Forum Topics WEB WEB Webjet Ltd General Discussion
thunderhead
Added 5 years ago

Is the Strawman (or anyone who knows the company well) concerned about the solvency risk, either of Webjet and/or their main trade debtors? We have already seen Thomas Cook go under, and the impact that had on the company's earnings. The shares look mighty cheap but only if the company can tide through the COVID-19 crisis without falling over. Even if they raise capital, it is likely to be hugely dilutionary.

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Bear77
Added 5 years ago

I don't know the company well, but I had a look at them this morning. I wouldn't touch them at this point. They do have some net debt, but not as much as FLT do now. The trouble with lending covenants is that most companies won't generally disclose them to the public, so we usually only hear about them after they've been breached. I know that they do vary a lot. Some even stipulate minimum market capitalisation, which really means that if the share price falls below a certain level they can breach that particular lending covenant. I hope most companies don't have one of those covenants. Most of them do centre around revenue and earnings levels, and that can be a big worry when earnings are going to be hit as much as they are with companies in this particular sector - even if it does turn out to be a short-term hit. Companies with higher overheads such as FLT - with their bricks-and-mortar stores as well as their web presence - are likely to see earnings hit harder - because of higher fixed costs - but WEB will still be hit. They might be hit less, due to lower fixed costs, but they'll still be hit. And we don't know by how much yet, and nor do they, which is why they've withdrawn their earnings guidance. In this environment - with lending covenants largely unknown (by us at least), it pays to tread very carefully with smalls and mid-caps that have net debt and are going to see earnings hit significantly. In my opinion.

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AUROPAL
Added 5 years ago

Excellent straw InvestorRN, really comprehensive and shows a thorough understanding of the business. A valuable contribution and much appreciated.

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thunderhead
Added 5 years ago

Yes, neat straw. I sold out at $12 because the negative impacts of COVID-19 were quite obvious to me. I am still interested in owning the stock again, especially because it appears to be "in play" and could get an opportunistic bid.

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