Webjet Group Limited (ASX: WJL) is a leading digital consumer travel business comprising two key businesses and a technology company. The company recently completed a demerger from WEB Travel Group (formerly Webjet Limited) on September 30, 2024, positioning itself as a standalone entity focused on the B2C travel market.
Webjet Group’s growth is underpinned by strategic focus on revenue optimization initiatives and increasing international flight bookings, offsetting subdued domestic travel demand in Australia.
A key secular tailwind for Webjet Group is the gradual recovery in international travel bookings and the strategic shift toward higher-margin products and ancillaries. The company’s technology enhancements, particularly through Trip Ninja, are enabling more complex international itineraries and driving greater revenue per booking above pre-pandemic levels.
The stock has recently commenced trading on the ASX following the demerger, with projected index inclusion in the S&P/ASX 300. The company’s low valuation makes it a strong growth pick for investors.
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About Webjet Group
Webjet Group Limited (ASX: WJL) operates three distinct businesses that collectively serve the digital consumer travel market. Webjet OTA is Australia and New Zealand’s leading online travel agency, enabling customers to compare, combine and book domestic and international flights, accommodation, holiday packages, and ancillary products. GoSee is a global travel e-commerce specialist in car and motorhome rentals operating through the Airport Rentals and Motorhome Republic websites.
Following its demerger, Webjet Group has established a strong balance sheet with net cash of approximately A$100.7 million as of September 30, 2024, and no drawn debt. The company also has access to a three-year A$20 million revolving credit facility. Webjet Group does not expect to declare dividends for FY25 but anticipates paying dividends from FY26 onward.
At time of writing, Webjet is trading at a market capitalization of A$1.73 billion.
Source – Webjet 1H25 Presentation
Market Position And Business Model Are Strengths
Webjet (ASX: WJL) B2C boasts several key strengths that position it as a leader in the digital travel industry. At the forefront is Webjet OTA’s market leadership, commanding a 44% share of the OTA flight bookings market in Australia and New Zealand for FY24.
This dominant position affords Webjet OTA significant scale advantages and brand recognition. The company’s success is built on a foundation of technological innovation, with a history of groundbreaking developments such as one of the world’s first Travel Services Aggregation technologies in 2004 and an industry-first domestic flight matrix presentation.
Source – Webjet 1H25 Presentation
More recently, the integration of Trip Ninja technology in 2022 has yielded impressive results, improving revenue per search by 125% for complex multi-city itineraries.
Webjet OTA’s revenue optimization capabilities are another cornerstone of its success. By leveraging advanced technology and data analytics, the company excels in sophisticated upselling and cross-selling of ancillary services, while also utilizing personalization and targeting capabilities to enhance customer experiences.
These strategies have contributed to Webjet OTA’s industry-leading profitability, with FY24 EBITDA margins reaching an impressive 44.7%.
The company’s strong brand and extensive customer reach, connecting with over 5.5 million customers monthly across various channels, provide a solid foundation for customer acquisition and retention.
Furthermore, Webjet OTA’s highly scalable business model, characterized by a variable cost base, allows for effective cost management through demand fluctuations while maintaining strong and consistent cash flow.
By capitalizing on these core strengths, Webjet B2C is well-equipped to pursue growth opportunities and maintain its leadership position in the dynamic digital travel landscape.
The Webjet OTA business continues to demonstrate remarkable resilience with EBITDA growth of 3% in 1H25 despite challenging domestic market conditions, maintaining impressive EBITDA margins above 44%.
This performance highlights the company’s successful execution of revenue optimization strategies, particularly the shift toward higher-margin products and new revenue sources.
Ancillaries now account for 35% of revenue (up from 32% in 1H24), while international bookings have grown to 20% of flight bookings (up from 17% in 1H24). The company’s strategic focus on member-only offers and enhanced first-party data capabilities is also yielding positive results, with significant increases in daily sign-up and sign-in rates during promotional campaigns.
Trip Ninja’s proprietary technology represents another significant competitive advantage, providing Webjet with capabilities to optimize conversion rates and margins on complex international itineraries.
Source – Webjet 1H25 Presentation
This technology is applied across all multi-stop trip searches within Webjet OTA and is also being marketed to other travel intermediaries, creating an additional revenue stream.
The integration of this technology has contributed to the company’s ability to drive revenue per booking above pre-pandemic levels despite the loss of certain commission and override revenue sources.
GoSee And Increased Regulatory Costs Post Demerger Are Weaknesses
However, Webjet Group (ASX: WJL) faces notable challenges, particularly within its GoSee business. GoSee has experienced a 10% decline in bookings and an 82% reduction in EBITDA during 1H25, reflecting the softening domestic flights market and continued pressure on the motorhome segment.
The motorhome business remains impacted by the lack of inbound long-haul tourism and persistently high pricing, with costs remaining more than 60% higher than pre-pandemic levels.
To address these challenges, management has initiated a strategic restructuring program aimed at delivering approximately A$4.0 million in annualized OPEX savings, with approximately A$1.0 million expected in 2H25.
This restructuring includes simplifying the service offering, automating manual processes, reducing headcount, and consolidating the online investment in the more established Airport Rentals and Motorhome Republic brands.
The recently completed demerger from WEB Travel Group also introduces additional corporate and operating costs estimated at approximately A$2.6 million per annum. These include ASX listing fees, share registry costs, and expenses associated with maintaining a separate board and executive team.
While these costs represent a negative in the short term, they give Webjet Group greater strategic freedom to pursue initiatives that may not have been prioritized before the demerger.
International Flights And Loyalty Programs Are Opportunities
Looking ahead, Webjet Group (ASX: WJL) has significant growth opportunities through its focus on increasing international flight bookings. Management sees substantial potential as international flight prices begin to fall, “early bird” fares return, and additional capacity enters the market, all stimulating demand.
The Webjet Member Program is expected to drive further international bookings, while the continued roll-out of New Distribution Capability (NDC) for international airlines provides differentiated content and pricing advantages.
Source – Webjet 1H25 Presentation
The company is also prioritizing the enhancement of first-party data capabilities to enable greater segmentation and personalization, which should support more targeted marketing efforts and higher conversion rates.
Member-only campaigns represent another promising growth avenue, with five such offers launched since September 2024 generating significant engagement. Various member-only campaigns are planned for 2H25, including Black Friday and Boxing Day promotions, which should continue to drive member acquisition and engagement.
The implementation of social sign-on functionality in Australia and New Zealand further streamlines the user experience while creating greater re-targeting capabilities.
Competitive Sector Dynamic And Macro Environment Are Threats
Despite these opportunities, Webjet Group (ASX: WJL) faces several external threats. The company operates in a highly competitive travel market with numerous direct and indirect competitors, including established and emerging online travel platforms.
Economic pressures continue to impact consumer discretionary spending, particularly in the domestic travel market, as evidenced by the 10% decline in domestic bookings in 1H25.
The collapse of the leisure airline REX in 1H25, which accounted for 5% of Australian domestic capacity as of June 2024, further illustrates the challenging market conditions. Cybersecurity and data privacy concerns also pose ongoing risks, particularly given the company’s extensive collection and processing of customer personal and payment information.
The loss of diversification benefits previously provided by the WebBeds business may also increase exposure to fluctuations in the consumer travel segment.
Webjet Financials
Webjet Group Limited (ASX: WJL) has demonstrated resilience and growth since its demerger from WEB Travel Group on September 30, 2024.
Source – Webjet 1H25 Presentation
In the first half of FY25, the company reported total revenue of A$72 million, an 8% increase from the previous corresponding period. EBITDA saw a significant rise of 32% to A$16.2 million, reflecting improved operational efficiency. However, net profit remained stable at A$6.6 million. Excluding share based comp and some non-recurring expenses, NPAT increases to A$9.2 million.
The company faced some challenges, with bookings down 8% year-on-year to 783,712 and Total Transaction Value (TTV) also declining 8% to A$752 million. These decreases were attributed to subdued domestic travel demand in Australia, particularly affecting the GoSee business.
Despite these headwinds, Webjet OTA demonstrated strong performance with EBITDA growth of 3% in 1H25, maintaining impressive EBITDA margins above 44%. The company’s focus on revenue optimization initiatives and increasing international flight bookings has been successful, with ancillaries now accounting for 35% of revenue (up from 32% in 1H24) and international bookings growing to 20% of flight bookings (up from 17% in 1H24).
Webjet Group maintains a robust financial position with net cash of approximately A$100.7 million as of September 30, 2024, and no drawn debt. The company also has access to a three-year A$20 million revolving credit facility.
Looking ahead, Webjet Group has announced ambitious plans to double its total transaction value by FY30, indicating confidence in its long-term growth strategy despite current macroeconomic pressures.
Webjet Conclusion
In summary, Webjet Group (ASX: WJL) enters its new chapter as a standalone entity with significant competitive advantages in its core Webjet OTA business, supported by innovative technology and a clear strategic direction.
While facing headwinds in its GoSee segment and additional costs related to the demerger, the company’s focus on international growth, revenue optimization, and enhanced customer engagement positions it well to capitalize on the ongoing recovery in travel demand.
Management’s pragmatic approach to addressing challenges through restructuring and operational improvements further supports the investment case for this leading digital travel platform. The company’s low valuation as showcased by an earnings multiple of barely 8 de-risks its execution and macro risks.
