Web Travel ‘can become a high-growth, pure-play B2B company following Webjet demerger’

Market watchers say Web Travel Group can become a high growth operation which is well placed to outperform its competitors.

Web Travel Group will become a high-growth, pure-play, global business to business (B2B) marketplace for hotels through its ownership of WebBeds, following its demerger from Webjet, brokers say.

The old Webjet entity traded under its new brand, Web Travel, on Monday after shareholders voted last week to split the ­company.

Web Travel controls WebBeds and B2B travel distribution assets, while the newly created Webjet oversees consumer products including Webjet OTA, GoSee and Trip Ninja.

RBC Capital Markets analyst Wei-Weng Chen reaffirmed the company’s outperform recommendation, saying Web ­Travel had a record of growing market share in the global hotel wholesale market and was more diverse, having expanded rapidly outside its European stronghold.

“The company has a demonstrated track record of growing ahead of the broader global hotel wholesale market,” she said.

“Web Travel will become a high-growth, pure-play, global B2B marketplace for hotels through its ownership of WebBeds.

“The marketplace connects over 500,000 hotels in more than 190 countries to over 50,000 buyers through API connectivity or trade-only booking websites.”

Webjet chief executive John Guscic.

WebBeds has faced challenging conditions this financial year following poor European trading in June and July after the collapse of FTI Group, which resulted in about $2bn worth of hotel inventory distorting the market and affecting margins.

It now expects $5bn in total transaction value (TTV) for the financial year, which is less than the consensus forecast of $5.1bn.  Ms Chen said that the removal of Webjet’s business to consumer assets and the addition of incremental stand-alone entity costs had reduced its 12-month price target from $10 to $8.50.

“Web Travel trades on a higher multiple relative to AU travel names.

“However, we believe this is justified by higher EBITDA growth expectations,” she said.

Macquarie has retained a neutral rating and a post-merger target price of $7.63.

It forecasted continued revenue margin pressure, with margins of 7.2 per cent likely in the 2025 fiscal year compared to 8.2 per cent in the previous year. It noted that the volume growth profile was attractive.

However, despite expected scale benefits, Web Travel was expected to have broadly flat underlying earnings before interest, taxes, depreciation, and amortisation margins of 50 per cent.

Web Travel houses the WebBeds business, which is a marketplace for hotels.

“Revenue margin contractions will be driven by Web Travel targeting volume growth in lower-margin regions, continued investments by hotels into direct channels … and the rise of exclusive contracts,” the broker said.

“We value Web Travel on an unchanged next 12 months underlying EBITDA multiple of 15.5 times.”

Web Travel has 391 million shares on issue after the split, and $60m of Australian available debt, with a market capitalisation post merger of $2.79bn.