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 (SKO) 1H22 result – first take</h2>
Serko (SKO) reported a strong 1H22 result beating our half year forecasts while more importantly significantly exceeding our estimates for the number of migrated customers on its Booking.com JV contract
The company has also announced this morning it is looking to raise NZ$85m of capital – a proportion of which it will use to fund the potential acquisition of a global travel tech company for between NZ$50m-NZ$75m
The company has announced first time revenue guidance for FY22 of NZ$21m-NZ$25m vs Forbar’s total revenue forecast of NZ$41m (including Booking contribution revenue of NZ$19m) and consensus total revenue of NZ$38m.
Key takeouts
<ul>
<li>Booking for Business platform migration is now complete with over 300,000 customers migrated to the SKO platform (vs our prior base case of 229,000)</li>
<li>Since launch the JV has generated +30,000 new customers to the platform</li>
<li>Transactions on the platform currently range from 1,000 to 1,500 per weekday despite COVID-related disruption</li>
<li>Commentary on North American progress is encouraging with SKO in discussions to provide its Zeno product to a number of Fortune 500 companies</li>
<li>Average revenue per Booking (ARPU) decreased from FY21 from NZ$8.76 to NZ$7.38. This is driven by a greater proportion of revenue generated from expense management vs travel platform revenue given the COVID-19 related disruptions to corporate travel and recent lockdowns in Australia</li>
<li>Booking.com related ARPU in comparison was reported at just below NZ$20 (over NZ$20 in October)</li>
<li>SKO is looking to raise NZ$85m of cash (split NZ$75m fully underwritten placement/NZ$10m non-underwritten retail offer)</li>
<li>Use of proceeds are expected to be used for 1. Investment into its JV with Booking.com (expansion of content), 2. Future growth initiatives in existing markets and 3. Inorganic expansion with SKO in negotiations for the potential acquisition of a global travel tech business which would for total consideration of NZ$50-NZ$75m (split by scrip, cash and deferred performance based consideration)&nbsp;</li>
<li>The company has guided to 2H22 monthly cash burn of NZ$4m and total revenue for FY22 of NZ$21m to NZ$25m with the assuming of reduced travel volumes in Australasia for 2H22&nbsp;</li>
</ul>
Financials
<ul>
<li>Reported revenue NZ$9.2m vs our forecast NZ$8.5m</li>
<li>EBITDA reported at -NZ$11.8m vs our forecast -NZ$15.4m</li>
<li>Net loss for the half was reported at –NZ$15.2m vs our forecast loss of NZ$17.2m</li>
<li>Cash balance for 1H22 totalled NZ$62.3m</li>
<li>Monthly cash burn of NZ$2.9m was in line with our expectations of monthly NZ$2.9m for the period</li>
</ul>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/243/633/original/image_5655986441637716761412.png?1637716762" class="editor-image img-responsive" data-smartkarma-image-id="243633"></figure>
Analyst call 11.30am NZT
<a href="https://event.webcasts.com/starthere.jsp?ei=1503170&amp;tp_key=fab313a1a2" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://event.webcasts.com/starthere.jsp?ei%3D1503170%26tp_key%3Dfab313a1a2&amp;source=gmail&amp;ust=1637800173361000&amp;usg=AOvVaw1CNPxxfsenNTmK5lsZyaYE" rel="noopener">https://event.webcasts.com/starthere.jsp?ei=1503170&amp;tp_key=fab313a1a2</a>

Serko (SKO) 1H22 result – first take
Serko (SKO) reported a strong 1H22 result beating our half year forecasts while more importantly significantly exceeding our estimates for the number of migrated customers on its Booking.com JV contract
The company has also announced this morning it is looking to raise NZ$85m of capital – a proportion of which it will use to fund the potential acquisition of a global travel tech company for between NZ$50m-NZ$75m
The company has announced first time revenue guidance for FY22 of NZ$21m-NZ$25m vs Forbar’s total revenue forecast of NZ$41m (including Booking contribution revenue of NZ$19m) and consensus total revenue of NZ$38m.
Key takeouts

Booking for Business platform migration is now complete with over 300,000 customers migrated to the SKO platform (vs our prior base case of 229,000)
Since launch the JV has generated +30,000 new customers to the platform
Transactions on the platform currently range from 1,000 to 1,500 per weekday despite COVID-related disruption
Commentary on North American progress is encouraging with SKO in discussions to provide its Zeno product to a number of Fortune 500 companies
Average revenue per Booking (ARPU) decreased from FY21 from NZ$8.76 to NZ$7.38. This is driven by a greater proportion of revenue generated from expense management vs travel platform revenue given the COVID-19 related disruptions to corporate travel and recent lockdowns in Australia
Booking.com related ARPU in comparison was reported at just below NZ$20 (over NZ$20 in October)
SKO is looking to raise NZ$85m of cash (split NZ$75m fully underwritten placement/NZ$10m non-underwritten retail offer)
Use of proceeds are expected to be used for 1. Investment into its JV with Booking.com (expansion of content), 2. Future growth initiatives in existing markets and 3. Inorganic expansion with SKO in negotiations for the potential acquisition of a global travel tech business which would for total consideration of NZ$50-NZ$75m (split by scrip, cash and deferred performance based consideration)&nbsp;
The company has guided to 2H22 monthly cash burn of NZ$4m and total revenue for FY22 of NZ$21m to NZ$25m with the assuming of reduced travel volumes in Australasia for 2H22&nbsp;

Financials

Reported revenue NZ$9.2m vs our forecast NZ$8.5m
EBITDA reported at -NZ$11.8m vs our forecast -NZ$15.4m
Net loss for the half was reported at –NZ$15.2m vs our forecast loss of NZ$17.2m
Cash balance for 1H22 totalled NZ$62.3m
Monthly cash burn of NZ$2.9m was in line with our expectations of monthly NZ$2.9m for the period


Analyst call 11.30am NZT
https://event.webcasts.com/starthere.jsp?ei=1503170&amp;tp_key=fab313a1a2

Serko Ltd

Serko (SKO): 1H22 Result – First Take