WEB, HWT

[TjamesX]

I have been looking around for an internet based company that could be the leader in its service field - and so reap the rewards.

WEB (webjet.com.au) came to my attention on Friday and after doing some quick research I was very pleased by their latest results.... I don't know if anyone has used them - but their competition seem to be;

- travel.com.au (TVL)
- zuji.com.au

Has anyone used any of these - what was their experience??

Well anyway, back to the saga.... Webjet's largest shareholder is Harvey World Travel (HWT) with 19%. On a quick look at HWT’s business they seem generate most of their income through franchising their agencies. The number of company owned agencies has been decreasing as they have moved to franchising.

Webjet is currently making a profit and has spare cash, further to this HWT has an option to increase its holding to 34% of issued shares at a discount to current price (without triggering a takeover – don’t ask me how this works). If HWT were to exercise this option at the current price, we are talking many million more going into webjets business, cashed up and ready to expand!!. Webjet would then be a very significant part of HWT existence (already is) and would effectively be the companies bet on the future of the travel agency business.

HWT announced on Friday it was looking into its holding and option in webjet (read – it is looking to exercise) both WEB and HWT’s prices rocketed up late last week. Whether HWT would actually proceed with a full takeover is ?? as webjet would not be attractive to anyone else with HWT’s holding and options.

Now to throw something else into the mix, SEL an ASX listed company that says its involved in property management and services has today announced a takeover bid for HWT at $1.85!!! (14% above Friday’s close) ….

Well I think that about wraps it up.

1) I wouldn’t want to touch a HWT franchise agency
2) How will flight centre react?

 

[tech/a]

Snap!!

Mentioned it here on Friday.Post 14.

As you can see I like them.
Havent used them though---price is rising so Thats how I found them.

https://www.aussiestockforums.com/forums/showthread.php?t=1214&page=1&pp=20

 

[britishcarfreak]

After a major run to 40c yesterday the question is whether the layers of takeovers and options exercising (HWT and SEL) will drive this any further. I hold a small amount and was anticipating further runs but am now starting to worry. I'd be keen to see if anyone else has any ideas about potential to keep moving or whether this run was it....

 

[TjamesX]

Short to medium term there is a lot of uncertainty

SEL has a takeover bid on HWT, but in its statements appears to be more interested in HWT's existing agencies and synergy benefits with its property holdings - it doesn't mention webjet. Webjet is in a rapid growth phase that I think would be much better served with HWT's ownership than SEL.

If webjet reached critical mass I think it could be big, it could do this with the capital injection via HWT options. But if it was going to make it big, then you would think HWT would control the process or just take it over. Chances of a bidding war for it are small.

A small comparison of HWT and WEB businesses;

- HWT profit of $2mill on revenues of $58mill
- WEB profit of $1.5mill on revenues of $5mill

WEB's business is essentially a website, its high margin stuff - good business model. HWT's business is much lower margin - much more risky.

I don't hold any of the mentioned shares, I'll sit and watch for the time being - lots of uncertianty

 

[TjamesX]

had my eye off the ball last few weeks,

HWT is currently at $2.05
WEB rose 11% today to 48.5c

Did you get any of these Tech?

 

[tech/a]

Been on Web since first mentioned.
Obviously now I lament not having the house on it!!
But Hey.

 

[TjamesX]

Took the opportunity to get into WEB today at 39.5c after the big falls of the last two days, I am hoping this will be a long term holder.

I'll post some simple calcs I've done tonight.

Noticed on the TV last night Flight Center advertising its website heavily for the first time!! This for a company that has customer service offices on every corner - maybe the penny has finally dropped. All I hope is that HWT and/or SEL don't stuff this business up.

 

[GreatPig]

Took the opportunity to get into WEB today at 39.5c

Well I took some profit today at 41.5 cents.

Which means you're onto a sure thing: it will certainly shoot back up now

GP

 

[tarnor]

I sold this somewhere under 5c not too long ago, please make it stop.

 

[TjamesX]

Ok Here are my basic calcs;

Valuation in 5 seconds.....

2005 figures

Trans Values: 77.5 mill
Revenue: 5.3 mill
% conversion of Trans Values to revenue: 6.84%
Expense (before tax): 4 mill
Tax: 0 mill (use of tax losses)
PAT: 1.4 mill
Shares on issue (inc options): 224 mill
EPS (diluted) 0.625c
Current PE @ 40c = 64 times

2006 estimates

Using Trans values of 10.9 mill for July, 14.1 mill for Aug, 14.5 mill for Sep and then 14.5 mill per month for the rest of the year (no increase), total Trans value is 170 mill (and that this converts to revenue at 6.84%). I will assume expenses increase 40% and it uses tax loss benefits of 1.8 mill and no shares are issued during the year

Trans Values: 170 mill
Revenue: 11.6 mill
% conversion of Trans Values to revenue: 6.84%
Expense (before tax): 5.6 mill
Tax: 0 mill (use of tax losses)
PAT: 6 mill
Shares on issue (inc options): 224 mill
EPS (diluted) 2.68c
Forecast PE @ 40c = 14.9 times Thats better

Which compares nicely with overall market PE of around 15-16 especially for an internet company

any thoughts?

 

[TjamesX]

Just some other comparisons

REA (realestate.com.au) currently trades at a PE multiple of 36 times, for WEB to trade at a multiple of 20 times (on my forecast 2006 earnings) the SP would need to move to 53.6c, and at a multiple of 25 times SP would be 67c

I'll just hope my 5 sec estimates are close

 

[tech/a]

Sold WEB at 44 on Tuesday.

Looking at buying in again as the dust settles.

 

[el_ninj0]

Sold WEB at 44 on Tuesday.

Looking at buying in again as the dust settles.

How did you get the hint to sell out on Tuesday tech/a?
thats a very lucky move if you didn't know what was going to happen yesterday.

 

[tech/a]

Just a couple of Bombs went off in Bali.

I was watching this tick chart and as youll see it retraced from 42c I just logged a sell at market and jagged 44c So WEB was looking sick--no genius on my part I'm afraid.
This is why I think its an over reaction plus its being pulled along with the correction---I think,want,hope,wish,pray,and want to believe.

 

[TjamesX]

Well I doubled my holdings in WEB yesterday, was so close to getting order filled at 36.5 but in the end had to settle for 38

I happy with 38, the same price that Pratt increased his holdings at not too long ago

Now i'll just sit and wait to see if their monthly transaction volumes keep rising

TJ

 

[Richard Willoughby]

I've just joined this website and pleased to see a thread on webjet (unlike most other sites). I am a long term holder of web. (very biassed) I think the current run is more about reaching profitability and increasing trans values than due to HWT/SEL etc. Webjet has taken approx 5 years to reach this point, this was delayed by commissions falling from 5% to 1%. They gambled all to pay microsoft to design/build website with plenty of redundancy in it, nearly went broke which is where HWT where let in cheaply to provide money/time for model to work. I don't think costs will increase by 40% as business model is very good. Last year trans value approx 20mil for (memory) 14 employees this year trans values 77mil for 19.5 employees. Although a resolution for this years agm is for pay increases for directors, they are not paid much now.I think they are planning to expand to include other international markets and if they can achieve any type of success os(usa) than the skys the limit. Interesting that Norm Fricker (HWT Chairman and director of webjet) has quit the webjet board not sure what to make of that..
Anyway its good to see webjet discussed here.
Regards tricky

 

[TjamesX]

I think the current run is more about reaching profitability and increasing trans values than due to HWT/SEL etc.

Agree, SEL have now aquired HWT. I now believe that SEL does not know what it is doing with regards to WEB and the fact WEB could actually be bigger than HWT and SEL.

They gambled all to pay microsoft to design/build website with plenty of redundancy in it, nearly went broke which is where HWT where let in cheaply to provide money/time for model to work.

In my google research about WEB I stumbled across a case study advertising microsofts expertise in building .NET infrastructure websites that detailed the Webjet project - about how stable the site is and how easily it can be scaled up

I don't think costs will increase by 40% as business model is very good.

I was trying to be a little conservative in my analysis

I think they are planning to expand to include other international markets and if they can achieve any type of success os(usa) than the skys the limit.

Personally I would prefer if they cemented their position in Aus first. i would like to see a bit more advertising - I don't know how they've grow so quickly so far without it? Flight centre are advertising their website pretty aggressivly at the moment....

Interesting that Norm Fricker (HWT Chairman and director of webjet) has quit the webjet board not sure what to make of that..

Norm has left as a result of HWT being taken over by SEL, the other HWT guy has decided to stay on for the time being. I would have prefered a webjet with HWT as majority holder - oh well.

Anyway its good to see webjet discussed here.

Lets hope the discussion continues...

this week should be interesting - it rebounded heavily last week only to trade back down to 42c. I am a strong believer in their business if they can keep the growth going....

 

[el_ninj0]

What do you all think a good entry price for WEB is?
Ive come to believe that its an excellent investment, but at what price I'm not quite decided on yet. Consolidation is probably in order I think before it starts its rise again, but im not quite sure.

 

[Richard Willoughby]

price entry? i think (hope) it will hold above .40 until this months trans is available, mainly to see what effect the latest bombs have. i don't think they will hurt much but who knows..web was going along fine until the trade centres then bali happened and it stalled(trans values) the next two months figures if good i think will raise the sp significantly.
tjames conservative is good i was just adding to discussion, cementing in ossie, yes definitely. with ref to os(usa) when web ist started they had no manual assistance operators it was solely do it yourself, in fact that initially was a major part of their business model, they changed that and rightly so i believe but maybe if they had an agreement with a usa type hwt they would revert temporarily(with os cust) to that type of arrangement which i think the existing website could be easily(low cost) adapted to it.
David Clarke seems to have the ability to form partnership/agreements with other parties and each time trans values seem to keep rising.(so far)
tarnor i know exactly how u feel(i didthat 2)
cu tricky

 

[el_ninj0]

Looks to be coming back down for a couple of months before it comes back up.
Seems to have broken the support it was on. Very hard to tell how far it will fall by the chart.

Any one else got some thoughts they'd like to share?