The small-cap ASX stock Siteminder Ltd (ASX: SDR) has suffered amid the US tariff volatility. It's down 40% since 25 February 2025, which is a hefty drop for a relatively short amount of time. I think it's a great buy at the share price of $3.85.
This business describes itself as the name behind Siteminder, the world's leading hotel distribution and revenue platform. It also offers Little Hotelier, an all-in-one hotel management software that provides services for small accommodation providers to help their operations.
Despite being a relatively small business, it operates globally. It is headquartered in Sydney and has offices in Bangalore, Bangkok, Barcelona, Berlin, Dallas, Galway, London, Manila and Mexico City.
Impressively, it claims to have the largest partner ecosystem in the global hotel industry, generating more than 125 million reservations worth over A$80 billion in revenue for its hotel customers each year.
Cheaper small-cap ASX stock opportunity
The business has suffered a large decline, much more than the S&P/ASX 200 Index (ASX: XJO), which has only fallen by 5.2% since 25 February 2025.
It's important to keep in mind that despite the decline, the business is growing operationally and financially, even if the market hasn't reflected that improvement. The fact that the share price is down makes it seem much better value in this situation.
In terms of revenue, the business reported that total revenue climbed 13.9% to $104.5 in the first half of FY25, while annualised recurring revenue (ARR) climbed 18.4% to $216.2 million.
Pleasingly, the number of adopted transaction products increased 36% to 30,600, helped by contributions from its relatively new smart platform. The number of net rooms added increased by more than 50% compared to the first half of FY24, thanks to its strategy of pursuing larger hotel properties.
Increasingly profitable
One of the factors that can enable a small-cap ASX stock to outperform the market over the long-term is rising profit margins. That means additional revenue makes more profit for the company, which is a powerful tailwind because investors usually value a business based on how much profit it makes.
In the HY25 result, Siteminder revealed its underlying gross profit margin rose by 118 basis points to 66.9%, reflecting an increase in the margin for both subscription and transaction revenue. The subscription gross profit margin benefited from operating leverage.
Pleasingly, the company has reached positive operating profit (EBITDA) status. I think that's important as a catalyst and will mean the company's profit can soar from here. In HY25, the business made $5.3 million of underlying EBITDA, up from a $1.2 million loss in the first half of FY24.
I'm expecting the ASX small-cap stock to deliver higher profit margins in the coming years and this could excite investors again. I recently decided to invest – it's at a much cheaper valuation now than a few months ago, I'd be very happy to buy more Siteminder shares today.
