The ASX small-cap stock Siteminder Ltd (ASX: SDR) is currently trading at a very attractive value, in my view. I recently invested in it because I'm bullish about its prospects.
This company provides Siteminder software, which it describes as the world's leading hotel distribution and revenue platform. It also offers Little Hotelier, an all-in-one hotel management software that "makes the lives of small accommodation providers easier". Impressively, it generates more than 125 million reservations, which is more than A$80 billion in revenue for those hotel customers.
The ASX small-cap stock is truly a global business, with offices in Sydney, Bangalore, Bangkok, Barcelona, Berlin, Dallas, Galway, London, Manila, and Mexico City.
There are three key reasons why I think it's a great investment right now.
Strong revenue growth
I believe the businesses that are growing at a good speed have the best chance of delivering good returns.
By targeting a global customer base, Siteminder has an impressive total addressable market to aim at.
The ASX small-cap stock's software offerings are clearly resonating with customers because of how quickly its revenue is growing.
In the FY25 first half, the business delivered total revenue growth of 13.9% to $104.5 million, while annualised recurring revenue (ARR) grew by 18.4% to $216.2 million (with contributions from its new smart platform).
Siteminder's smart platform is "on track" and "gaining traction with hoteliers and partners". 'Channels plus' successfully completed its pilot and progressed to general release at the end of the FY25 first half. The number of participating hotels has more than doubled from the pilot intake. 'Dynamic revenue plus' was launched in Australia and New Zealand, with positive feedback – it's on track for the northern hemisphere release at ITB Berlin in March 2025.
Promising future profit for the ASX small-cap stock
As a software business, Siteminder has the capability to achieve appealing profit margins as it becomes larger. Its costs aren't rising anywhere near as quickly as revenue.
In the HY25 result, the underlying gross profit margin increased by 118 basis points (1.18%) from the second half of FY24 to 66.9%, reflecting higher subscription and transaction margins.
Thanks to operating leverage, the underlying subscription gross profit margin increased 31 basis points (0.31%) to 85.5%, while the underlying transaction gross profit margin increased 384 basis points to 34.5% (which included contributions from the smart platform).
Its profit metrics are now reaching a pleasing place.
In HY25, underlying operating profit (EBITDA) was positive $5.3 million for the half, improving from a $1.2 million loss in the FY24 first half. Reported EBITDA was a positive $0.3 million, while underlying free cash flow improved by $8.1 million to negative $0.6 million.
In five years, I think the business could be making pleasing amounts of net profit after tax (NPAT).
Better valuation
As the chart below shows, the Siteminder share price has fallen 30% since 25 February 2025. It's a lot cheaper now, despite having the largest ARR in its history. I think it's a good time to invest.
Based on the current valuation of $4.41, it's valued at 26x FY29's estimated earnings, according to UBS estimates.
