Webjet Limited

 

WEB Details
 
Higher TTV Margins & Robust Growth in WebBeds Business: Webjet Limited (ASX: WEB) is a top supplier of online travel services in Australia and New Zealand. The company is engaged in digital travel business covering both consumer markets and wholesale markets worldwide.
 
Shareholding Update: On 18 December 2019, the company announced that Macquarie Group Limited and its entities, have ceased to be a substantial shareholder in the company, effective from 13 December 2019.
 
Financial Highlights for the Period Ended 30 June 2019: During the period, total transaction value (TTV) of the company came in at $3.83 billion, an increase of 27% year over year. Revenues for the period came in at $366.4 million, up 26% on a yearly basis. EBITDA for the period came in at $123.1 million, up 43% year over year. EBITDA margins came in at 33.6%, expanding 395 basis points on a year over year basis. Net profit after tax came in at $60.3 million, up 45% year over year. Earnings per share during the period came in at 47 cents, an increase of 30% year over year. The company paid a fully franked final dividend of 13.5 cents in FY19.
 

Financial Highlights (Source: Company Reports)
 
WebBeds Business Performance: During the period, the company’s WebBeds business reported $3.4 million travel bookings, up 51% year over year.  Total transaction value (TTV) for the period came in at $2.15 billion, an increase of 59% year over year. Revenues for the period came in at $184.5 million, up 62% on a yearly basis. EBITDA for the period came in at $67.3 million, up 148% on year over year. EBITDA margins came in at 36.4% as compared to 23.8% reported in the year-ago period. During the year, TTV and EBITDA margins continued to improve in all regions, with cost witnessing a decline as a % of TTV.
 

WebBeds Financial Highlights (Source: Company Reports)
 
Trading Update:In the first 6 weeks of FY20, WebBedS’ TTV went up by more than 50% (excluding Thomas Cook), whereas Webjet Online Travel Agency (OTA) TTV increased by 9%. In the Online Republic, TTV witnessed an increase of 4%.
 
Outlook: For FY20, the company expects TTV from the investments made in Thomas Cook to be in the range of $150-200 million. Webjet Limited expects additional EBITDA from the WebBeds business to be in the range of $27 million to $33 million. Significant growth opportunity is expected from Asia-Pacific region, with an additional expected TTV in the range of $75-125 million in FY20. Further, the company expects FY20 CAPEX to increase in the range of 10-15% on y-o-y.
 
Valuation Methodology:Price to Earnings Multiple Approach

Price to Earnings Based Valuation (Source: Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock is trading below the average of its 52-week low and high of $9.980 and $17.190, respectively. As on 18 December 2019, the company’s market capitalisation stands at ~$1.78 billion, with 135.6 million outstanding shares. The stock gained 24.08% on a year-to-date basis. In FY19, the company’s top and bottom-line increased on a year over year basis.The company is confident about its growth on the back of a strong pipeline of acquisition opportunities. Also, the company is witnessing market growth opportunities in both overseas and domestic flights. The company remains focused on higher TTV margins and lower cost of acquisition. Considering the above factors, we have valued the stock using Price to Earnings based relative valuation method and arrived at a target price depicting single-digit upside (in % terms). Hence, we recommend a “Buy” rating on the stock at the closing price of $13.30 per share, up by 1.218% on 18^th December 2019. 
 
 
WEB Daily Technical Chart (Source: Thomson Reuters)

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