nice work webjet.
it is a solid acquisition, just over 10% dilution in shares on issue and in sp at the offer price of 11.50, but the reality is that on a proforma basis we are talking about 130m ebitda for fy19 which for continuing operations which is 50% growth from fy18 (87m).
they had previously signalled intentions for further m&a so
this comes as no surprise.
the organic bookings growth is still good but the high p/e demands some additional acquisitive growth and the balance sheet is conservative enough to support the m&a in a rising interest rate world... this is why they are predominately using equity rather than debt to fund growth.
my only concern is that it is another large acquisition at a time when jac travel and the thomas cook agreement are still being executed and synergies extracted, so they tun the risk of over extend
ing and being unable to manage an overly complex set of business integrations simultaneously.
having said that, i think there is an arms race going on the b2b space so their reasons for pursuing this b2b acquisition are to ensure a strong place in the market rather than risk being pushed out by consolidation of competitors who can then improve margins and/ or apply pricing pressure to smaller competitors who have less economies of scale.
ultimately this looks like a good move and a positive trading update (i would say in line with my expectations of around 30% ebitda growth for fy19 excluding this acquisition.
remember that this acquisition will not fully realise its potential in terms of revenue and cost synergies for 2 years and that the thomas cook agreement will boost fy2020 ebitda further and that the jac travel acquisition has further synergies to improve ebitda to play out over the next 2 years.
also the underlying industry / tourism growth tailwinds for b2c and b2b will provide a nice base for growth over the next 5 years.
i would reiterate my prediction from august that we should see 150% total growth (sounds overly euphoric but that only requires 20% cagr and given they are headed towards 50% proforma ebitda growth for fy19 (adjusted to around 42-43% after accounting for 15% equity dilution) after achieving around 65-70% ebitda growth in fy18, i think thats very achievable.
lots of risks, as per the end of their presentation, but hey thats the stockmarket and growth investing. if time is on your side and your horizon is 5 years like me, this looks good.
(20min delay)