Liquidity was $307m as of May 31.Morgans now expects Webjet to be loss-making in FY21 at the operating earnings (EBITDA) level and a full recovery is pushed out to FY23. He joined the Sydney Morning Herald in 1999 as its technology editor.
Morgan Stanley, too, expects domestic travel will dominate the recovery for some time, which implies Webjet's biggest earnings contributor and growth engine, B2B, will be a late-cycle event.UBS is more positive, believing well capitalised operators such as Webjet will continue to take share and acquire good businesses at discounted prices. Webjet Limited operates globally through the provision of online travel sales for both end consumers (B2C) and wholesale markets (B2B). The proceeds will be used to repay $50m in existing term debt, for potential acquisitions and capital management.The notes will be listed on the Singapore exchange. Technology or ancillary products could be of interest and the broker acknowledges the company would require a high degree of conviction before pursuing a transaction.Morgans also notes WebBeds has greater exposure to international travel and Webjet has largely dismissed bolstering this segment through acquiring another competitor such as JacTravel.The B2C business should benefit from a structural shift of holiday bookings to online, and despite growth opportunities being on hold they will return.
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The impact on profitability and the delay the recovery is now greater than previously anticipated.Credit Suisse considers there are plenty of acquisition opportunities as a number of travel assets are looking for recapitalisation.
UBS, on the other hand, believes Webjet should be able to fund its operations for 14 months even with no revenue, while paying down the working capital unwind and writing off the majority of receivables.With debt facilities to begin maturing in late 2021, Credit Suisse argues liquidity may still be required if the recovery takes longer and the summer of 2021 in the northern hemisphere remains materially affected by the pandemic.Some booking activity has commenced in Australia but the Middle East is shut, and this is around one quarter of bed transaction value and more profitable. The raising was a win for Webjet, the ASX which had changed the listing rules, and its brokers. The ASX Group's activities span primary and secondary market services, including capital formation and hedging, trading and price discovery (Australian Securities Exchange) central counter party risk transfer (ASX Clearing Corporation); and securities settlement for both the equities and fixed income markets (ASX Settlement Corporation).
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Webjet is not in dialogue with any business at this stage but will explore the proposition with more vigour over the next several months.Therefore protecting the balance sheet is a priority.