CentralNic (AIM:CNIC) is a company that sells domain names and related services to resellers and directly to big corporate clients as well as small businesses. CentralNic Group PLC is listed on the Alternative Investment Market (AIM) of the London Stock Exchange.
Investment Case
Customers are very sticky in the domain business given the high levels of automation and high switching costs, with transfers between providers amounting to a small proportion of all transactions. This customer stickiness, combined with the high value and quality of earnings of existing customer books, makes the domain industry a very attractive and relatively low risk industry in which to acquire businesses.
Business Model
- Subscription based business lines. Sticky customers translates to highly recurring revenue.
- Utility-like business. Reminiscent of Cable the cable industry.
- Fragmented market with potential for synergies through horizontal acquisitions.
Competition
Domain registry is not a sexy business. As a result, these businesses are not considered high-tech or innovative. They are much more utility-like as the services that they provide are pretty mundane.
The market is fragmented with many smaller players. CentralNic currently has circa 13% penetration in the Internet Services Offerings market which is highly fragmented and ripe for consolidation. The total addressable market for domain names and related internet services is estimated at least USD 30bn.
GoDaddy (GDDY) is the biggest player in the space, with a market capitalization of about $13 billion and annual revenues of about $3 billion.
CentralNic Resources
- CentralNic Investor Relations Page
- Equity Research Coverage from Pello Capital (January 2020)
- Investment Case on CentraNic’s website
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