WEB - regained most shorted stock title
This is indeed interesting, as WEB has once again become the most shorted stock as at 2021-03-30 with a bit of an upturn in the total shares shorted graph.
What I find interesting though, is most analysts are still saying that WEB is their preferred travel play, I think it was today again mentioned on Ausbiz.
So I guess if you side with the analysts, the current decline in share price may be an inviting opportunity to buy.
WEB - being reviewed on today's Ausbiz The Call
WEB being reviewed today in detail as the main stock submitted, rather than as the alternative preferred holding.
Very interesting and positive outlook with respects to the advantage that Webjet will have over smaller competitors as the re-open trade
I recommend watching today's Ausbiz segment when it gets posted online later today.
WEB - Short Positions predictably continue to close out
As foreshadowed the graph shows the continued downward trend in Short Positions held over WEB shares.
As at the 15th of March though here was still 10.76% of the shares on issue shorted, which is 36.4 million shares
Again this week WEB was mentioned as the preffered travel stock on numerous occassions
WEB is still the 2nd most shorted stock on the market at the moment as shown here
WEB - Short Sellers and Share Price side by side
Taking a look at the patterns of Shorts v Price throughout 2020 and into 2021, it's fair IMO to assume that most of the short sellers are underwater by around 50% (refer to the attachment)
When you take a look at May through Oct 2020 when Short Positions were being acumulated from less than 5% up to the 17.5%, the short sellers at best got set at $4 / share.
Then in comparison the period of Aug 2020 through Feb 2021 when the short sellers stubbornly held their positions to a total above 15% shorted, the share price went up by $1 / share (25% loss to the early shorters)
Since Feb 2021 when it appears some of the short sellers said enough is enough and started to unwind and total shorts came below the 15% level, the share price has since gone to above $6 / share and those shorters still holding are now underwater $2 /share (or 50%)
There are still up to 40 million shares short sold and the avg daily traded volume of WEB shares as an eyeball estimate is say 4m shares per day.
10 trading days where 100% of trades are short sellers covering their losses for them all to close out ??? Unlikley, probably more like 30 days at best if they all take their medicine with a sense of urgency, but they cant really because the sell side is pretty thin in market depth with only 871K shares on offer.
Even if this is large funds insulating their holdings against further downward movments, what is playing out is that they are infact limiting fund gains by their hedge losses going against the share price gains at a 1 for 1 ratio.
Very interesting and maybe less about fundementals in the short term, by which time travel restrictions and international travel bubbles may have been put in place.
And all of this alongside nearly every panelist on Ausbiz saying that WEB is the preferred travel holding at the moment (I beleive even this week's The Call during the FLT review that sentiment was again yet aired)
WEB - Price Action above $6, Short Sellers still holding open positions
With the price action now nudging $6.20 and the Short Selling data showing there were still 40 million shorted shares as of the 4th of March (the latest available data here)
The total traded volume since the 5th of March being 15 million shares plus today's trade of currently 3.5 million shares, there is AT LEAST still 20 million shorted shares out there if you use the very unrealistic assumption that every share transacted since the 5th of March was a short seller closing their position.
There is a very good case for WEB to run higher and be supported by the nervous short sellers needing to close out.
The trend of the Short Positions graphs is showing the inverse of the WEB share price itself, so I'm concluding that the shorts have been chipping away at closing out, but when will they decide to run for the exit ??
All of this is just my opinion, so DYOR
Next s/r to pass is 5.6
Then 10 ish
Nothing in cal can seem to perturb bullish sentiment
But vol is needed for sp to keep going up
WEB - Price Action and Short sellers
24th Feb 2021
some interesting insight this morning on Ausbiz by Mathan Somasundaram from Deep Data Analytics on the WEB share price and the large amount of short positions.
The basic message being that with so many short positions, when the time comes that the Shorters are feeling pressured it will take months to close those out in amongst avg daily trade.
Basically WEB just have to come out and match their performance numbers (or better) and in the absence of negative sentiment it should see the price continuing to drift up.
So I guess if you take a positive view on the re-configured WEB operations being ready to pounce when things start to ramp back up, there's this angle to the share price support too.
Of course if the shorters all rush tto the market at once, we'll see a single day price run like BUB experienced recently and the data showed that to be a close out situation.
WEB - Price Action trying to nudge past the $5.20 resistance
I guess the positive feel with the commencement of the COVID vaccines rolling out is transferring into WEB's price of late
Webjet has unsurprisingly delivered some nasty results, reporting a 90% plunge in revenue for the first half due to ongoing travel restrictions.
Despite a 52% reduction on costs, this resulted in first half EBITDA dropping from $87m in H1 2020 to -$40m this half.
It's not all bad news though.
The domestic online travel agency business has returned to profitability and has also taken market share as other competitors have hit the wall. Average monthly booking here are now at about 40% of pre-covid levels, doubling between Oct and Dec 2020.
WebBeds and Online Republic are showing small improvements, but remain well below pre-covid levels (at 12% and 25%, respectively).
Fortunately, the business is very well capitalised, and is managing cash flows well. Webjet is reporting a monthly cash burn of $4.8m against $283m in cash at the bank. The group's bank waivers have been further extended through to March 2022.
Webjet has also been busy improving cost efficencies, something that they think will be 20% improved at scale.
With vaccine rollouts now well underway the future is a little more certain. And it's encouraging to see lots of pent-up travel demand.
I think it will likely be at least until 2023 before the travel market is completely back to normal (barring any unexpected surprises). But at that time Webject will find itself a much leaner business with less competition.
Shares are probably attractive for those with the patience to look beyond the current difficulties.
this is just a copy and paste from a valuation I posted on HotCopper for WEBJET. There are images on there that I wasn't able to paste here. Here's a link to my post: https://hotcopper.com.au/threads/webjet-4-party.5514945/?post_id=46222359
just as a disclaimer - I am no financial genius whatsoever.
I just used the 2019 FY numbers and shrunk them down based on expected revenue volume due to COVID travel restrictions. I made a target of normality in year 2024 which brings numbers back to where they are now. Obviously I don't have a crystal ball so DYOR and take this with a grain of salt.
The numbers from 2020-2024 are just ratios which I double checked with previous historical data which you can check out here: https://finbox.com/ASX:WEB/financials/income/statement
I forecasted these numbers to get an EPS value of 0.20 in 2024.
I then grew out the EPS by the historical average of 30% starting from 2024 which got me an EPS of 0.95 by year 2030 (10 years out from now). I do not know what will happen to the travel climate 10 years from now but 30% is a good start.
Then I just multiplied the Future EPS of 0.95 by the industry standard PE of 15 and got a future SP of $14. I then worked that back expecting a 15% CAGR of 15% to arrive at a current valuation of $3.50.
OBVIOUSLY this is not advice to tell you to buy or sell.
Even if I apply the current PE of 8 (as Webjet potentially has taken a massive earnings hit) I will arrive at a sticker price of circa $2.10.
oh and if I took the average of a 15 & 8 PE.. say 12 on the furture EPS of 0.95, I got a discounted current fair value of around $2.80.. Not bad for a rough calc.
DYOR. I have done mine plus more.
I am long term investor and believe in the capabilities of the webjet management and product proposition. Your investment time horizon may be different from mine so I don't mind if you chuck shade at me. Otherwise GLTAH.
01-July-2020: Another capital raising announced by WEB today: WEBJET ANNOUNCES EURO 100 MILLION CONVERTIBLE NOTES OFFERING
And the SP went up +7.5% on the back of that. FLT (Flight Centre) also announced today they were accepting assistance via a loan from the Bank of England under the UK's COVID-19 support arrangements for business, and FLT were also up today (+3.15%). Further strengthening of company balance sheets is generally seen as a positive in this new environment.
Thinking the consensus valuation/market valuation is maybe a bit high for this one, with the stock currently trading at a PE of roughly twice what it normally has historically. Valuations might not be taking into account the recent capital raise and issue of new shares?
Thoughts are that the business outlook for international sector is probably a long way from returning to anything near normal, however not sure of what proportion of WEB's business is in the international market. Regardless, thinking the PE being traded at (56), should be less than historical levels (20-30 from memory), rather than almost double.
NB; PE numbers taken straight from commsec app
Any one else scratching their head on WEB and other travel valuations at the moment post capital raises? Hitting pre-covid levels in terms of market cap is mind boggling given the uncertainty.
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
Or for Webjet:
0.12 = AU$106m ÷ (AU$1.4b – AU$551m) (Based on the trailing twelve months to December 2019.)
Therefore, Webjet has an ROCE of 12%.
21-Apr-2020: Impact of Virgin Airways Administration
Webjet Limited (Webjet) notes the announcement today by Virgin Australia Holdings Limited (Virgin) that it has appointed a voluntary administrator. Webjet has enjoyed a strong long-term relationship with Virgin and sees it occupying a vital position within the ongoing Australasian travel landscape.
Notwithstanding its relationship, Webjet does not have a material financial exposure to Virgin should an administrator restructure the airline or elect to cease trading. Webjet books airfares on behalf of its customers as agent and is not the provider of the service. Webjet is working closely with its customers and on their behalf to process refunds/credits directly with all airlines who are no longer able to honour prepaid tickets, including Virgin.
While the travel industry will be impacted by Covid-19 for some time, Webjet considers that it will emerge with a strong competitive position given the diversity of geographic markets in which it operates, its diverse product offers and its capital position following the recent capital raise.
01-Apr-2020: Webjet (WEB) have released a number of announcements this afternoon with the main 3 being:
So, the dividend has been deferred for 6 months until October 15, they are raising $275m at $1.70/share, a LONG way below the $3.76 they last traded at before the trading halt and suspension, and a very long way below the $13.72 they closed at on Feb 19th (around 6 weeks ago).
The headline details of the capital raising are that they are undertaking an institutional placement and an accelerated pro-rata, non-renounceable (1 for 1) entitlement offer to raise a minimum of $275 million via:
As correctly suggested by @AUROPAL (see Webjet forum), the delay appears to have centred around the underwriting of the retail component of the raising, which has ended up only being partially underwritten. In other words, the first $101m (the institutional placement) is locked in, but whether they raise the full remaining $174m (of the $275m) is very much up to ordinary retail investors and how much more money they want to pour into WEB - at a price (of $1.70) that is 87.6% below their Feb high of $13.72.
Macquarie Bank (MQG) became substantial holders of WEB shares during the trading suspension, suggesting they were involved in organising this raising for WEB. Macquarie also organised the "rescue raising" for RCR last year, also at a huge discount to their last traded price, and of course that didn't stop RCR from going into Administration shortly afterwards anyway - with investors that had hung in there until the end losing 100% of their money. Not sure how much exposure Macquarie managed to retain through to when RCR management called in the Administrators (before their lenders did), but I would image MQG had managed to offload their shares before then. It will be interesting to see what Macquarie do with their WEB shares now. If they retain them, that's likely a positive. If they quickly sell them after the capital raising has been completed, I would see that as a negative. Because they are substantial holders, any sells of 1% or more must be reported via an announcement to WEB which the ASX will publish.
The 1:1 (1 for 1) entitlement offer means that current WEB shareholders (that were on the books before they went into the trading halt and suspension) will be entitled to buy one WEB share (at $1.70) for every one WEB share they already own. Considering that WEB have announced that they are prepared to extend the retail component by an additional $57m from the proposed $174m up to a max of $231m - which seems a little optimistic to me - I would think it HIGHLY likely that existing shareholders will ALSO be given the opportunity to apply for additional shares (at the same $1.70 price) that would be from the pool of shares not taken up by other shareholders as part of the entitlement offer.
I guess the main questions shareholders need to ask are:
I don't hold any WEB shares, so I won't be spending too much time on those questions myself, but considering I did hold shares in RCR when something very similar happened to them, I would be thinking carefully about the answers to those questions if I did hold WEB shares.
20-Mar-2020: WEB are still suspended from trading, pending the details of their capital raising, which Marcus Padley in his daily newsletter is calling a "rescue raising". Today, we learn that UBS has now become owners of 5.78% of WEB (on Tues March 17) and it appears that the vast majority of their position is for the purposes of "Securities Lending Agreements", which usually means they're providing stock to shorters. Appendices A, A1 & B have all of the details. Apart from the Prime Brokerage Agreement with TIGA (Thorney Investment Group Australia), there are Securities Lending Agreements with 9 different entities. And I would imagine that UBS weren't the only ones getting set to capitalise on such an opportunity - in terms of shorting stocks like WEB. If the shorters are wrong, it could be a great buying opportunity, but so far they've been right. You can read today's announcement here.
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.
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%
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
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
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.
Webjet has delivered a very impressive result, and the market has reacted accordingly.
Revenue rose 33% to $175m and NPAT up 61% to over $38m. On a per share basis, profit was up 48%.
Total Transaction volumes grew 29% and the oprating margin was over 2% stronger.
Recent acquisitions certainly helped a lot, but even if you exclude these organic revenue growth was over 20%.
It was WebBeds (the groups B2B segment) that did the heavy lifting and is the world's second largest player in this space and accounts for over half of Webjets operating profit.
It is this area that holds the biggest potential for furthert growth. Indeed, the traditional Customer facing business saw a decline in profit, no doubt a further signal of domestic economic weakness. That's to be expected for a cyclical operation, and I don't read that as anything structural.
Personally, I find it difficult to wrap my head around the accounts -- there's a lot of moving parts and past acquisitions muddy the waters. But it's hard to argue with the top line performance.
Although I don't own, and havent recommended on Strawman, it's great to see the community rank this highly and am glad it's in the Strawman index.
You can find some great coverage over at Ethical Equities here
ASX announcement is here