Australia | Sep 26 2024
Analysts are positive on Webjet's demerger of its B2B and B2C businesses into separate listed entities, allowing each to focus more specifically.
-Webjet splits into B2B and B2C
-Benefits greatest for the larger B2B entity
-Overlooked B2C will enjoy better focus
-Analysts positive on the split
By Greg Peel
Last week, Webjet demerged its business-to-business (B2B) and business-to-consumer (B2C) divisions into separate ASX-listed entities. Shareholders voted overwhelmingly to approve the demerger last month, hoping it would help to unlock value for the little-understood B2B business. Webjet has become a global wholesaler of hotel rooms to other online travel and corporate travel companies.
Webjet's customer-facing business includes its online travel agency (OTA), which holds about 8% of online flight and hotel bookings across Australia and New Zealand, as well as GoSee, a motorhome and car rental group, and the Trip Ninja smart travel technology.
The B2B entity continues to trade as Webjet Travel Group under the existing ticker ((WEB)), while the B2C entity trades simply as Webjet Group under the new ticker ((WJL)). Not the least bit confusing. The B2B entity owns WebBeds.
There is a clear valuation difference in the B2B entity, trading around $7.29, with the B2C, trading around 99c.
Good Idea?
Morgan Stanley views the demerger as a positive, unlocking assets which enjoy the sole synergy of shared overheads. Specific focus might improve business performance, the broker suggests, but primary upside is in the potential re-rating for Webjet Travel (B2B).
Morgan Stanley feels both businesses will be cleaner single business unit stories with greater management focus and accountability. The broker sees scope for a WEbjet Travel (circa 90% of value) re-rating without Webjet Group (10%). The new structure is more tax effective for highest growth and highest multiple business.
On the negative side, the resultant -$8.1m overhead dis-synergy was larger than Morgan Stanley had expected. Also, one-off costs of -$12.2m seem high. The broker also sees potential adverse impacts to index relevance, and sees little additional capital structure flexibility post transaction, and given the covid experience, expects both businesses to keep plenty of balance sheet capacity.
Regarding index inclusion, Wilsons believes Webjet Travel will stay in the ASX200 but there is a risk Webjet group will not make the ASX300 threshold.
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