Webjet Limited’s (ASX: WEB) shares were uplifted by 3.36 percent on 22 November 2018 following the completion of DOTW Holdings Limited’s acquisition. It is expected that this acquisition will deliver significant benefits to Webjet’s customers, suppliers and shareholders.
Founded in the year 1994, DOTW Holdings Ltd. is a leading independent B2B player of scale which is headquartered in Dubai and with offices in MEA, APAC, Europe and the Americas. Webjet Limited has acquired the DOTW for an enterprise value of A$240 million which was paid through an Entitlement Offer and A$102mn of debt funding, including a new acquisition debt facility. Further, around A$28mn of new Webjet shares were issued to continuing management shareholders and the private equity vendor of DOTW at an issue price of AU $12.77 per share.
In the recently conducted Annual General meeting, the Managing Director of Webjet told the shareholders that this acquisition will increase WebBeds' directly contracted hotels by circa 24% to approximately 28,500 across all geographic destinations and this acquisition will also increase WebBeds’ FY18 TTV by A$734 million.
After the acquisition of DOTW holdings, it is expected that the business from DOTW will generate an incremental EBITDA of around AUD$10 million in FY19. In the recently held AGM, while discussing about the FY2019 Outlook, Webjet’s Managing Director told that the total expected FY19 EBITDA for the existing Webjet business and the 7-month contribution from DOTW is around AUD$120 million, pre-synergies. He further informed that the company is anticipating the cost synergies of US$3mn per annum, starting from FY19, mainly through a combination of focused headcount reductions and reduced travel expenses. Further, the revenue synergies of US$7mn per annum are expected to be achieved through this acquisition. DOTW’s acquisition has diversified Webjet’s global footprint and it has created a more balanced portfolio for the company.
In FY 2018, Webjet’s TTV and Revenues were 54 percent higher than the prior year at $3 billion and $291 million, respectively. The Company’s EBITDA from continuing operations increased by 71 percent to $87.4mn in FY 2018. The EBITDA margin increased by 303bps to 30.0 percent and the NPAT of the company increased by 63 percent to $55.7mn in FY18. Through a combination of strong organic growth and the acquisition of JacTravel, Webjet’s B2B division reached the status of No.2 global B2B hotels business in FY 2018. Webjet.com.au and webjet.co.nz grew strongly in FY 2018, with domestic and international flight bookings growing at more than three times the market rate. The company’s sales of ancillary products (packages, car hire, insurance and hotels) grew in aggregate faster than flight bookings and generated higher margins in FY18. Within Online Republic, both the Motorhomes and Cars divisions performed strongly in FY18 with bookings growing by 16% and 14%, respectively.
Over the past one year, the share price of Webjet Limited increased by 14.52 percent as on 21 November 2018, and it traded at a PE ratio of 32.230x. WEB’s shares traded at $12 with a market capitalization of circa $1.49 billion as on 22 November 2018.