The ASX tech stock Siteminder Ltd (ASX: SDR) is a leading opportunity according to one of the top brokers in Australia.
The company aims to provide software that "unlocks the full revenue potential of hotels". It's responsible for more than 115 million reservations worth over $70 billion in revenue for its hotel customers annually. Its all-in-one hotel management software for small accommodation providers is called Little Hotelier.
There are a number of positives about the company, according to the broker UBS.
Bullish reasons UBS likes this ASX tech stock
The broker said there are multiple positives for the company's outlook following the FY24 third-quarter update.
First, UBS noted that Siteminder's underlying free cash flow of negative $0.2 million was close to breakeven. This was consistent with the management's target of generating positive free cash flow in the second half of FY24.
The second positive was developments with its new product – 'Channel Plus' signed an agreement with Trip.com Group. This means hoteliers can "effortlessly distribute their inventory to the rebounding Chinese outbound tourism market, while Trip.com will gain access to more hotels." UBS noted that 14 channels have been signed, compared to just six in the FY24 first half. There is "strong initial customer interest" in Siteminder's new releases, according to UBS.
The third positive about Siteminder is its product enhancements. The ASX tech share has introduced Siteminder Pay into "new markets". The company also noted the rollout of Siteminder Pay terminals is on track for the first half of FY25. Little Hotelier Autopay, which was released at the start of the FY24 third quarter, has seen "strong adoption and increased Siteminder's capture of gross booking value at participating properties."
The final positive UBS pointed to about the ASX tech stock was that hotel subscriber additions have continued the momentum from the first half of FY24, which is "skewed towards larger properties", with the highest room count per hotel added since the COVID-19 reopening. In the broker's view, this provides higher revenue per subscriber, a larger base for future transactions and higher new product uptake, combined with lower subscriber churn.
The ASX tech stock is still targeting medium-term revenue growth of 30%. UBS thinks the core offering looks "appealing" and sees potential upside to its estimates if traction for the new product launch is stronger than expected.
Siteminder share price target
UBS has a price target of $6.65 on Siteminder shares, which is currently around 25% higher than it is today. A price target is where the broker thinks the Siteminder share price will be in 12 months.
That positive outlook is despite the Siteminder share price rising around 70% over the past 12 months, as seen on the chart below.
