Dividend Yield is below 2% and Div cover is below 2. Forward PE is I calculate around 18-19. Price to sales 3.95. The business is not cheap.
The 3 businesses are
Escrow
Assurance
Domain Services
Escrow is a high 59% + operating margin business with v high 80% + retention. Organic growth is however only circa 5%. There have been acquisitions into this division. These acquisitions have been OK but not stunningly successful. This division is in many respects the gold laying goose with little downside risk, little reputational risk and the ability to throw of cash in the long term
Assurance is the sexy end of the business. 17-19% organic growth rate and an 18% operating margin. With the issue of IT security an ever increasing one organic growth rates are unlikely to slide and this division has recently completed a couple of well regarded acquisitions. Given the area that NCC operates in it seems likely that costs are going to rise at potentially a higher rate than revenues given the need to retain or hire the best (though 2015 margins at 18% are the same as 2014 so we may be overly concerned). This division also has a significant reputational risk as what it does is highly skilled and could be significantly impacted by one poor job becoming public.
Domain Services. NCC seems to have a vision in which it will provide a “gated community” in which it sells customers a protected internet experience that they can leverage to their customers. Everyone is then safer on line and so everyone feels able to transact more. Around this vision NCC has purchased a Doman registry business, but the core thrust of a “gated community” built around a domain has yet to be delivered.
So one golden cash cow, one currently successful, high growth assurance business, one expensive and so far unproven Domain Services business and a quite expensive Central overhead.
Value wise we have models that spit out anything between £350m and £700m. We are currently holding but would not let it cross the 10% level at these valuations.