Weekly Reports | 10:00 AM
SiteMinder on the cusp of a cashflow deluge; Credit Corp serves up a more positive FY25 outlook and Jarden on the look out for improving trends for mining service providers.
-SiteMinder adopts new product growth levers
-Credit Corp's US earnings on the rise
-Mining services' labour costs, a potential margin boost
By Danielle Ecuyer
Quote of the week from Mark Zuckerberg at the latest Facebook quarterly earnings call.
"At the end of the day, we are in the fortunate position where the strong results that we're seeing in our core products and business give us the opportunity to make deep investments for the future, and I plan to fully seize that opportunity to build some amazing things that will pay off for our community and our investors for decades to come."
A bang the table Buy rating
SiteMinder ((SDR)) was a catch my eye stock this week as the usually conservative Ord Minnett jumped on the growth bandwagon.
The broker delved into the McKinsey growth model to frame SiteMinder's two new products, Dynamic Revenue Plus and Channel Plus as Stage 3 growth levers for the company.
Ord Minnett believes these new innovations can disrupt the hotel software industry and "reshape the organisation's future".
Worldwide the hotel industry is dominated by legacy technology and a tardy adoption of digitalisation, which the analyst attributes to the majority of operators as independent hoteliers or some 70% of total global rooms.
The incumbent structure comes at a time when the business-to-consumer agents are shifting to this sector to offset declining airline remuneration fees.
Ords suggests SiteMinder's new products offer a three-to-five-year runway of growth before peers can effectively compete.
The broker's modeling suggests the Channels Plus product, with a smaller contribution from Dynamic Revenue Plus, could generate additional revenue of $389m and around $100m in free cashflow by FY30, with up to $864m in incremental revenue in FY35.
By way of context, SiteMinder is forecast to generate revenue of $190m in FY24 and $240m in FY25 according to the broker's current numbers.
It is hard not to salivate at the potential growth for the company.
The analyst does stress the "third pillar of the growth strategy" Smart Platform is not included in its forecasts and the current 12% rise in the valuation and target price to $7.55 belies the potential move to profitable earnings, revenue growth and share price re-rating.
Ord Minnett continues to bang the table with a Buy rating on the stock.
The FNArena daily monitored brokers have an average target price of $6.77 and all have a Buy-equivalent rating, including Ord Minnett.
Is Credit Corp back in saddle?
Credit Corp ((CCP)) also caught my eye this week.
It traded as high as $35 back in January 2022 and although the share price has recovered to above $16 and is well off its November lows around $12, it might be worth revisiting the story for those investors who love a good 'buy the fallen angel story'.
Evans and Partners doesn't offer target prices, but the broker has a tasty valuation of $26.62 on Credit Corp.
FY24 results declined -11% on FY23 which would account for the share price malaise, but the report was at least in line with the analyst's estimates.
All eyes are on the company's US public debt ledger business which management offered up a more positive commentary on, according to Evans and Partners.
The broker highlights the US is expected to only contribute some 18% to FY25 earnings, but the real incentive for growth is anticipated in FY26 when the US is estimated to generate 69% of net profit growth.
What was deemed a sigh-of-relief rally for Credit Corp at the earnings announcement may transpire into a "sustained period of outperformance", Evans and Partners proposes, with the stock seen trading on an undemanding 12x FY25 price-to-earnings ratio; cheap relative to its historical valuations.
Canaccord Genuity also proposes Credit Corp may have moved through the storm of a shrinking collection pool in Australia and tougher US conditions.
This broker believes FY25 has started on stronger footing and net profit growth between 11%-23% might be in the offing, with 17% growth forecast by the analyst, securing a lift in the return on equity to over 11%.
Although Canaccord has left earnings forecasts unchanged, the analyst was pleasantly surprised the company had notched up a $106m purchase book for FY25 against the $65-$75m achieved a year previously and around $130m in FY24.
On balance, the broker believes "the winds have turned" supported by management's commitment to additional funding to provide the flexibility to capitalise on investment opportunities.
Canaccord has a $20.70 target price and a Buy rating.
Among the daily FNArena monitored brokers, Morgans is the most positive with an Add rating and a $20.50 target price.
What's in focus for mining services
Over at Jarden, the broker peeks into the upcoming earnings reporting season for the mining services sector and is quick to point out the improving disposition of the mining services labour market.
Although the headwinds from a tight market are lingering, project delays and care/maintenance stoppages are offering some relief in the industry. While evidence of declining labour costs has yet to occur, Jarden does believe there are improving labour market conditions and scope at some stage for margin improvements.
Capital intensity also looks set to decline, particularly for the more capital-intensive business models at Emeco Holdings ((EHL)) and NRW Holdings ((NWH)), the broker states.
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