As we discussed in the Christmas issue of Shares the market was waiting for confirmation of revenue and profit growth. This update delivers in spades with the £113 million cap unveiling annual revenue for 2014 of at least $49.5 million and adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) of at least $16.6 million. This is around 43% and 24% respectively ahead of 2013. Momentum has been building ahead of this announcement and with today's rise the stock is comfortably above the 49p issue price on the March 2014 IPO.
The Israeli firm’s main source of business is its 2,000 and counting website portfolio and its search engine optimisation activities. The websites are typically gambling portals which offer information on gaming-related topics. XLMedia uses the sites to direct traffic to online gaming sites offered by the likes of 888 (888) and Unibet (UNIB:SS) and banks a fee when users start gambling.
The group stepped out into the social gaming arena through the $19 million acquisition (1 Sep) of ExciteAd Digital Marketing and it is also looking to diversify into new geographies from its core focus on the Nordic region with the UK, Germany, Canada, Australia, Denmark, Belgium and the Netherlands in its sights. In addition the group is positioning itself for the medium-term opportunity in the US.
The company does not appear to be resting on its laurels with headcount increasing more than 50% in 2014 as it targets the next phase of growth and it confirms the outlook for 2015 'remains positive'.
House broker Cenkos Securities reiterates its buy recommendation, upgrades 2014 and 2015 forecasts and, unsurprisingly, is extremely bullish: 'With a growing presence in regulated markets, a diversified client base and an attractive earnings growth profile - reflecting the exposure to fast-growing markets - we believe the stock is fully deserving of a re-rating.
'Add to this the balance sheet strength to support a consolidation play and highly cash generative nature of the business model, the board’s policy is to distribute at least half of net earnings by way of dividends, and we consider XLMedia to be a high-conviction buy.'