Summary
- eDreams ODIGEO was one of our worst performers during FY22.
- EDDRF had a very strong year.
- Should co. reach mgmt. targets, I believe shares could more than 4x from the current price.
- Emerging positive data has led to our shares in eDreams increasing 50% during the past month.
The following segment was excerpted from this fund letter.
eDreams ODIGEO ( OTCPK:EDDRF )
Despite the strong recovery in travel and equally strong operating performance, eDreams was one of our worst performers during FY22, declining at one point around 60% from peak to trough, pricing in more difficult times ahead than the COVID related shut down of the entire global economy.
eDreams had a very strong year, posting record bookings (10% above pre-COVID numbers), revenue growth of 244% and significant cash EBITDA growth from a loss in FY21. More importantly, Prime, the company’s subscription loyalty program tripled its member count from 2021 to reach 2.7mm subscribers (as of H1 ’23, Prime subscribers have reached over 3.6mm). Earnings power will continue to grow with the acceleration of Prime growth, the entrance into new markets and the diversification of revenue.
As Prime grows along with the increased contribution to total revenue, profitability should increase materially throughout the next few years.
At present, eDreams has doubters in the areas of growth, profitability, and the value of their subscription program. To be fair, analysts jobs are made more difficult with the lack of detailed unit economics disclosed for Prime, including churn. However, with the passage of time, the attractiveness of each Prime cohort in their second year will start to reveal itself and the fundamentals will be impossible to ignore. Management continues to focus on their 2025 targets of 7.25mm Prime members and cash EBITDA of €180mm euros. Should the company reach these targets, I believe shares could more than 4x from the current price.
In December, private equity firm Ardian, through a fund that owned 16% of eDreams shares, sold their position as the fund’s life came to an end. The buying firm was an institutional quality investment fund with a focus in hospitality. That, combined with positive travel data emerging has led to our shares in eDreams increasing 50% during the past month.
Disclaimer: Past performance is no guarantee of future results. Investing involves risks which clients should be prepared to bear, including but not limited to partial or complete loss of principal originally invested. Investing in small and microcap companies can result in additional volatility and higher risk due to comparatively low market capitalization, more sensitivity to economic and market conditions, and more limited managerial and financial resources. In addition, small companies typically trade in lower volume, making them more difficult to purchase or sell at the desired time and price or in the desired amount. Please refer to Form ADV Part 2 brochure for more information about Greystone Capital Management and its personnel. |
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Greystone Capital - eDreams ODIGEO: Shares Could More Than 4x