SABR - Sabre: Heavily Undervalued And Developing Well Yet We Are Cautious

2024-04-08 23:26:25 ET

Summary

• Sabre's revenue growth has been highly volatile, impacted by market share growth, acquisitions, and the Covid-19 pandemic, with revenue currently significantly below FY19.
• In addition to revenue, its margins are considerably below historical levels, forcing the Management to raise debt and cripple the business. Both factors create significant risk.
• The industry is forecast to grow well, and Sabre’s recent performance illustrates this. Management’s strategy should deliver value, making FY25F a very important year for its future.
• SABR is heavily undervalued, with the potential to generate its entire market cap in FCF in the next 5 years. The issue is the risk associated with margin improvement and economic conditions.
• We suggest investors remain patient and monitor Q1’25 for how growth and margins progress. Are economic conditions weighing on demand? Is EBITDA-M moving toward 15%?

Introduction and thesis

Sabre Corporation ( SABR ) is a leading technology provider to the global travel and tourism industry. The company offers software, data, mobile, and distribution solutions to airlines, hotels, travel agencies, and other travel providers. Sabre's products and services help streamline operations, enhance customer experiences, and optimize revenue for its clients.

Whilst we are not overly convinced by Sabre's historical profile, the business does have attractive qualities. It is a leading player in its industry, which should exhibit 5-10% growth in the coming years, with a moat underpinned by technological capabilities and a network effect....

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