Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
WebJet returns to profit and shoots for the stars
“Guess who’s back? Travel’s back, baby,” says the MD of Webjet, John Guscic.
And travel is back, borders are open, and people are travelling overseas. The online flight booking company is cash-flow positive and in a much better position than it was six months ago. According to brokers, this week’s FY22 result was an improvement however divisional performances missed expectations and costs were a little higher than expected. As a result, the WEB price dropped on Thursday but looking the medium-long term picture is still intact. Here are the details:
- Reported revenue growth of 258% to $138 million. Goldman Sachs expected $143.6 million. Miss.
- EBITDA loss of $15 million. Goldman Sachs expected EBITDA of $1.5 million. Miss.
- Operating cash flow of $71.5 million was ahead of Goldman’s estimate of $43.4 million. Consensus estimates were for $28.3 million. Beat.
- Total transaction value (TTV) up 261% to $1,638 million.
- Statutory net loss of $85.4 million (underlying loss of $38.4 million)
- Returned to profit during the second half
Webjet returned to profit in 2H22, with the company now cash flow positive and profitable throughout the year. Booking volumes for hotel rooms were above pre-pandemic levels which is a big improvement and gives Webjet a new avenue of growth going forward. Despite being unable to provide guidance for the year ahead, all indicators are pointing towards a full recovery to pre-Covid levels.
According to the company, “FY22 saw the business turn around, delivering a profitable 2H22 driven by WebBeds and Webjet OTA. As revenues start to return, costs are materially lower than they were pre-pandemic, reflecting the significant efficiencies coming through, particularly in the WebBeds business. TTV and Revenue were up materially compared to the 12 months to 31 March 2021 (up 262% and 466% respectively) while Expenses were only up 7%. FY22 Underlying EBITDA loss of $15 million reflected a $103 million improvement compared to the 12 months to 31 March 2021.”
Outlook – The company said “Based on current bookings trajectory the Group remains on track to be back at pre-pandemic bookings volumes by 2H23 – October 2022 to March 2023. We believe there are significant growth opportunities in all our businesses and are excited for what the future holds.”
“While Webjet has significant cash reserves, we continue to watch cash, cash flow and debtor risk very closely. We are starting to see strong cash inflows as major travel markets open again, and the Company is back to being cash flow positive. We paid the deferred FY20 interim dividend during the year however given the inherent uncertainty that still remains, we have not declared a dividend for FY22.”
All in all, two misses and a beat. On paper, not the greatest of results. But look past it. The travel market bore the brunt of the pandemic and was the hardest hit. Just being able to survive and remain cash flow positive is a big deal. There’s a sense of confidence at Webjet that the worst is over. Management is starting to see growth in the North American business beyond current levels. Goldman’s has a Buy recommendation with a target price of $6.90, implying a potential upside of 23%. Morgans have an Add recommendation with a target price of $6.55. Ord Minnett has a Buy recommendation with a target price of $7.51 that’s 27.94% upside. Brokers seem overly optimistic on Webjet.
Ord Minnett in an initial response remains positive despite Webjet missing expectations. The broker says, “Investors looking for exposure to business travel with leverage to leisure recovery in the Northern hemisphere should definitely consider Webjet. Ord Minnett picks up management at the company sees strong signs of demand for travel, as well as that Webjet has just experienced its most profitable month since the outbreak of the covid pandemic.”
