Internet stocks such as Webjet (ASX: WEB), Wotif.com, Trade Me and SEEK.com tend to trade on high valuations which reflects the high growth potential of companies who conduct their business over the Internet, and investors are prepared to price in tomorrow’s growth today.
WEB reported 16 consecutive half years of growth in the first half ending 31 December 2011 (1H) as total transaction values (TTV) increased 29% to $369 million and net profit increased 17% to $5.9 million. It also reported an acceleration of growth in the 1H and it greatly outperformed the general travel market in Australia and New Zealand by over 4 times.
WEB’s website has strong comparative brand strength and its recognition is well ahead of its competitor Flight Centre, and well ahead of the airlines, which shows customers think of booking their travel with WEB before booking with the airlines themselves.
WEB has diversified into the online accommodation booking sector but still has a long way to go to catch the dominant player Wotif. Its global growth strategy is progressing, and WEB reports that it has made a great start in the USA but it is not ‘betting the farm’ on the region, while in Asia it says it is just getting started.
WEB has first mover advantage, and despite the shares already beginning to price in future growth they are worth buying, WEB expects net profit growth of at least 10% in the year ending 30 June 2012 (FY12) as it moves forward with its strategic plans.
FY12’s earnings per share (EPS) is forecast to be 17.5c which places WEB on a FY12 PE Ratio of 19.6x, while more growth is expected in FY13 with EPS of 20.2c expected, which leaves WEB trading on a FY13 PE of 16.9x, slightly expensive due to the recent strong run after the 1H result.
WEB is worth buying, but preferably on price weakness due to the recent surge in the share price.
About Webjet: WEB is Australia and New Zealand’s number 1 travel booking website and the company also has operations in North America, Singapore and Hong Kong. WEB also offers hotel bookings and car hire and has Alliances and Affiliations with top travel and technology brands including VeriSign (secure online payments); MacquarieTelecom (hosts the Webjet booking engine); Galileo (provides airline schedules and availability in real time); Avis, Hertz & Budget (rental cars); and Allianz Global Assistance (Travel Insurance).
Status: GROWTH BUY
WEB’s shares today traded at $3.43
For portfolio, sharemarket and fixed income enquires contact: Dan Stratful at Investment Research Group (IRG) Authorised Financial Adviser (AFA) 0800 437 8489, 09 304 0232, dan.stratful@irg.co.nz **A disclosure statement is available, on request and free of charge.
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