The Siteminder Ltd (ASX: SDR) share price has been a strong performer since hitting the ASX boards last month.
Since listing with an IPO price of $5.06, the leading open hotel commerce platform provider's shares have risen 21%.
Can the Siteminder share price keep rising?
One leading broker has given its verdict on the Siteminder share price this morning. And while it isn't recommending its shares as a buy, it still sees reasonable upside ahead.
According to a note out of Goldman Sachs, its analysts have initiated coverage on the company with a neutral rating and $6.90 price target.
Based on the current Siteminder share price of $6.15, this implies potential upside of approximately 12% for investors over the next 12 months.
What did the broker say?
Goldman notes that Siteminder is operating in 150 countries with a current total addressable market estimated to be A$9.3 billion per annum. This means that the company has penetrated just 1% of this market.
The broker explains that this market "comprises A$2.5bn in its core hotel segment (1mn properties, c.70% using manual solutions), A$4.4bn from transactions (SDR sharing property GMV), and A$2.4bn from alternative accommodation through extending Little Hotelier."
While Goldman acknowledges that the company's revenue growth has stalled because of COVID-19, it expects this to change. The broker believes a resumption in global travel, accelerating small/medium business hotel software adoption, and its expanded product offering to underpin a revenue compound annual growth rate of 21% between FY 2021 and FY 2025.
Why neutral?
Given its positive outlook for the company, the broker explained why it is only initiating coverage with a neutral rating.
Goldman commented: "Although acknowledging SDR's strong growth prospects and positive risk-reward, we initiate at Neutral given: (1) Uncertainty around the phasing of the global travel recovery; (2) Bottom quartile unit economics (even on a normalised basis); (3) Execution and competition risks in SDR growth markets; and (4) Growth adjusted valuation multiples that are in-line with peers. Our 12-month target price of A$6.90 is based on our EV/GP methodology – using 18X our FY23 GP estimate."
"This multiple is in-line with ANZ peers when adjusting for GP growth outlook and covid-19 impacts on FY22 (-ve SDR, +ve peers). Our NPV sensitivity analysis implies potential LT valuations of A$15.00/A$3.80, suggesting meaningful upside on successful execution," it added.
