Webjet split could create $2bn of upside, analysts say

Shareholders will vote on a split of Webjet next month. Picture: Supplied.

Analysts have started crunching the numbers on the possible value of the $3.3bn online travel company Webjet following its demerger and they believe the split could add up to $2bn to its overall value.

Webjet’s demerger is set to be approved at an extraordinary general meeting on September 17 before shares of the two entities are due to trade on September 23.

Analyst research published by Ord Minnett suggests that the business-to-business unit WebBeds, to be called Webjet Travel, would likely trade at a range of 15 to 25 times its earnings before interest, tax, depreciation and amortisation on a valuation basis including debt, otherwise known as its enterprise value.

Assuming annual EBITDA of $175m and net cash of $303m, the valuation ranges from $7.49 to $11.96 per share, in their opinion.

With 391 million shares on issue once split, and $60m of Australian and EUR25m of available debt, the group could have a value range of between about $2.9bn and $4.7bn.

The business to consumer unit is one that the analysts describe as “a gem that needs a polish”.

They said that the market took the view that it did not have the same growth opportunities and was the “black sheep” of the group.

The analysts believe the unit would have a share price value of $1.04 to $1.50. This is based on annual EBITDA of $45m and net cash of $91m.

Webjet’s consumer business, to remain with the name Webjet, will have 392 million shares on issue with $70m of available debt once split, and based on the analyst numbers, its market value could be between $408m and $588m.

Analysts believe that the market’s view of the business have been overplayed.

Working on the demerger has been investment bank Goldman Sachs, designed to create upside to the company’s overall value.

Some believe that the transaction not only unlocks share price value, but enables suitors to come forward for the remaining business to consumer assets.

It could also be a defensive play to fend off suitors that may have been circling with plans to buy the business and break it up.

Private equity firms, including Kohlberg Kravis Roberts and Bain Capital, have looked at the business over time.

WebBeds is described as a global business to business travel distribution operation with a disruptive business model, a large addressable market and opportunities to enhance scale globally and with technology targeting new customers, travel suppliers and markets.

It has a comprehensive range of hotels it sells for, ranging from about 40,000 to 80,000 globally, and among its customers are groups like Flight Centre.