IT stock seen to rally over 43% as IIFL Securities bullish on recent acquisition
Software-as-a-services (SaaS) company RateGain Travel Technologies Ltd recently announced the acquisition of the assets of Adara Inc., for a cash consideration of $16.1 mn. The management expects to turn the US-based travel data exchange platform profitable within three months of the acquisition, through cost rationalisation, highlighted domestic brokerage and research firm IIFL Securities which sees a sharp upside on the stock.
“Organic growth for the asset is likely to be ~15% in FY24ii, driven by cross-selling opportunities, as per management. This, prima facie, looks like an attractive price paid for an asset that has the potential to scale as well as improve profitability; however risks around revenue leakage would need to be watched. We incorporate the acquisition and consequently raise FY24ii-25ii EPS estimates by 6%. We now forecast 39%/72% revenue and EPS Cagr over FY23ii-25ii,” the note stated.
The brokerage has maintained its Buy rating on the stock with a 12-month target price of ₹425 per share (from ₹405), implying a potential upside of over 43%, as it has moved its target price methodology due to the increased M&A intensity.
This acquisition will enhance RATE’s customer acquisition and wallet share expansion offerings, through one of the largest sources of travel intent data in the world, which Adara acquires through its data partnerships with 270+ Travel and Hospitality companies, it said.
“It will help RATE’s DaaS (provide custom segment audience data based on travel intent) as well as Martech (provide targeted advertising based on travel intent) business units. It will also add 55-member team to RATE across US, Europe and RoW,” IIFL added.
The company is a leading provider of SaaS solutions for travel and hospitality. RateGain shares made their market debut in December 2021 and the IT stock has declined more than 12% since listing.
“The acquisition will also strengthen and consolidate RateGain’s position across commercial teams in leading hotel chains, airlines and car rental companies which work with both Adara and RateGain as well as give access to a niche segment of over 50 destination marketing organizations in the US,” RateGain had said in an exchange filing earlier this week.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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