CTM - Catena Media

[NewbieD]

Roll-up of casino & gambling affiliate sites. Active in the Scandinavian, UK and US (Pennsylvania,New Jersey) markets. Market cap ~$550 mUSD.

 

Investment thesis

- Market is overweighing the risk of changes in Google organic and/or paid search adversely affecting the company. Admittedly this is a risk but being a good partner to google in helping users find games they enjoy should be a win-win-win.

- Continued cheap acquisitions above what is expected in the price. The affiliate space is filled with medium sized sites founded by young guys who are thrilled to sell for 5-6x EBIT and share $5m between them. Likely for competition to increase but a few more years of cheap buying seems likely.

- Risk of operators abandoning the affiliate channel for own marketing/affiliating is low. They will keep using the cheapest way of acquiring customers, and there is little reason imo to think that reaching customers on your own will become cheaper.

- Well positioned to take advantage of de-regulated US markets

- Affiliate is an attractive part of the value chain when the operator and game creation segments are increasingly crowded and the products commoditized

- Seemingly sustainable strategy aiming for good content rather than black hat seo tactics

- Well positioned for possible de-regulation of US markets

- Low capital intensity (although increasing a bit with more content), very high ROE and good reinvestment opportunities

 

Last report

http://irstream.se/catenamedia/2016-q3/

https://www.catenamedia.com/app/uploads/2016/11/2016.11.16-Quarterly-Report-Q3-English-final-v2.pdf

 

Unfortunately this is much less cheap than at the IPO, but it still looks like a decent buy to me up to 110 (now 95).

 

Curious to hear what the board thinks of eg the possibility of online gambling opening up in the US