Sorry please expand further on 8.35?

GS has updated their guidance and advised on $7 price target

Webjet Ltd. (WEB.AX): FY21 First Take: Underlying NPAT in line; improved costs offset slower B2B; Buy

19 May 2021 | 11:08AM AEST

Webjet reported FY21 results for the 9 months ended 31 March 2021. FY21 revenue was -9.7% below GSe majorly resulting from a miss in Webbeds. However, the group reported an EBITDA beat of +5.5% with lower than expected costs. Key takeaways are:

• OTA recovery was ahead of expectations driven by domestic recovery with TTV at A$99mn vs. GSe A$96mn. Revenue margins remained at 9.6% in line with 1H21. Divisional EBITDA was at A$3.0mn for the 3 months ahead of GSe at A$2.6mn.

  • The division has reported an improvement in average market share at 11% over Jun20-Apr21 vs. 9.9% over Jun20-Dec20.

  • Bookings have progressively improved over the months with April reporting c. 86.1k bookings c. 66% of pre-COVID levels and domestic being c. 95% of pre-COVID bookings

• Activity levels in the bedbanks division were a dissapointment vs. GSe with TTV -23.8% and revenue -19.5% for the 9 months to March. However, divisional EBITDA loss was lower than anticipated at A$-46.9mn vs. GSe at A$-50.7mn

  • All regions reported a miss in topline activity vs. GSe with Europe being exceptionally weak. Subdued activity levels have continued into April 2021, but with bookings pickup noted to be strong in North America

  • Revenue margins were at 7.3% an improvement vs. the drop to 6.1% in 1H21

  • Operating costs were lower at A$19.3mn c. 4.4% improvement vs. the average monthly costs in 1H21

• Online republic reported TTV of A$21mn vs. GSe at A$16.2mn for the 3 months, however with weaker revenue margins at 7.1%. EBITDA loss was at A$-1.0mn vs. GSe at A$-0.5mn

  • Management expects revenue margins to normalize to c. 9-10%

  • Bookings have approached the breakeven mark in a couple of weeks in April 2021.

• Operating cash flow was ahead of expectations at A$-15.4mn (GSe A$-21.0mn) for the 3 months. Excl. client funds, the group reported a net debt position of A$1.6mn in March 2021.

Bottomline: Overall, recovery activity for the B2B market has been underwhelming but continues to be strong in the domestic exposed divisions. Cash flow has been largely in line with expectations. Monthly cash burn was noted to be at c. A$5.5mn for FY21. However, a recovery in B2B activity should improve this further.

Exhibit 1 : Summary of FY21 results

Source: Company data, Goldman Sachs Global Investment Research

Valuation: Our 85% weighted fundamental valuation and 15% weighted M&A valuation based 12-month target price on WEB is A$7.00 per share. We are Buy rated on WEB.

Key downside risks: 1) Delay in industry recovery, 2) Increased competition in the OTA segment, 3) Impact of innovative models in the bed banks business.