Webjet Limited (WEB.ASX) Summary

Brief info on company:

• 62% earnings generated from Webjet Online Travel Agency, 7% from Online Republic (cars and motorhome rental) and 31% from WebBeds (B2B accommodation supplier)

Market expectation for FY20 results:

Overall markets are expecting revenue to drop by 21%, earnings (NPAT) to decline by 81%, EPS to drop by 90% and DPS to decrease by 73%.

Key Recent Events:

Last month, it raised money through convertible notes (A$163 mil), strengthening its balance sheet and preparing it for any M&A opportunities.

Outlook:

WEB will continue to face earnings pressure in the near to mid-term. Recently, the Australian government has taken up a stricter position in dealing with the COVID outbreak, partially following New Zealand’s harsh measures (as seen last week when the country went into lockdown after having only a few new cases). However, we expect travel agency companies to fare better than airlines due to substantially lower expenses (physical airplanes and oil expenses). In the travel services space, WEB is positioned well for this season as well as post-COVID with its strong balance sheet post raising capital twice this year. Smaller players in the industry with less capabilities to obtain funds might drop off, leaving WEB to take a larger market share post-COVID.