Webjet Limited (ASX: WEB) is Australia's leading online travel agency, offering flight and accommodation packages to both business (B2B) and retail consumers (B2C). After a record-breaking half-year result, we take a closer look at the company's performance to see if the share price could still be a buy.
Webjet's half-year report
The Webjet share price has soared after announcing its performance for the first half of FY19 back in February. The company reported a total transaction value (TTV) of $1.9 billion, accompanied by a 42% increase in earnings before interest, taxes, depreciation, and amortisation (EBITDA) to $58 million, and a 61% increase in net profit after tax (NPAT) to $38.3 million (before acquisition amortisation expenses).
Webjet's Managing Director John Guscic commented that the company's "increased global size and scale" were due to significant contributions from their recent acquisitions. In November last year, it raised more than $150 million from shareholders to acquire Destinations of the World (DOTW), a Dubai-based independent B2B platform. It's no doubt that the success of this acquisition has driven much of Webjet's growth in FY19, with firm forecasts for EBITDA of at least $120 million for FY19 (a 37% increase on FY18).
The outlook for Webjet
Perhaps the most prominent driver of Webjet's recent success is its B2B platform WebBeds. By providing accommodation, Webjet has leveraged its existing technology and infrastructure to deliver better packaged deals to its customers. This half has seen a 50% increase in bookings, and a 136% increase in EBITDA to $30.1 million. According to management, this only represents the beginning. Along with organic growth in the WebBeds business, the company expects its DOTW acquisition to earn an additional $40 million EBITDA through cost synergies, as well as providing access to growth opportunities in the Asia-Pacific region. If the company can achieve its "8/4/4" target (with revenue, costs, and EBITDA making up 8%, 4%, and 4% of TTV, respectively) while continuing to grow its bookings, then Webjet's current price-to-earnings ratio of 21 presents fantastic value.
Should you invest?
It's important that investors consider the volatile nature of the travel industry; Webjet's cash flows are likely to be impacted by global market conditions and economic cycles. For many years, Australians have enjoyed a higher currency to boost their purchasing power overseas. However, with the Reserve Bank of Australia's recent decision to cut rates to a record low of 1%, the impact of a weakening Australian dollar may present currency headwinds that hamper Webjet's travel business. It appears more investors are becoming more conscious of this risk, with the shares shedding almost 20% since their May highs.
Nevertheless, with a diversified income stream and a growing number of online bookings, Webjet Limited presents a high-growth opportunity for risk-tolerant investors.
