New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Serko<br>FY22 Result — Clouds Still Linger&nbsp;</h2>
<p></p>
<div>
<h2>RESEARCH&nbsp;INSIGHTS</h2>
</div>
<p>Serko&nbsp;(SKO) reported a mixed FY22 result. Positives included rising corporate travel bookings and Visa's acceptance of&nbsp;SKO's&nbsp;Zeno as its corporate booking tool, however, FY23 revenue guidance was below our and consensus expectations. We reduce our revenue assumptions across our forecast horizon, with the impact on earnings offset by a headcount-driven reduction in employee costs assumptions. That said, there is still a wide range of potential outcomes over the medium to long term. With the uncertainty surrounding&nbsp;SKO's&nbsp;earnings profile,&nbsp;investments in growth initiatives will need to be prudently managed (we forecast monthly cash burn of ~NZ$3.5m in FY23).&nbsp;SKO has yet to provide any specific information on the potential acquisition opportunity the company noted at its November 2021 capital raise.​​</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/275/295/original/image_31044377141652923247217.png?1652923246" class="editor-image img-responsive" data-smartkarma-image-id="275295"></figure>
<div>
<h3>What's changed?</h3>
</div>
<div id="m_6293690034057186085itnub">
<ul>
<li><strong>Earnings</strong>:&nbsp;We reduce our revenue&nbsp;forecasts by -11% and -6% across FY23 and FY24, we are now marginally ahead of FY23 revenue guidance. Our EBITDA forecasts increase as we temper&nbsp;our previously aggressive employee expense assumptions.</li>
</ul>
</div>
<div>
<h3>Key takeaways&nbsp;from the FY22 result&nbsp;</h3>
</div>
<div id="m_6293690034057186085ijfnp">
<ul>
<li><strong>Booking.com for Business</strong>:&nbsp;Total registered customers now exceeds 420,000. Average revenue per booking (ARPB) was&nbsp;ahead of management's previously stated NZ$20 target.</li>
<li><strong>Acquisition opportunity?</strong>&nbsp; As flagged at the November 2021 capital raise a portion (~NZ$21m) was expected to be used to fund a potential acquisition opportunity. The company has stated that negotiations with a potential target are ongoing.&nbsp;&nbsp;</li>
<li><strong>ARPB (based on total recurring revenue/online bookings)</strong>:&nbsp;ARPB contracted by -11% to NZ$7.83 (from NZ$7.86 in 1H22 and NZ$8.76 in FY21). This is predominantly the result of a lower mix of expense-related revenue as travel booking volumes​​​​​​​ are growing&nbsp;more rapidly. Travel-related ARPB increased +8% to NZ$5.80, boosted by the higher ARPB generate by Booking.com.</li>
<li><strong>Australia and New Zealand</strong>:&nbsp;Australasian (ANZ)&nbsp;booking volumes had&nbsp;recovered to 78% of pre-COVID (March 2019) levels, with positive momentum continuing into April (83% of April 2019). Company guidance assumes ~NZ$20m contribution from ANZ&nbsp;managed travel in FY23. ANZ revenue&nbsp;was ~NZ$22m in FY19, though management has noted net new customer additions since then.&nbsp;</li>
<li><strong>North America</strong>:&nbsp;Management has highlighted positive travel recovery signs in the North American market. Furthermore, Visa has selected SKO’s Zeno as its corporate booking tool. The company does not expect the agreement to have a material impact in FY23.&nbsp;&nbsp;</li>
</ul>
</div>
<div>
<h3>Outlook</h3>
</div>
<div>
<p>The company provided first time FY23 guidance for revenue&nbsp;to be double what was achieved in FY22 (implying ~NZ$38m, net of marketing&nbsp;costs associated with the JV). SKO maintains its medium-term revenue target of NZ$100m. We assume that the company can achieve this during FY25 —&nbsp;driven by a substantial ramp-up in Booking.com revenue.&nbsp;</p>
</div>

Serko FY22 Result — Clouds Still Linger&nbsp;


RESEARCH&nbsp;INSIGHTS

Serko&nbsp;(SKO) reported a mixed FY22 result. Positives included rising corporate travel bookings and Visa's acceptance of&nbsp;SKO's&nbsp;Zeno as its corporate booking tool, however, FY23 revenue guidance was below our and consensus expectations. We reduce our revenue assumptions across our forecast horizon, with the impact on earnings offset by a headcount-driven reduction in employee costs assumptions. That said, there is still a wide range of potential outcomes over the medium to long term. With the uncertainty surrounding&nbsp;SKO's&nbsp;earnings profile,&nbsp;investments in growth initiatives will need to be prudently managed (we forecast monthly cash burn of ~NZ$3.5m in FY23).&nbsp;SKO has yet to provide any specific information on the potential acquisition opportunity the company noted at its November 2021 capital raise.​​


What's changed?



Earnings:&nbsp;We reduce our revenue&nbsp;forecasts by -11% and -6% across FY23 and FY24, we are now marginally ahead of FY23 revenue guidance. Our EBITDA forecasts increase as we temper&nbsp;our previously aggressive employee expense assumptions.



Key takeaways&nbsp;from the FY22 result&nbsp;



Booking.com for Business:&nbsp;Total registered customers now exceeds 420,000. Average revenue per booking (ARPB) was&nbsp;ahead of management's previously stated NZ$20 target.
Acquisition opportunity?&nbsp; As flagged at the November 2021 capital raise a portion (~NZ$21m) was expected to be used to fund a potential acquisition opportunity. The company has stated that negotiations with a potential target are ongoing.&nbsp;&nbsp;
ARPB (based on total recurring revenue/online bookings):&nbsp;ARPB contracted by -11% to NZ$7.83 (from NZ$7.86 in 1H22 and NZ$8.76 in FY21). This is predominantly the result of a lower mix of expense-related revenue as travel booking volumes​​​​​​​ are growing&nbsp;more rapidly. Travel-related ARPB increased +8% to NZ$5.80, boosted by the higher ARPB generate by Booking.com.
Australia and New Zealand:&nbsp;Australasian (ANZ)&nbsp;booking volumes had&nbsp;recovered to 78% of pre-COVID (March 2019) levels, with positive momentum continuing into April (83% of April 2019). Company guidance assumes ~NZ$20m contribution from ANZ&nbsp;managed travel in FY23. ANZ revenue&nbsp;was ~NZ$22m in FY19, though management has noted net new customer additions since then.&nbsp;
North America:&nbsp;Management has highlighted positive travel recovery signs in the North American market. Furthermore, Visa has selected SKO’s Zeno as its corporate booking tool. The company does not expect the agreement to have a material impact in FY23.&nbsp;&nbsp;



Outlook


The company provided first time FY23 guidance for revenue&nbsp;to be double what was achieved in FY22 (implying ~NZ$38m, net of marketing&nbsp;costs associated with the JV). SKO maintains its medium-term revenue target of NZ$100m. We assume that the company can achieve this during FY25 —&nbsp;driven by a substantial ramp-up in Booking.com revenue.&nbsp;


Serko: FY22 Result — Clouds Still Linger

Serko Ltd

Serko: FY22 Result — Clouds Still Linger