Datalex likely to hold off on share sale amid depressed price unease

Airline retail software company Datalex is likely to hold off on a share sale in the near term amid unease among existing investors about its depressed share price, even as its prospects are improving, according to sources.

The Dublin-listed company is likely to seek to raise further debt finance in the meantime for working capital as it works on activating major new contracts, said the sources, who declined to be identified. It is unclear whether any fresh debt financing would come from its main shareholder and debt provider, Dermot Desmond, or another party.

Datalex said in April that it was exploring “all financing options” to refinance loans under an existing €10 million facility from Mr Desmond’s Tireragh, as the rate attached to the loans increased from 10 per cent to 15 per cent and is on track to ultimately rise to 18 per cent from October.

The hope is that any fresh debt funding would be on better terms than the Tireragh facility, the sources said.

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Group chairman, David Hargaden, and chief executive, Sean Corkery, declined to comment on the funding plans when asked by The Irish Times after Datalex’s annual general meeting on Thursday, other than to say than the company will likely issue a statement on its plans within the next month.

Still, Datalex ultimately plans to refinance the Desmond loans, as well as an additional debt it takes on in the near term, through an equity raise, according to the sources. This will likely involve a €20 million share sale, according to market sources. Such a transaction could be pushed out to next year.

Datalex, early last month, said it saw a strong recovery in airline activity across all geographies in the first three months of 2023, after its pretax loss more than doubled last year to $11.4 million (€10.4 million) amid a delayed rebound in the Chinese market due to Covid-19 lockdowns.

The company has also recently renewed contracts with key existing customers JetBlue, Air China and Air Transat; and signed a deal with LatAm Airlines.

Mr Corkery told analysts at a capital markets day in May that a huge growth opportunity from airlines focusing more on ancillary revenues – and a change in its focus from building bespoke systems for airlines to off-the-shelf products where fees are fuelled by transactions – should see its turnover doubling to almost $47 million by 2026.

[ Datalex hails aviation recovery after losses more than doubled in 2022 to €10.3m ]

Shares in the company, however, have so far failed to capture the company’s improving prospects and have declined by 17 per cent over the past 12 months to 54 cents. That compares to the 50c-per-share price at which Datalex issued stock two years ago at the height of the pandemic and the shares’ highs of 96c from late 2021.

Analysts at Cantor Fitzgerald and Goodbody Stockbrokers, Datalex’s broker, have price target of 80c on the stock.

By contrast, the pan-European Stoxx Total Market Airlines Index has risen 38 per cent over the past 12 months.