The business can be split in two main segments:

Webjet – Online travel agent & Webbeds – B2B Accommodation

The CEO has skin in the game owning 5% of webjet . 7 years ago webjet took a new direction to open up new markets outside Australia and NZ and started buying B2B accommodation companies all over the world

Webbeds is now the second largest B2B accommodation broker in the world with 4% of the $50 billion worldwide hotel market. Webbeds allows travel agents to book wholesale hotel rooms from all over the world. Currently the market is fragmented into thousands of small regional operators

Hidden away behind the Webjet name is Webbeds.

Webbeds has grown revenue from $114m (2018) to $185m (2019) to $130million in only six months of 2020 with an 80% increase in EBITDA.

Before the corona virus hit Webbeds were on track for a record year and to pass webjet as the main component of the business

Another hidden value in Webjet is their Rezchain product.

Webjet built their own cross platform travel booking verification system using block chain technology. The system allows different booking platforms to talk to each other allowing travel agents to book hotel rooms from all around the world in seconds.

Webjet’s Australian competitors Flight center and helloworld pay a third party to use a similar system called zeno from Serko current share price $4 ($15million in revenue, not profitable)

With Webbeds preforming so well in the past 12months there has been rumors in the financial press before Christmas of a potential takeover bid from the biggest European competitor Hotelbeds. Management downplayed it but didn’t deny. Then the fires and corona virus has put Webjet into a tailspin.

Webbed’s plan for continued growth is to continue the plan of strategic business purchases to grow market share. Webjet has had good success at buying companies and generating more profit with the implementation of their Rezchain technology. Success in Dubai, Spain, North America, UK (Jac Travel biggest purchase to date $265m) has strengthen the overall company and reduced exposure to one particular market in the world, when the Australian fires were out of control the Webjet share price dropped even though the majority of revenue is now outside of Australia these short sighted share price shocks can present buying opportunities for those who understand truly how global the company is.

Another recent hit to Webjet’s share price was in September 2019 when Thomas Cook went bankrupt (UK travel agent) Thomas Cook owed Webjet $44million, the Webjet share price went from highs of $16 down to $10. Yes losing $44million is not nice but the global company was experiencing growth of 133% in Russia, 150% in India, 50% in Japan, 23% in China and entering Korea and Indonesia. With the sell down overdone multiple Webjet directors including the CEO John Guscic bought more shares around the ten dollar price. The share price recovered quickly to $14. I like to see directors backing the direction of their company and putting their own money on the line.

The first half 2020 results released in the middle of the corona virus outbreak were actually fantastic, revenue up 24%, profit up 55%, Webbeds revenue up 80%, debt reduced to 30% of equity. The announcement also noted the significant impact of corona virus giving a guidance of a potential drop of 15% revenue.

I believe this was a mistake to quantify a number, as at the time of the announcement the virus had not spread to western countries. Since then raised positive tests are being found in Italy, Korea, Australia, USA and Japan to name a few. If the Olympics are cancelled in Japan scheduled for July 2020 webjet will need to announce further downgrades to earnings as the majority of global tourism will be put on hold. In an interview the CEO stated in February they have had zero sales in China where only a few months ago it was one of their fastest / largest growing markets.

The share price has not been so low since 2016 when the business was generating half as much revenue and profit. Webbeds was only a few years old with revenue of 30million and EBITDA of $3million compared to $130million revenue and $60 million EBITDA for the first 6 months of financial year 2020

There is still too much potential bad news to come in regards to corona and the general investor doesn’t fully understand the webbed business, the negative sentiment will weigh the share price down.

I will definitely be looking to buy Webjet in 2020 but it will be after a director or major shareholder purchase or the stock falls below $7.50 as the IT system Rezchain is worth that even if they never booked another flight again the low share price will also attract potential suitors for a take over like previously mentioned. If any further travel is restricted or further outbreaks occur in America, Australia or other markets vital to Webjet a further fall in share price is not unreasonable.