Mondee: Upcoming Key Player In The Travel Technology Industry (NASDAQ:MOND)

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Description

I believe that Mondee Holdings, Inc. (NASDAQ: MOND) is worth $9.43, up ~24% as of the date of writing (October 19, 2022). With a portfolio of globally renowned leisure and travel brands, MOND is a travel technology and market place. The company stands out from the competition with a superior technological platform that enables faster transactions, is easily accessible on mobile devices and uses superior marketing and Fintech tools.

Company overview

MOND is a travel technology company and marketplace with a portfolio of globally recognized leisure and corporate travel brands. It provides state-of-the-art technologies, operating systems and services that enable seamless travel transactions. These technology-driven platforms can access global travel inventory and extensive negotiated travel content. Combined with MOND’s distribution network, these platforms create a modern travel marketplace.

Help and associated consumer journeys are ripe for disruption

Before the COVID-19 pandemic, travel and tourism were the most important and fastest growing global economic sectors. According to MOND’s S-1, in 2019 these sectors accounted for about 10% of global GDP. Global travel spending was $1.9 trillion, with annual growth of 6% before the coronavirus pandemic.

Assisted and Affiliated Consumer Travel includes inventory sold to travelers through affiliates and curators such as travel agencies, TMCs, corporations, call centers, associations and other membership organizations. With the help of third parties, end consumers gain access to airline and hotel reservations, car reservations and other accommodations that have been configured for specific travel or experience requirements and at the best prices. MOND reports that the Assisted and Affiliated Consumer Travel vertical generated $1 trillion in revenue in 2019. It focuses on this expanding segment of the travel booking market. According to MOND’s S-1 filing, the global travel market is expected to grow at a CAGR of 9% from 2021 to 2025, while the travel agency market is expected to grow by 11% during the same period.

Many traditional Assisted and Affiliated Consumer Travel stakeholders still depend on legacy distribution networks and archaic operating systems and rely on conventional booking methods, failing to align with the booking preferences and lifestyle demands of modern consumers. They often lack transaction platforms and operating systems with current consumer engagement technologies and transaction services, thereby underserving emerging consumer cohorts.

I believe these stakeholders are underserved by important segments of the fast-growing large economy travel market, including small and medium-sized businesses, creating significant opportunities in the white space market. In the Assisted and Affiliated Consumer Travel segment, the MOND platforms offer comprehensive solutions and a modern market for both leisure and business travelers.

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MOND’s travel ecosystem disrupts existing platforms by modernizing an industry still dependent on legacy technology infrastructure. The company’s technology platform increases the efficiency of transactions, provides excellent mobile accessibility and includes modern marketing and Fintech tools. For example, TripPro is the ultimate solution for the gig economy in the travel services market. It gives gig workers the tools they need to build a successful travel business or band to work from anywhere.

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2Q22 earnings presentation

MOND’s platform provides access to a wide range of content and prices

MOND’s distribution network connects more than 50,000 travel affiliates and agents with more than 500 airlines and more than one million hotel and alternative hospitality accommodations. This distribution network enables it to broadly provide segment-targeted travelers with access to its Global Content Hub (GUB) inventory. User-friendly platforms TripPro, Rocketrip, TripPlanet and UnPub are then used to help travelers in target markets use GCH’s inventory.

Management plans to expand its extensive flight content to differentiate itself from competitors by working with all airlines that need to fill planes quickly as the COVID-19 pandemic subsides. Most airlines have reduced the number of flights and capacity to partially compensate for the significant decline in passenger traffic, the rapid decline in load factors and the steep increase in losses. As the travel market recovers and these airlines reopen their routes and restore capacity, they will need additional help filling seats and increasing load factors.

In addition to flight content, hotel bookings are a recent addition to the MOND platform and currently account for less than 10% of its bookings. Hotel reservations is an area where MOND plans to focus its efforts as the company will focus on building relationships with other hotels and other alternative accommodation providers. MOND believes its UnPub subscription product will appeal to hoteliers hoping to fill hotel inventory at the last minute. The company plans to use its strength in airline ticketing content to increase hotel bookings by offering hotel bookings as an add-on or as part of a package with mostly airline transactions.

MOND will also prioritize the addition of new travel content categories such as cruises, dynamic packages and entertainment, organically and through acquisitions. Travel affiliates initiate most cruise bookings through offline channels and specialty distributors. It can leverage its strong relationships with travel affiliates and its position with emerging workers around the world to expand its relationships and content on cruises.

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2Q22 earnings presentation

Strong distribution capabilities

MOND currently maintains a distribution network that includes more than 50,000 travel affiliates and agents, corporate clients and partners with direct channels to travelers. Management plans to take the following steps to strengthen its global travel distribution network:

  1. The company plans to expand its presence worldwide to become the leading operating system for global travel accommodations. As such, international expansion is a priority in 2022 and beyond.
  2. MOND expands with TripPro’s new “Travel Solutions in a Box” offering, turning gig workers into 21st century travel providers. The company expects this new group of gig workers to grow the travel provider market exponentially. These gig workers will rely on the MOND platform to deliver this business, strengthening the company’s competitive advantage over legacy providers. I believe that the new economy of concert travel will also encourage travel providers who want to sell their travel content through these new concert travel providers to use MOND’s marketplace, which will strengthen its content and distribution network.
  3. Expand the travel market share for SMEs. Traditionally, only large companies had access to pricing, better service and reporting. Nevertheless, with TripPlanet, MOND intends to effectively provide this model to SMEs, non-profit organizations and other member organizations. TripPlanet already delivers a wide range of travel benefits, and the company plans to grow this business by focusing on more small businesses and nonprofits. MOND plans to add even more services, such as new benefits for employees and members of these companies who want to travel for fun.

M&A to further drive growth

The company has a strong track record in successfully integrating and strengthening its acquired businesses. MOND intends to continue to pursue strategic opportunities that will enhance its platforms, expand and deepen its content, and improve its content distribution infrastructure.

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2Q22 earnings presentation

MOND plans to expand its dynamic packaging capabilities with an even greater content offering and is evaluating acquisition candidates with this expertise to enhance these features on its platform. The company has identified opportunities to increase its international footprint by acquiring distributors, aggregators and platforms based in Europe and other global markets. In particular, MOND has been looking for ways to expand its range of hotels and other places to stay, cruises and tours.

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2Q22 earnings presentation

Evaluation

I believe MOND is worth $9.43 in FY23, representing a 24% gain since the date of writing.

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This value is derived from my model based on the following assumptions:

  1. Revenue growth will follow the management’s guidelines for the 22nd and 23rd floors, which are supported by organic growth and mergers and acquisitions.
  2. I diverge from the market and believe NOTE deserves a much higher multiple than it is today when compared to other major players in the travel space such as Booking ( BKNG ) and Expedia ( EXPE ). I believe MOND should trade in a similar fashion to EXPE given the greater similarity in business model. EXPE historically traded at around 11x forward EBITDA before COVID happened, and I expect MOND to eventually trade at similar levels once the world fully recovers from COVID.

Evaluation

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Leadership

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Key risks

Competition

The travel industry is competitive. MOND’s competitors may have access to significant financial resources, greater visibility and a well-established customer base in their target customer segments. This could make it difficult for MOND to acquire new customers. MOND competes for its share of the travel services market in several market segments, with different business models, technology and other skills and in different parts of the world. This may make it more difficult for MOND to find new customers.

Repeated closures will hurt MOND

These government mandates have had a significant negative impact on the travel industry and the many travel providers that our business relies on, as well as our workforce, operations and customers. Travel restrictions imposed by the European and US governments are beginning to be lifted, but there is still much uncertainty about the impact of new variants of COVID-19. Concerns have also been raised about how well existing vaccines will work against these new variants and when they will be distributed and administered worldwide.

Leveraged balance sheet

If COVID or another major disruption reoccurs, MOND could face liquidity problems given its high debt levels. MOND may need to raise additional financing through equity financing, which could dilute investors.

Summary

MOND is currently undervalued based on the current share price as of this writing. MOND is a marketplace and supplier of technology to the travel industry, and its client list includes many well-known names. The company differentiates itself from its competitors with a cutting-edge technology platform that enables faster transactions, is mobile-friendly and uses cutting-edge marketing and Fintech technologies. I think the current valuation is an excellent opportunity for investors to earn moderate returns over the next year.

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