The Serko Ltd (ASX: SKO) and Air New Zealand Ltd (ASX: AIZ) share prices are going nuts today, rising 12.5% and 17%, respectively.
Serko – up 12%
Serko is a New Zealand software company founded in 2004. Serko listed on the New Zealand stock exchange in 2014 and on the ASX in 2018. Serko’s travel management software is used by blue-chip Travel Management Companies (TMC) which use their software to book corporate/business travel for large clients. Serko also offers a growing expense management technology platform which is also sold through TMCs to help companies keep on top of their financial reporting and record-keeping.
Serko shares have been on a tear since bottoming in March and are now almost back to where they were pre-COVID — a 300% turnaround. There has been no material news put out to the market by Serko today. However, in recent times, the company has seemed ‘steady as she goes’ insofar as the business and the opportunities for growth. In early April, the company provided a market update and acknowledged that travel had been severely impacted, but it had $42 million of cash and modeled its financials as if COVID travel restrictions remained in place for FY21.
Featured video: Hamish Douglass, on The Australian Investors Podcast
To watch more videos with Australia’sbest investors consider subscribing to Rask’s free investment series, The Australian Investor Podcast on subscribe: iTunes, YouTube, Spotify or Castbox.
Air NZ – up 17%
The flagship airline of New Zealand carries around 17 million passengers a year with a lot of activity in the Pacific Rim between New Zealand, Australia, Asia and the Americas. Air New Zealand’s consolidated operating revenue was $5.5 billion in the 2018 financial year, generated by a fleet of over 100 aircraft and over 10,000 employees based globally.
News and speculation released over the weekend appear to suggest a ‘trans-Tasman’ bubble could soon in place, allowing Australian and New Zealand residents to travel for tourism. This positive news coincided with a statement from Air Zealand outlining the airline’s 800-day plan.
“Over the next two years we will Survive, then Revive and finally Thrive. We have set the Annual Results announcement in late August 2022, which is in around 800 days’ time, as the target date for Air New Zealand to report we are starting to earn healthy profits again even though we may be only 70% of our pre-COVID-19 size.” – Air NZ, 2020
So far, Air NZ has shed 4,000 employees from its ranks as it seeks to cut costs and survive. The next step, the company says, is to reduce $150 million of additional wages as it attempts to meet its financial targets and thrive in the post-COVID travel industry.
Buy, Hold or Sell
These two Kiwi companies have been standouts in their respective industries for many years, so I can see their appeal.
Personally, owning an airline stock has never been on my radar. So although I’d like to fly Air NZ it’s not a company I choose to own simply because I know airlines are very tough businesses to operate and the industry is incredibly low margin.
Conversely, Serko is about as close to the travel-related services industry as I would go. Indeed, I’d be very happy to own Serko shares at the right valuation. For now, though, I’m happy to wait on the sidelines to see the next batch of financials, due to be released on 24 June 2020.
[ls_content_block id=”14945″ para=”paragraphs”]
