Top broker gives its verdict on the Siteminder (ASX:SDR) share price

Is the Siteminder share price going higher?

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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.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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