Peel Hunt has got off the fence and is recommending its clients buy shares in CentralNic Group PLC (LON:CNIC) after yesterday’s results.
The numbers were in line with expectations and therefore the broker is not altering its earnings and revenue estimates.
It does seem, however, that the broker is more bullish about the group’s acquisition opportunities following the successful purchase of Instra in January of last year.
“CNIC is building out its retail and wholesale businesses, thereby growing its recurring revenue base and confirming it as a go-to partner for domain owners in the future,” Peel Hunt said.
“It has a long established, solid technical and management base on to which to add external growth – its small revenue by comparison to leaders such as GoDaddy, belies its industry presence,” the broker added.
CentralNic is a wholesale, retail and enterprise supplier of domain names and other, associated services.
For the uninitiated the top-level domain (TLD) is the label given to the very last section of an internet name, located after the last dot – so suffixes such as .com, .org and .gov.
It has a long way to go to be the daddy of the sector, judging by GoDaddy in’s (NYSE:GDDY) £6.1bn market capitalisation – CentralNic is valued at just £45mln – but Peel Hunt thinks the UK player’s earnings quality should steadily improve as the renewal revenue stream grows and it gets the chance to upsell value-added services.
“In the meantime it has a proven track record of earnings delivery, with profit growth throughout its three year listed life, and a supportive balance sheet for organic growth,” Peel Hunt said, as it lifted its target price from 48p to 62p and moved from ‘hold’ to ‘buy’.