AIM-listed Minds + Machines Group (7.25p) owns and operates a portfolio of top-level domain assets. Top-level domains are managed by registries, which are overseen by The Internet Corporation for Assigned Names and Numbers (ICANN). Minds + Machines Group has been granted the right to act as the registry for many top-level domains by ICANN. A domain name registry is the authoritative source of information for domain names registered in a particular top-level domain. Registrars sell domain names and other goods and services directly to customers.
The sales and marketing led registry business is focused on deriving economic benefit from its portfolio, working with a global network of distribution partners. As a registry, the portfolio is focused on geographic domains such as .london, .boston and .miami, professional occupations like .law, consumer interests (e.g. .fashion and .wedding), lifestyle (e.g. .fit, .surf and .yoga), outdoor activities (e.g. .fishing, .garden and .horse) and generic names such as .work.
In the year ended 31 December 2019 there was a significant improvement in performance. Revenue jumped by 25% to US$18.9m and this saw the company make a profit after tax of US$4.7m versus a loss of US$12.6m in the previous year. Earnings per share were 0.51c (2018: 1.68c loss) and adjusted cash generation was up 170% to US$6.2m. In the first half of 2020, year-on-year registrations were 31% higher at 2.38 million and automated online channel billings (amounts invoiced) increased 20% to US$7.8m, with overall billings growth of 7%. Total billings in the six months to 30 June 2020 were US$7.9m (2019: US$7.4m). Cash generated from operations in the six month period increased 13% to approximately US$2.5m (2019: US$2.2m), with cash on hand at 30 June 2020 improving to US$7.3m. This is particularly impressive given the US$1.2m share buyback in May. It will be interesting to see how the business performs for the rest of the year but so far the impact of Covid-19 has not been as severe as it could have been.
The long term potential of businesses operating online has been highlighted further this year and some valuations have increased significantly as a result of this. In the case of Minds + Machines Group there has been some recovery from March lows but the share price is at broadly the same level as where it started 2020. Under more normal circumstances the vastly improved financial performance would almost certainly have attracted more attention. There are some impressive institutional investors amongst the largest shareholders already and there does look to be scope for the share price to surge higher if new buyers are attracted. Our Share Tip is SPECULATIVE BUY.
