So, taken straight from the FY19 annual report "Webbeds has now become Webjet’s largest business, accounting for approximately 56% ($2,154 million) of Group TTV, 50% ($184.5 million) of Group revenue and 48% ($67.3 million) of Group EBITDA (before corporate costs)."
So B2B and B2C account for 48% and 52% respectively of earnings and therefore EPS.
As seen above, WEB inflow of cash is quite diversified between the two major segments and I believe Google Travel will not affect much of Webjet's margins. as a large amopunt of their traffic is organic reach, direct search or PPC. The most google can take is 8%, a large number but this is an absolute best case scenario for Google Travel.
WEB doesn't exactly have a competitive advantage, this may be one reason why the sell off was warranted, nor a strong moat. But i believe its strong brand name, ease of use and the full function booking from flight to hotel to car hire is great. However, Webjet is carving something unseen in the travel industry through RezChain, which is a cross platform travel booking verification platform, this could lead to a wide economic moat and is something i may look into at a later date.
Not much to say about management, all round great. WEB’s senior management has a mix of backgrounds, with a core group of directors and managers having been with the company for several years. In the early 2000’s this group pursued the development of an integrated booking platform to streamline its website activities Since then they have expanded Webjets services into complimentary fields that can be managed via their existing website. Webjet’s ROE over the last several years attests to the success of these decisions and management’s ability to provide good returns on investor capital. Internal ownership is substantial, with over 12% of outstanding shares owned by the directors and senior managers alone. Bonuses are typically 20% or less of total remuneration across the management group - taken from. https://www.macrobusiness.com.au/2011/09/equities-spotlight-webjet-web/
With that out the way lets get into the technicals.
Using the discounted cash flow analysis for the Webbeds segments alone which accounts for 48% of EPS. stockopedia.com estimates 28.4% TTM growth rate and a long term growth rate of 12.2%
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B2B EPS = 63.3 * 48% = 0.30384
- B2B EPS = 0.30384
- Expected EPS growth: 12% annually
- Earnings projected forward at 5 years
- Leveled off at the industry average 6% there after
- 11% discount rate
Potential SP: $8.19 for the Webbeds segment alone (INSANE) at 12% growth
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B2C EPS = 63.3 * 52% = 0.3029
- B2C EPS = 0.33
- Expected EPS growth: 12% annually
- Earnings projected forward at 5 years
- Leveled off at the industry average 6% there after
- 11% discount rate
Potential SP: $9.01 for the B2C segment. TOTAL = $9.01 + $8.19 = $17.2
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So, there you have it, a discounted value of $17.2 is where I put Webjet, and that is only factoring a 12% growth value, i do believe, growth will continue in the medium to long term but in the short term WEB will suffer with the Corona Virus media storm. I see continued downside for the remainder of the month of February depending on their half yearly. Once corona virus vaccines hits the shelfs its business as usual.
WEB has great long term outlook, with a narrow to potentially wide moat, and a strong brand name and diversification. In addition, it is the number #2 B2B travel online platform and a global presence is only ever a positive. The recent sell off is not unwarranted however oversold, WEB is a good long term investment and an actual steal under $11, not to mention the 1.9% dividend. Also, do take into consideration WEB has multiple bidders interested at taking the company private.
