Accelya looks very interesting at this point. I have been tracking this company for over a decade. The first time I bought Accelya was way back in 2012 and exited completely in 2018. I started buying again in January this year and will continue to add.
Few points on why Accelya should do well:
- Valuations are cheap, be it historical or absolute.
- Recovery started in late 2021, and numbers have been decent since. My first target was matching 2019 numbers, which was done in this quarter.
- A new growth cycle is underway, I expect earnings growth to be around 20%, revenue growth around 15%. There are quite a few reasons for this –
(i) There’s a trend of new carriers emerging all over the world, so a lot of these incremental partnerships are higher margin in nature
(ii) There’s renewed energy in the airlines sector once again, which means there’s focus on getting a better price for their inventory and also reducing costs, meaning outsourcing of non core functions. This helps Accelya cross sell better. Recent examples are Frontier Air adding Accelya’s AirRM 2, and Thai Airways adding outsourced revenue accounting services 1 to their renewals.
(iii) The biggest driver of growth is this new distribution system launched by IATA, that is called NDC & ONE Order. Will expand more on this –
NDC (New Distribution Capability) is a travel industry-supported program (NDC Program) launched by IATA for the development and market adoption of a new, XML-based data transmission standard (NDC Standard). The NDC Standard enhances the capability of communications between airlines and travel agents and is open to any third party, intermediary, IT provider or non-IATA member, to implement and use.
NDC transition is underway, which means this will see more one time project spending on transition, which benefits Accelya and the other existing players. Accelya has already started working on NDC implementation, plus they’re getting more allied work. For example, one of their big customers, American Airlines engaged them on a different project to support sale of unused EDIFACT tickets exchangeable through NDC connections 3. For reference – EDIFACT is the old standard and NDC is the new standard.
Resources to understand NDC and ONE Order –
Interesting times for a monopoly player that has been sleeping for years!
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