but value-added services performed even more strongly. The Indirect segment reported organic growth of 12% in H121, as revenues increased 25% y-o-y to US$51.3m (H120: US$41.2m), with net revenues of US$16.3m and a gross margin of 32%. Growth benefited from increased scale, led by key Wholesale brands notably in North America. In the Direct segment, both Retail and the Enterprise businesses continued to grow, with 10% organic growth leading to gross revenues rising 25% y-o-y to US$27.0m (H120: US$21.6m) with net revenues of US$12.8m, gross margins of 47%. The segment was also lifted by the acquisition of SafeBrands in January 2021.

Exhibit 1: H121 gross revenue split

Exhibit 2: H121 net revenue split

Source: CentralNic

Source: CentralNic

Exhibit 1: H121 gross revenue split

Source: CentralNic

Exhibit 2: H121 net revenue split

Source: CentralNic

Online Marketing: The acquisitions of Zeropark, Voluum and Wando Internet Solutions expanded the service offering to a full suite of online customer acquisition solutions, including data analytics. Online Marketing was CentralNic’s fastest growing business in H121, with 28% organic revenue growth leading to gross revenues rising 99% y-o-y to US$96.4m (H120: US$48.5m), with net revenues of US$26.1m and gross margins of 27%. Growth was driven by PubTONIC, Team Internet’s traffic arbitrage platform, as well as the acquisitions of Zeropark, Voluum and Wando. It is worth noting that none of CentralNic’s marketing platforms rely on third-party cookies or collect personal data. As such, the Online Marketing division expects to benefit from privacy restrictions implemented by Apple and Google Chrome, as traffic is displaced from other channels.

Outlook: Margins to improve as business scales

Based on the H121 results, management reiterated that CentralNic’s recurring revenue model and strong cash generation will provide operating leverage in future periods as the business scales. CentralNic has a full M&A pipeline and comfortable levels of net debt (30 June 2021: US$83.8m), with attractive interest cover given the profitability and cash generation (H121: 126% adjusted cash conversion) of the group.

Estimates: Higher revenue growth, EBITDA margins to rise

As we indicated in our Flash note in July 2021, we intended to review our estimates alongside the H121 interim results, once the more detailed margin picture was available.

In its H121 results, following ‘significant investment in resources, restructuring and market-leading products and promotions’, management guidance is for ‘full year revenue and profits to be at least at the upper end of market expectations. As our investment levels plateau, we expect future periods to benefit from increasing operational leverage.’

As such, we are revising our estimates for FY21 and FY22, as well as introducing estimates for FY23, reflecting the following principal changes:

Revenue growth: we have revised our FY21e revenue upwards by 8% to US$350m, by applying a simple annualised revenue run-rate based on H121. Based on the group’s investment supporting higher sustainable growth, we have raised organic revenue growth expectations from 6% to 8% for FY22e and FY23e, leading to revenue estimates of US$379m and US$409m, respectively.

Gross margin: gross margins remained at c 32% in H121 due to the business mix, with the lower-margin Online Marketing outperforming the higher-margin Online Presence in terms of revenue growth. Accordingly, we have adjusted our FY21e gross margins to 32%. With management expecting the group to benefit from increasing operational leverage in future periods, we have then assumed gross margins strengthen to 33% for FY22e and FY23e.

Adjusted EBITDA and adjusted EBITDA margins: the H121 adjusted EBITDA margin of 11.7% (H121 adjusted EBITDA: US$20.5m) was below our 12.2% prior estimate for FY21e, as the business mix has continued to change. We have applied the 11.7% H121 margin for FY21e, leading to a small rise (due to the lift in revenues) in adjusted EBITDA to US$41.1m, towards the top end of current consensus and allowing for further outperformance of Online Marketing in H221. For FY22e and FY23e, we assume adjusted EBITDA of US$45.2m (11.9% margin) and US$48.8m (11.9% margin) respectively, benefiting from a slight lift in margins due to the anticipated operating leverage as opposed to a change in business mix.

Shares in issue: following the share and option awards announced in June 2021, we assume that CentralNic has 228.8m voting shares, with 22.4m non-voting shares held by the employee benefit trust (EBT), together making 251.2m fully diluted shares in issue.

Exhibit 3: Edison’s revised estimates for FY21e and FY22e and introduction of FY23e

Year end 31 December
US$’000

Actual

Old

New

Old

New

New

Y-o-y

2020

H121

H221e

2021e

2021e

Change

2022e

2022e

Change

2023e

growth

Gross revenue

241,212

174,700

175,433

323,428

350,133

8%

349,953

378,848

8%

409,156

8%

Net revenues

76,318

55,200

56,842

108,348

112,042

3%

117,234

125,020

7%

135,021

8%

Adjusted EBITDA

30,594

20,500

20,586

39,458

41,086

4%

43,744

45,213

3%

48,830

8%

Normalised operating profit

28,510

19,800

17,886

36,664

37,686

3%

40,721

41,534

2%

44,857

8%

Profit before tax (norm)

19,817

14,500

13,259

26,737

27,759

4%

30,069

30,882

3%

34,208

11%

Profit before tax (reported)

(9,395)

(600)

6,153

11,261

5,553

10,476

11,464

18,508

61%

Reported tax

975

(900)

(1,394)

(4,046)

(2,294)

(5,049)

(4,624)

(5,552)

Net income (normalised)

20,792

12,600

12,866

22,691

25,466

12%

25,020

26,258

5%

28,656

9%

EPS - basic normalised (c)

10.57

5.74

5.43

9.71

11.17

15%

10.70

11.40

6%

12.44

9%

EPS - diluted normalised (c)

10.16

5.50

4.67

9.39

10.17

8%

10.35

10.39

0%

11.34

9%

Revenue growth (%)

120.9

0.0

45.2

34.1

45.2

8.2

8.2

8.0

Gross margin (%)

31.6

31.6

0.4

33.5

32.0

33.5

33.0

33.0

Adjusted EBITDA margin (%)

12.7

11.7

0.0

12.2

11.7

12.5

11.9

11.9

Normalised operating margin (%)

11.8

11.3

0.6

11.3

10.8

11.6

11.0

11.0

Capex

(4,259)

(1,500)

(2,455)

(4,972)

(3,955)

(20)%

(5,380)

(4,280)

(20)%

(4,622)

8%

Closing net debt/(cash)

84,985

83,800

80,025

80,038

80,025

(0)%

63,579

62,267

(2)%

34,579

(44)%

Source: CentralNic accounts, Edison Investment Research

Valuation: Persistent discount to peer group

Whether we compare the group to web services (CentralNic’s ‘Online Presence’) or online marketing companies, CentralNic continues to trade at a material discount to its peers.

Disregarding Verisign, which we include for completeness, the web services peer group in Exhibit 4 trades at average EV/sales multiples of 3.0x for FY1 and 2.7x for FY2 and EV/EBITDA multiples of 10.2x for FY1 and 9.2x for FY2. In terms of P/E, the peer group trades at 26x for FY1 and 20x for FY2. We estimate that CentralNic will deliver 45% sales growth in FY21, meaning it offers among the strongest growth in the group and yet trades on an FY21 P/E multiple of 12.9x and an FY22 P/E multiple of 12.5x, a discount to the web services peer group averages of 50% and 37% respectively.

With the increasing sales out-performance of Online Marketing, which we expect to continue in the foreseeable future, we have also introduced an online marketing peer group. Given a lack of comparators in Europe, this group is focused on North American peers. Valuations are rich, although average current year sales growth is in excess of 40%, with average EV/EBITDA multiples of 39x and 30x for FY1 and FY2, respectively, and P/E multiples of 94x for FY1 and 64x for FY2.

Exhibit 4: Peer group table

Year end

Share price

Quoted Ccy

EV (US$m)

Sales Growth FY1 (%)

Gross margin FY1 (%)

EBITDA margin FY1 (%)

EBIT margin FY1 (%)

EV/ sales FY1(x)

EV/ sales FY2 (x)

EV/ EBITDA FY1 (x)

EV/ EBITDA FY2 (x)

P/E 1FY (x)

P/E 2FY (x)

CentralNic Group

Dec-21

103

GBp

409.0

45.2

32.0

11.7

10.8

1.17

1.17

10.0

9.0

12.9

12.5

Web services (‘Online Presence’) peers

Verisign

Dec-21

216.2

USD

24,843

4.9

85.7

69.9

65.4

18.7

17.2

26.8

24.1

40.0

35.0

GoDaddy

Dec-21

73.4

USD

14,947

13.0

64.8

21.3

8.7

4.0

3.6

18.7

16.6

63.7

41.9

Criteo

Dec-21

38.3

USD

2,033

9.2

86.1

32.5

20.5

2.3

2.1

6.9

6.5

15.1

14.0

Catena Media

Dec-21

45.2

SEK

446

30.2

75.0

54.3

47.1

2.7

2.5

5.0

4.7

9.1

7.9

iomart group

Mar-22

237.5

GBp

433

2.5

60.7

36.8

19.2

2.7

2.7

7.5

7.4

16.3

15.9

R22

Jun-21

52.1

PLN

243

54.9

NULL

24.7

18.7

3.1

2.7

12.6

10.7

NM

NM

Mean

19.1

74.4

39.9

29.9

5.6

5.1

12.9

11.7

28.8

22.9

Mean (ex Verisign)

22.0

71.6

33.9

22.8

3.0

2.7

10.2

9.2

26.0

19.9

Median

11.1

75.0

34.6

19.8

2.9

2.7

10.1

9.0

16.3

15.9

Online marketing peers

Trade Desk

Dec-21

80.7

USD

37,929

39.9

81.4

37.9

30.7

32.4

25.2

85.7

68.8

114.8

99.7

Applovin Corp

Dec-21

73.3

USD

27,880

NM

71.7

26.1

10.7

10.3

8.4

39.2

29.1

148.8

82.5

Ironsource

Dec-21

9.8

USD

9,905

NM

84.4

34.0

14.5

19.1

14.5

56.3

43.8

171.6

99.5

Magnite

Dec-21

28.4

USD

4,258

87.2

73.2

30.9

11.7

10.3

7.9

33.2

25.0

46.7

31.3

PubMatic

Dec-21

27.5

USD

1,261

39.9

71.2

32.5

15.4

6.1

4.8

18.6

15.9

59.1

54.3

Quinstreet

Jun-22

17.8

USD

853

11.2

13.5

9.9

5.7

1.3

1.2

13.4

11.1

22.4

18.8

Viant Technology

Dec-21

14.0

USD

792

27.1

61.1

14.6

(27.4)

3.8

3.3

25.8

20.9

NM

NM

Mean

41.1

65.2

26.6

8.7

11.9

9.3

38.9

30.6

93.9

64.3

Median

39.9

71.7

30.9

11.7

10.3

7.9

33.2

25.0

86.9

68.4

Source: Refinitiv data as at 31 August 2021; CentralNic estimates are from Edison Investment Research.

Exhibit 5: Financial summary

31-December

US$’000

2019

2020

2021e

2022e

2023e

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

109,194

241,212

350,133

378,848

409,156

Cost of Sales

(66,419)

(164,894)

(238,090)

(253,828)

(274,134)

Gross Profit

42,775

76,318

112,042

125,020

135,021

Adj. EBITDA

 

 

17,921

30,594

41,086

45,213

48,830

Normalised operating profit

 

 

16,615

28,510

37,686

41,534

44,857

Amortisation of acquired intangibles

(8,299)

(12,508)

(14,406)

(15,468)

(15,700)

Exceptionals

(8,259)

(10,529)

(4,100)

-

-

Share-based payments

(2,878)

(5,113)

(1,700)

-

-

Reported operating profit

(2,821)

360

17,480

26,066

29,157

Net Interest

(471)

(8,693)

(9,927)

(10,652)

(10,649)

Joint ventures & associates (post tax)

74

79

-

-

-

Exceptionals

-

-

(1,000)

(3,950)

-

Profit Before Tax (norm)

 

 

16,144

19,817

27,759

30,882

34,208

Profit Before Tax (reported)

 

 

(6,616)

(9,395)

6,553

11,464

18,508

Reported tax

39

975

(2,644)

(4,624)

(5,552)

Profit After Tax (norm)

16,119

20,792

25,116

26,258

28,656

Profit After Tax (reported)

(6,577)

(8,420)

3,910

6,840

12,956

Minority interests

64

-

-

-

-

Discontinued operations

-

-

-

-

-

Net income (normalised)

16,183

20,792

25,116

26,258

28,656

Net income (reported)

(6,513)

(8,420)

3,910

6,840

12,956

Basic average number of shares outstanding (m)

175,084

196,680

228,080

230,381

230,381

EPS - basic normalised (c)

 

 

9.24

10.57

11.01

11.40

12.44

EPS - diluted normalised (c)

 

 

8.97

10.16

10.03

10.39

11.34

CNIC Adj EPS basic (c)

 

 

9.24

10.57

11.01

11.40

12.44

EPS - basic reported (c)

 

 

(3.72)

(4.28)

1.71

2.97

5.62

Dividend (c)

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

155.9

120.9

45.2

8.2

8.0

Gross Margin (%)

39.2

31.6

32.0

33.0

33.0

Adj. EBITDA Margin (%)

16.4

12.7

11.7

11.9

11.9

Normalised Operating Margin

15.2

11.8

10.8

11.0

11.0

BALANCE SHEET

Fixed Assets

 

 

217,544

271,817

270,766

259,849

241,491

Intangible Assets

206,055

256,955

257,554

248,421

229,233

Tangible and Right-of-use Assets

6,427

8,677

7,028

5,243

6,734

Investments & other

5,062

6,185

6,185

6,185

5,524

Current Assets

 

 

67,433

77,606

100,566

118,324

146,330

Stocks

491

1,011

1,011

1,011

1,330

Debtors

40,760

47,941

47,941

47,941

47,941

Cash & cash equivalents

26,182

28,654

51,614

69,372

97,060

Other

-

-

-

-

-

Current Liabilities

 

 

(78,767)

(94,421)

(94,421)

(94,421)

(94,529)

Creditors

(75,683)

(87,256)

(87,256)

(87,256)

(87,256)

Tax and social security

-

-

-

-

-

Short term borrowings

(3,084)

(7,165)

(7,165)

(7,165)

(7,273)

Other

-

-

-

-

-

Long Term Liabilities

 

 

(129,206)

(137,867)

(155,867)

(155,867)

(155,867)

Long term borrowings

(102,799)

(113,024)

(131,024)

(131,024)

(131,024)

Other long term liabilities

(26,407)

(24,843)

(24,843)

(24,843)

(24,843)

Net Assets

 

 

77,004

117,135

121,045

127,885

137,426

Minority interests

69

-

-

-

-

Shareholders' equity

 

 

77,073

117,135

121,045

127,885

137,426

CASH FLOW

PBT

(6,616)

(9,395)

6,553

11,464

18,508

Depreciation and amortisation

9,605

14,592

17,806

19,147

19,673

Share-based payments

2,878

5,113

-

-

-

Working capital

8,963

309

-

-

(319)

Exceptional & other

3,795

9,413

9,927

10,652

10,649

Tax

(2,309)

(1,957)

(2,644)

(4,624)

(5,552)

Net operating cash flow

 

 

16,316

18,075

31,642

36,639

42,959

Capex

(15,497)

(4,259)

(3,955)

(4,280)

(4,622)

Acquisitions/disposals

(63,840)

(42,532)

(12,800)

(3,950)

-

Net interest

(1,970)

(9,512)

(9,927)

(10,652)

(10,649)

Equity financing

2,133

37,287

-

-

-

Dividends

-

-

-

-

-

Other

-

1,814

-

-

-

Net Cash Flow

(62,858)

873

4,960

17,757

27,688

Opening net debt/(cash)

 

 

2,115

74,998

84,985

80,025

62,267

FX

(6,730)

1,117

-

-

-

Other non-cash movements

(3,295)

(11,977)

-

-

-

Closing net debt/(cash)

 

 

74,998

84,985

80,025

62,267

34,579

Source: Company accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by CentralNic Group and prepared and issued by Edison, in consideration of a fee payable by CentralNic Group. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for ‘wholesale clients’ within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are ‘wholesale clients’ for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a ‘personalised service’ and, to the extent that it contains any financial advice, is intended only as a ‘class service’ provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘FPO’) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the ‘publishers' exclusion’ from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by CentralNic Group and prepared and issued by Edison, in consideration of a fee payable by CentralNic Group. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for ‘wholesale clients’ within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are ‘wholesale clients’ for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a ‘personalised service’ and, to the extent that it contains any financial advice, is intended only as a ‘class service’ provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘FPO’) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the ‘publishers' exclusion’ from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Kendrion — Recovery in full swing

Kendrion’s H121 results showed a strong recovery after the negative impact of the pandemic on the H120 results, with its Automotive division growing revenues organically by 29% y-o-y and Industrial by 15% y-o-y. Margins also recovered, driven by operating leverage. Despite short-term uncertainty about supply chain constraints and the impact of higher raw materials prices, underlying trends such as electrification and energy transition continue to support underlying growth. We raise our estimates and expect an EPS CAGR of 37% in 2021–23e. The unweighted average of our three valuation methods points to a fair value of €29 per share.

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