Webjet Limited

EBITDA on Rise: Webjet Limited (ASX: WEB) has an engagement into the online sale of travel products including flights and hotel rooms. Its B2C division operates in two online travel businesses under the ‘Webjet’ and ‘Online Republic’ brands. Its WebBeds B2B business provides online fulfilment of hotel room bookings for travel industry clients (primarily travel agents, OTAs, wholesalers and tour operators) via its online booking platforms.

The company recently announced that the voluntary escrow restrictions on 1,059,681 ordinary shares which were issued in part consideration for the acquisition of DOTW Limited will be lifted on May 21, 2019. At UBS Emerging Companies Conference, Webjet highlighted that its Online Republic is a market-leading specialist in the provision of online cruise, car-hire and motor-home bookings.

In the same presentation it stated that, in the year 2013, WEB launched WebBeds which is now world’s second largest and fastest-growing accommodation supplier to the travel industry, operating across Europe, Americas, Middle East & Africa and Asia-Pacific. It’s UmrahHolidays International (51% interest of WebBeds) focuses on providing the ultimate Umrah and Hajj (religious travel) experience with a sophisticated, integrated online VISA application tool.

H1FY19 Financial Performance: The Total Transaction Value (TTV) increased by 29% pcp to $1.9 Bn. Its revenue increased by 33% pcp to $175.3 Mn. Its EBITDA increased by 42% pcp to $58 Mn.


Segment’s EBITDA Data (Source: Company Reports)

What To Expect: The company expects that its RezChainwill play a key role in delivering“8/4/4 target” by FY22 (8% revenue/TTV and 4% costs/TTV to drive 4% EBITDA/TTV). It expects that the travel industry company Thomas Cook to be connected later in 2019. Its ongoing enhancements are focused on improving the simplicity of connection and speed. Its UmrahHolidays International has huge market opportunity as Islam is the world’s second largest religious group with nearly 25% of the world’s population is Muslim, and around 2.4 million Muslims completed Hajj in 2018 & 3.3 million Muslims visitors completed Umrah in the Kingdom of Saudi Arabia in 2018. The Kingdom of Saudi Arabia has a vision to welcome 30 million religious visitors a year by 2030, and their key initiatives include:
 

• - Improving visa procedures to enable smooth visa processing with the aim of full automation,
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• - Integration of e-services into the pilgrim’s journey to enrich the religious and cultural experience,
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• - Provision of new facilities such as a new international airport, new railway connections, 35,000 new hotel rooms and expansion of Holy Mosques.
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Stock Recommendation: Its EBITDA margin, and net margin for H1FY19 stood at 29.7%, and 15.1% better than the H1FY18 results at 9.9%, and 5.2%, respectively implying decent fundamentals of the company.
It is currently trading close to its 52 weeks high, and due to decent financial results & promising outlook; breakout possibility cannot be avoided. Hence, considering the aforesaid facts and current trading level, we recommend a “Buy” rating on the stock at the current market price of $16.870 (up 1.749% on May 16, 2019).
 

Serko Limited

Trading Close To Its 52 Weeks High Level: Serko Limited (ASX: SKO) is an important player in online travel booking and expense management for businesses. The company recently advised that it will announce its FY19 Full Year Results ended 31 March 2019 on Wednesday, 22 May 2019.  In another update, Serko and Carlson Wagonlit Travel (CWT) announced an extension to the CWT reseller agreement to make Zeno, Serko’s Travel and Expense platform, available to CWT clients in the United States and Canada as part of the CWT preferred supplier program for its small to medium enterprise market customers.

This contract extension to offer Zeno to CWT’s customers in the North American market is an exciting step for Serko. SKO does not anticipate any material impact on the current financial year guidance due to the requirement for development work followed by an initial limited rollout for pilot customers which is not expected to be completed until mid-2019. Its total operating revenue for H1FY19 increased by 25% pcp to $11.4 Mn.


H1FY19 Performance Metrics (Source: Company Reports)

What To Expect: The company retains its guidance for the revenue growth within the range of 20-30% for the year ended March 31, 2019. Currency fluctuations and the timing of customer onboarding will be key factors determining the final results. SKO aims to accelerate investment in system development during the second half to provide local content, additional functionality and to ensure that they have the infrastructure to support global growth. It expects that the benefits of this investment will be apparent in the 2020 financial year. It anticipates that the majority of these costs will be capitalised, resulting EBITDA to remain consistent with the prior period. It is looking forward to the next phase of its growth plan as it takes Zeno to the world. It is expected to continue its assessment of acquisition opportunities to support its growth objectives.

Stock Recommendation: The stock of SKO is currently trading close to its 52 weeks high. Its EBITDA margin and net margin for H1FY19 stood at 13.1% and 8.1% which are lower than the industry median of 28.5% and 15.8%, respectively. Hence, considering the aforesaid facts and current trading level, we have a wait and watch stance on the stock at the current market price of $3.250 per share (up 0.619% on May 16, 2019).

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