My Agency’s revenue (acquired in 2022) was back on track in H1 22, having returned to its pre-crisis levels. MHM’s hotel matching application development is underway.
My Agency benefitted from the return of tourists
The return to France of tourists this summer coupled with growing national demand saw My Agency’s revenue back or close to its pre-crisis level according to AV (2019 figures not yet available). With revenues of c.€10m expected in FY 22 (guidance, half of this being consolidated in H2 22), we expect this business to near operational break-even this year. My Agency was roughly billing €10m in 2019 and further 2023 top-line growth should see this business turn a modest profit for the FY 23, in our view.
The number of clients was up 10% and the average ticket per client was up 20%, both of which are positive leading indicators. Since the comparison with a difficult base year in 2021 was favourable, only the H1 23 will enable meaningful analysis of the underlying growth pace aside from the the swings attributable to the basis of comparison. However, we don’t rule out the H1 22 ending up as an unfavourable comparison basis due to firstly the catch-up in post-Covid consumer spending in 2022 and, secondly, a possible decline in the price of services (airline tickets/hotels) following the extraordinary use of pricing power detected in the leisure sector in 2022 (RevPAR in hotels, flight tickets, fossil fuel by transparency). Consequently, we don’t expect the My Agency top-line to grow at an annual 20-30% in 2023-24.
My Agency signed a significant contract with a well-known jewellery trademark in 2022 and this should help improve the shopping experience for end customers. This is the first testimony to demand for the luxury Conciergerie business. We share the opinion that luxury brands can improve end client loyalty by recourse to a specialist external services provider and new contracts of this time seem possible in future. Such contracts would enable My Agency to exit a pure “cost +” structure (variable charges) by materialising an incremental cash margin to access its platform.
Matching application: on the road
MyHotelMatch’s full development will depend on the commercial launch of its app in 2023-24. This is both the company’s core source of potential value creation and admittedly of risk. Operational costs in H1 22 recognised a first acceleration in development expenses. Looking purely at the shareholder’s commitment to contributing €2.2m until September 2023, the cash burn looks moderate. The latter however doesn’t take into account the significant costs incurred in referencing (Google) and the marketing spend to support the full commercial launch.
The beta test version of the Matching App should be made available in early 2023 although we don’t anticipate the first accurate figures to be made available before 2024. We will monitor the cash expenses initially before monitoring the ramp up of the client base later in 2024-25.
Balance sheet secured until end-2023
The reference shareholder is committed to supporting the balance sheet until end-2023. A capital increase looks likely to: i/ refinance this shareholder loan amounting to c.€3m and ii/ prepare for the acceleration in cash burn in 2024 (commercial launch). While there are as yet no details on the latter, we book an accrued amount of €20m in 2022-25. The company’s current market cap is €5m.
With MHM trading at c.€0.017, the current share price stands 32% below the warrants’ strike price of €0.025 per unit (maturing in 2023). The exercise of the warrants would provide the company with c.€9m of fresh cash. This is included in our estimates. Failing this conversion, MHM would have to increase the amount to be raised via a more classical capital increase. A maturity in December 2023 doesn’t require the integration of this “non-exercise” scenario at pixel time.
Due to the increase in operating expenses expected in 2023-24, MHM will have to provide the market with visibility on its balance sheet before November 2023.
In the absence of a matching app contribution in 2022 and with the My Agency recovery being in line with expectations, we see no need to adjust our forecasts. Although operating expenses look a bit higher than had been expected in FY 22 (€600k recorded in H1 22 vs. €400k expected in FY 22) this is insignificant vs. the mid-term issues in 2023-25. On the other hand, there may have been a couple of undisclosed one-offs in H1 22 attributable to MHM’s full strategic shift. All in all, analysis of the company should focus on the 2023-25 horizon rather than the H1 22.
Note that our target price will mainly depend on the price of the new shares to be issued in 2023-24 and this will, in turn, depend on the success of the Matching app.
