Online travel agent Webjet (ASX:WEB) has long claimed that technology is what underpins its success. Established in 1998, it developed the world’s first travel services aggregator, was quick off the mark in producing an iOS app app, and was an early adopter of cloud technology.
That relentless drive to improve customer experience and drive efficiencies has seen Webjet grow to be the largest online travel agent in the country and its WebBeds B2B hotel business (launched less than 6 years ago and now the largest division) is the 2nd largest of its kind globally.
With around $4b in total transaction value (TTV) booked each year, and growing strongly, Webjet has delivered a total return to shareholders of over 1500% in the past 10 years.
The latest development has been to use blockchain technology to streamline transactions between travel providers. Called Rezchain, it is the first roll-out of blockchain technology for the travel industry and seeks to improve transparency and minimise error between travel partners and hotel suppliers. Although development first commenced back in 2016, the latest version is now implemented across all the WebBeds platforms and is key to the company’s goal of increasing operating margins to 4% of TTV by FY2022.
In a presentation to the Ord Minnett investor session today, Webjet also highlighted its in-house payment card industry (PCI) compliance solution, Rezpayments. Unable to find an adequate 3rd party solution to the problem of payment rules compliance, Webjet went ahead and built its own.
Not only is it already delivering efficiencies for Webjet, but the company believes its technology has broader applications and has already secured two external customers.
Is Webjet a Buy?
Shares in Webjet have climbed around 39% so far in 2019, although remain below their record high set in August last year. The reality is, shares are rather volatile; Webjet stock lost over 40% between August and December last year, before climbing by around 50% through to today.
The business, though, has been a much more steady performer. Revenue and operating profit (EBITDA) have increased at a relatively steady and solid clip in the past decade, aided by a number of acquisitions. At the most recent half, sales were 33% higher while EBITDA grew 42%.
For the full year, Webjet today reiterated guidance for $120 million in EBITDA; a 37%-odd lift from FY2018.
According to analysts consensus estimates, Webjet is trading on a Price to earnings ratio of approximately 24 times FY19 profit. Given the pace of growth, that’s far from excessive although investors would do well to remember that Webjet is a highly cyclically exposed business. Any material downturn in travel demand would be keenly felt, although the global diversity of the business does afford some comfort.
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