Webjet Ltd (ASX: WEB)

Shares of Webjet plunged heavily by 11.5% on November 22, 2017 while the group delivered its Investor Day presentation and laid down the key earnings update. Particularly, WEB has highlighted for a negative cash flow in the first half of FY18 at the back of one-off acquisition cost from buying JacTravel (European travel business). Further, annual EBITDA of about $80 million is said to be below the market’s expectations, while the guidance entails a 57% growth on FY17 EBITDA of over $50 million from continuing operations. WEB also indicated an impact of $1.7 million Netflix tax for Online Republic and costs associated with Thomas Cook, while FY18 FIT Ruums losses are said to be in line with FY17.

On the other hand, the group’s FY18 - FY20 bookings growth is said to include 3-year B2C growth target with bookings growth of more than 3 times the underlying market growth rate and 3-year B2B growth target with bookings growth of more than 5 times the underlying market growth rate. The group also aims to deliver $3 billion TTV in FY18.

The group otherwise updated that it is witnessing ongoing growth in Webjet OTA (online travel agent) business with domestic and international flight bookings and Packages tracking well. The group has been able to successfully integrate Online Republic. Strategic sourcing partnership with Thomas Cook growth in Asian market, and transformational acquisition of JacTravel for WebBeds growth are all seem to support the performance. For FY17, the group’s reported NPAT of $52.4 million was up 146.6% while reported EBITDA of $69.9 million was up 90.7% and EBITDA from continuing operations of $51.0 million surged 40.3%.

While the group intends to reverse its negative cash flow in 2H, the short-term pressure prevails. We believe that the stock is ‘Overvalued’ at the current price of $10.49
 

Webjet Performance relative to market (Source: Company Reports)

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