Canadian Bank Recommends Investing In Registrars
In a report prepared for investor clients, RBC Capital Markets have prepared a report on the new generic Top Level Domain expansion saying that “with potentially 100s more gTLDs becoming available for use in the next year or so, we think DMD (Demand Media) and WWWW (Web.com) – two companies in our coverage universe with major domain registrar operations – will be longer-term beneficiaries through the expansion of the domain name-space.”
The report titled Say .anything – Opening Up the gTLD Landscape [PDF] by a subsidiary of the Royal Bank of Canada goes on to say that “should DMD/WWWW become official registry operators for certain new gTLDs (they currently do not have any registry operations), there could be significant value creation that we think is currently under appreciated by the market.”
“We estimate a registry that reaches 10mm domains in 7 years (with moderate growth thereafter) could be worth ~$260mm. We have a favorable view of the domain registry business given its high-margin and stable/growing cash flow characteristics. Our DCF analysis suggests a registry that reaches 10mm domains in 7 years (with moderate growth thereafter) could be worth ~$260mm in PV terms. We do note that assessing the potential size of a gTLD is more art than science.”
In a section on “Valuing a Registry – Taking a DCF Approach,” the report says “we have a favorable view of the domain registry business given its high margin and stable/growing cash flow characteristics, which we think also makes the DCF approach an appropriate method for valuation.”
To download the 17 page report, go to:
https://rbcnew.bluematrix.com/docs/pdf/b4a12ee4-90f0-44b0-84ed-bf7bba042781.pdf
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