Cannae Holdings, Inc.

CNNE Details

Cannae Holdings, Inc. (NYSE: CNNE) is a holding company engaged in actively managing and operating its investment portfolio by making majority and minority stock investments in other companies to strengthen its performance. As of June 30, 2021, the company's primary investments included minority investments in Dun & Bradstreet Holdings, Inc. (D&B), Ceridian HCM Holdings, Inc. (Ceridian), Paysafe Limited (Paysafe), Alight, Inc. (Alight), Optimal Blue Holdco, LLC (Optimal Blue), AmeriLife Group, LLC (AmeriLife), and QOMPLX, Inc. (QOMPLX).  CNNE also has a controlling stake in O'Charley's Holdings, LLC (O'Charley's) and 99 Restaurants Holdings, LLC (99 Restaurants) and additional stock and debt investments. As of November 01, 2021, the company’s market capitalization stood at USD 3.03 billion.

Latest News:

• Strategic investment: CNNE announced on August 17, 2021, that it has invested USD 240 million and led another USD 270 million fundraising round in Sightline Payments (Sightline), a leading digital payments service and mobile app developer. This investment follows CNNE's USD 32 million earlier investment in 2021 and puts Sightline's post-money worth at over USD 1 billion.

H1FY21 Results:

• Significant Growth in Revenue: The company reported a YoY surge of 35.81% in total operating revenue to USD 374.3 million during H1FY21 (ended June 30, 2021) compared to USD 275.6 million during H1FY20, attributable to increase in overall store sales driven by recovery from the COVID-19 pandemic and reconsolidation of Legendary Baking and VIBSQ business entities.
• Decline in Net Income: CNNE reported net loss of USD 56.1 million in H1FY21 compared to a profit of USD 1.10 billion in H1FY20.
• Cash and Debt Position: As of June 30, 2020, the company stood with cash and cash equivalents of USD 271.2 million, with total debt (notes payable) of USD 51.50 million.

Key Risks:

• Dependence on Key Personnel: The most valuable assets of any investment firm are its investing professionals and management teams. As a result, any key distribution or management team leaving the organization could significantly impact its operations. Furthermore, any changes in the remuneration system may cause discontent among the group, affecting the company's long-term viability.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CNNE Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

CNNE's stock price has increased 1.42% in the past three months and is currently leaning towards the lower end of its 52-week range of USD 29.51 to USD 46.57. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 68.52. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 38.62.

Considering the company's growth prospects, significant track record, strong balance sheet, associated risks, and current valuation we recommend a "Hold" rating on the stock at the closing price of USD 34.30, up 0.59% as of November 01, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.