SiteMinder Travelling Well

This story features SITEMINDER LIMITED. For more info SHARE ANALYSIS: SDR

SiteMinder’s March quarter update showed the company is on track to reach positive earnings and cash flow next quarter and new product launches offer growth.

-SiteMinder on track to be cash flow positive
-Revenues fall short due to Easter timing
-New product launches offer growth upside
-Plenty of room to move for market share

By Greg Peel

SiteMinder ((SDR)) develops, markets, and sells online guest acquisition platform and commerce solutions for accommodation providers in Australia and internationally.

The company listed on the ASX in November 2021 and proceeded to lose -55% of its value before bottoming out in mid-2023 and rallying 95% to now.

SiteMinder’s March quarter saw free cash flow generation in line with broker forecasts, and management reiterated its guidance of targeting 30% organic revenue growth over the medium term and for it to be underlying earnings and free cash flow positive in the second half.

Revenue, up 23.3% year on year, nonetheless fell short of forecasts, which management attributed to Easter not falling within the school holidays this year as it did last year, as well as moderating annual revenue per user growth in subscriptions because of lower price increases this year.

While the June quarter is seasonally stronger, given the weaker March quarter revenue, Citi sees potential for consensus revenue and earnings downgrades.

New Products

SiteMinder showed continued progress in its two new products in the quarter, with Demand Plus called out as seeing accelerated adoption and strong booking activity and Trip.com signing up to join Channels Plus, giving hoteliers exposure to the recovering outbound Chinese tourism market, and providing SiteMinder with more scale as the fourteenth-ranked online travel agency than Jarden previously expected.

The company’s operating cash flow was slightly better than expected in the quarter due to lower administration and corporate costs, offset by higher capex related to higher product development spend.

Online travel agency partners for Channels Plus have increased to fourteen from six at the first half result, with Trip.com signing up to the Channels Plus program. Further, Channels Plus pilot program is now live with 1,000 hotels, earlier than Citi had expected.

This broker continues to see upside to medium-term revenue forecasts from stronger adoption of Channels Plus, with forecasts assuming some $25m in revenue in FY28 from Channels Plus.

The Demand Plus mobile app, launched in the quarter, provides revenue managers a tool to make changes from anywhere, and Morgan Stanley notes very positive initial feedback. The launch of Demand Plus is expected mid-2024.

Wilsons continues to suspect much is baked into consensus for incremental growth from the new products, with SiteMinder now needing to execute.

Growth Opportunity

Wilsons retains a Market Weight rating and a $5.40 target.

The company continued to demonstrate net subscriber momentum in the quarter, with management noting it was the highest room-per-property quarter since June 2022. All of which supports Jarden’s view to reiterate a Buy rating, with a target of $6.02, up from $5.48 previously.

SiteMinder is a global hotel technology company with the greatest scale amongst competitors, Morgans notes, with only 4.2% market share, and offers an attractive long-term growth opportunity underpinned by its global under-penetrated total addressable market.

This broker is particularly attracted to the company’s opportunity to monetise its $70bn of gross booking value (it currently captures around 0.2%) which it plans to leverage with new products.

Morgans has an Add rating with a price target of $6.25.

The key positives from the update for Citi were the fact that SiteMinder is on track to become free cash flow positive in the June quarter, as well as Channels Plus continuing to gain traction. However, this is offset, the broker suggests, by likely consensus downgrades to FY24 earnings due to weaker than expected revenue growth which could result in the share price underperforming.

Citi retains a Buy rating with a $6.30 target.

Morgan Stanley maintains an Overweight rating with a $6.40 target. UBS rates the stock a Buy alongside a price target of $6.65. JP Morgan has stuck with a Neutral rating and a price target of $5.70. Barrenjoey's rating is Overweight with a $6.10 price target.

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