Desmond-backed Datalex rebounds from Chinese concerns

Datalex, the travel software company in which businessman Dermot Desmond holds more than a 21 per cent stake, staged an impressive 13 per cent rally during the week following a share sell-off late last year.

The 23 per cent slump in the final eight weeks of 2017 had been down to a few factors, including the presence of what sources described as a “sloppy seller”, who had been drip-feeding shares into the market for weeks, as well as chatter about the company’s income exposure to a unit of deeply troubled Chinese conglomerate HNA Group.

Datalex’s revenues are forecast by Goodbody Stockbrokers to grow from $55 million (€45.8 million) in 2016 to more than $100 million (€83 million) by the end of the decade, with pretax profits expected to jump at a faster pace – from $5.2 million (€4.3 million) to $13.5 million (€11.2 million).

Much of the growth is predicated on the fast-growing Asia Pacific region, where business from airlines currently make up 26 per cent of total revenues and researchers see the market for digital travel sales surging by almost 17 per cent a year out to 2020.

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Hainan links

One of Datalex's main clients in the region is Hainan Airlines Group, a unit of HNA, the group that emerged from relative obscurity in the past two years to spend $40 billion on an acquisitions binge, including the purchase of major stakes in Deutsche Bank, Hilton Worldwide Holdings and control of Irish aircraft leasing group Avolon.

Concerns over HNA’s finances went into overdrive late last year when some of its subsidiaries faced borrowing cost spikes, as they sought to raise funds, while others, including Hainan Airlines, scrapped bond sales.

However, sources said that Hainan Airlines accounts for less than 6 per cent of Datalex’s revenues. The Irish company serves five carriers within the Hainan Airlines group. Analysts have been pinning their hopes on the company snapping up contracts with the seven Hainan Airlines brands that it does not already work with.

HNA is now in sell-off mode, with plans to flog $6 billion (€ 4.9 billion) of overseas property, although close observers of the situation say that Hainan Airlines has a sound business and will remain core to the group. It’s also a sector, they say, in which the Chinese government has a major strategic interest.