Webjet Group’s (ASX: WJL) shareholder aspirations of the stock getting back up over the psychological $1 mark weakened further with the share price falling as much as 10% following today’s frank strategic update.
Webjet Group’s share price managed to hit $1.10 shortly after the former ASX-listed entity Webjet – now Webjet Travel Group (ASX: WEB) demerged its business-to-business (B2B) and business-to-consumer (B2C) divisions into separate ASX-listed entities.
However, since the spinoff last September, Webjet Group’s share price has dropped as low as $0.60.
There was also little joy for Webjet Travel Group shareholders with the share price down around 1.5% in early afternoon trading.
No earnings growth this year
What clearly irked the market today were revelations that Web Group won't grow its earnings in FY 2025.
While the demerger promised to deliver two cleaner single business unit stories - with greater management focus and accountability – both companies appear to have struggled to communicate these narratives to the market.
Management advised investors that it was on track to deliver FY25 earnings in line with FY24.
However, the group’s more robust long-term outlook may have been tarnished by investor wariness after the digital travel group was forced to restate its first-half results two months after last year’s demerger.
Subsequent accounting changes caused a $1.5 million hit to earnings before interest tax, depreciation and amortisation for fiscal 2024.
Five years of growth
Following a rigorous and substantive strategic review, CEO and managing director, Katrina Barry, aims to propel the business to new heights. This is done with fresh offerings across Webjet OTA, Airport Rentals and Motorhome Republic, and Trip Ninja.
By deploying the group’s five-year-growth strategy, Barry aims to double transactional value (TTV) to $3.2 billion by FY30.
“Webjet is an iconic brand… with a clear, focused vision, and a strong balance sheet," said Barry who has identified several key opportunities for growth over the next five years.
“We are now poised to propel the company into a new era of growth, industry leadership, and exceptional customer experience.”
The company plans to invest up to $15 million in FY26, including around $6 million in brand relaunch.
Barry's strategic priorities include:
- Refreshing the Webjet OTA brand and investing in marketing to build more brand familiarity and enter new adjacencies with momentum.
- Expanding their total addressable market: introducing an expanded hotel and package offering, a new tailored business travel offering, and increasing market share of outbound international flights.
- Capturing more of the travel wallet: delivering a new loyalty strategy and enhancing member offers to build a value-adding member experience and investing in marketing tech for cross-selling opportunities.
- Delivering operational excellence: enabling growth by building transformational capabilities, and continuing to invest in innovation, AI, and tech.
- Brokers, including Morgan Stanley viewed the demerger as a positive, unlocking assets that enjoy the sole synergy of shared overheads.
However, the $8.1 million overhead dis-synergy was larger than the broker expected as were $12.2 million one-off costs.
Outperformance following a demerger takes time
Shareholders can take some comfort from Macquarie research which suggests demerged businesses usually underperform in the first six months and in the last five years or so the underperformance has lasted 12 months.
However, when it comes to the parent company, investors have to wait even longer for outperformance to occur, with 18 months passing after the demerger before outperformance is registered.
Morningstar believes both Webjet Travel Group and Webjet Group are significantly undervalued, based on fair valuations of $6.13 and $.90 respectively.
Webjet Travel Group has a market cap of $1.6 billion making it an ASX200 stock. The share price is down 35% in one year and down 4% year to date.
Consensus is Moderate Buy.
Webjet Group has a market cap of $221 million. The share price is down 30% in one year and down 35% year to date.
Consensus does not cover this stock.
This article does not constitute financial product advice. You should consider independent advice before making financial decisions.
