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(Asx: WEB) | Webjet

Jan 4, 2022

Sentiment: Sideways

Type of Trade: Conservative

Industry: Travel

Webjet Limited is a digital travel business spanning both global consumer markets (through B2C) and wholesale markets (through B2B). Webjet Limited Registered Office is located in Melbourne, Australia.

The B2C division includes Webjet, an online travel agency (OTA) in Australia and New Zealand, and Online Republic a New Zealand-based online travel booking business.

The B2B division is WebBeds, a travel intermediary, or bedbank, providing accommodation and ground services to the travel industry through trade only booking websites (trading brands) or API connectivity. The company trades globally operating three, locally managed regional divisions – Asia Pacific (APAC), Americas Middle East & Africa (AMEA) and Europe.

The business as well as most of the similar travel companies has been hardly affected by COVID-19 pandemic, however Webjet has managed to turnaround and start looking for growth once again.

✅ $446 million in cash

✅ $3.5 million/ month in 1H22 cash surplus

✅ WebBeds, the B2B operations is still profitable since July driven by domestic North American and European markets; 1H22 costs
down 31% over pre-Covid levels; on track to be 20% more cost efficient at scale.

✅ Webjet Ota which is the B2C operations, has also been profitable in 1Q, with 2Q impacted by borders closures; with bookings picking up from October as domestic and international borders start to reopen in Q2 and Q3 we should see solid growth results in FY2022.

✅ Webjet has considerably reduced the expenses and cost materially with strong growth revenue. Even though the first quarter of FY22 has been affected by the lockdown and borders restriction, the Q3 and Q4 should far outweigh the weak period.

WebJet ATO

The main operation B2C in Australian and New Zealand, with business returning to profitability, mostly driven by domestic travel in 1Q2022, Webjet ATO should have strong Q3 and Q4.

  • Profitability highly correlated to domestic border openings; lockdowns and border closures impacted 2Q22
  • Profitable as soon as key borders open; able to leverage highly scalable cost base and scale key costs in line with demand
  • Increase in 1H22 expenses over 1H21 relate to higher volume-based costs tied to TTV (ie transactions costs) during the period

✅ Structural Shift to online continue to accelerate;

✅ Unique “mix and match” offering;

✅ Strong focus on servicing high end market such as leisure;

✅ In March 2021, Webjet Limited made a 25% investment in LockTrip Holdings UK (LockTrip), with a further option to increase that to 51%. LockTrip provides a B2C hotel marketplace, underpinned by a blockchain economy powered by a utility token, LOC.

✅ Investing in international opportunities such as in November 2021, we agreed to acquire 100% of Canadian travel technology company Trip Ninja. Trip Ninja has developed several key products for traditional or online travel agencies to automate the highly manual process of selling complex international itineraries. Trip Ninja products will be integrated into Webjet OTA, starting with Fare Structure and Flextrip, to deliver customers the best priced itineraries for their complex, multi-stop itineraries.

WebBeds

Digital Provision of Hotel Rooms to Global Partners, is essentially B2B operation, the company is taking advantage of changing market dynamics with a lots of players out of the market due the Pandemic (competition has decreased), that brings great deal of diversity to the business.

  • Domestic markets are the first to open up
  • B2C channels are seeking greater access to B2B content
  • API connections are increasingly important as customers want easy access to significant content
  • Hotels need global reach in order to fill rooms

✅ Strong growth prospect;

✅ Less competition

✅ Lower TTV (8/3/5) = at scale 8% revenue/TTV and 3% costs/TTV to drive 5% EBITDA/TTV)

✅ Bookings and TTV increasing as markets start to open

✅ Business value continue to increase as more international markets open.

✅ Cost down 31% on comparable period pre-Covid – transformation initiatives delivering sustainable cost savings; on track to be 20% more cost efficient at scale as volumes return to pre-Covid levels.

✅ New organisational structure with Dedicated CEO for the WebBed business.

✅ 4 Commercial regions – Europe, MEA, Asia Pacific and now also Americas, with Umrah Holidays International focused on capturing religious tourism opportunities.

GoSee

GoSee is a Webjet subsidiary that suppliers of rental cars and motorhomes across the globe to secure great rates and pass the savings directly on to consumers.

The operation has started to see profitability, mostly driven by border openings and costs down 30% over pre-Covid levels, once again giving the company a sustainable competitive advantage.

1H22 Bookings and TTV improved as Australian/New Zealand borders opened in 1Q; lockdowns and closure of trans-Tasman bubble impacted 2Q; profitability driven by Australian and trans-Tasman border openings Motorhomes – continues to be impacted by lack of international tourism into New Zealand
✅ Cars – global shortage of hire cars impacting inventory in key markets
✅ Costs down 30% compared to pre-Covid levels
🚩 TTV margins expected to normalise around 9-10% as refunds start to wind back
✅ GoSee rebrand launched in October – aimed at transforming the business to deliver greater efficiencies, improved customer experience and target global growth opportunities

1H22 – Financial Summary

✅ 1H22 – Strong cash position offers significant flexibility in terms of liquidity and runway, as well ability to pursue attractive growth opportunities.

✅ Positive working capital delivering cash surplus $3.5 million/ month (FY21: $5.5 million/month average cash burn)

✅ Cash increased to $446 million after taking into account investment in LockTrip/DOTW earn out and FX gains

✅ Despite the fact we saw an YOY increase of 13%, it was mostly due to salary cost returning to 100%, as well as material increases in D&O insurance, however still 10% below pre covid levels.

Outlook for 2022 and Beyond

The company believes that should be back at pre-Covid booking volumes by 2H23

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