The Webjet Limited (ASX: WEB) share price could be one to watch as the ASX travel share goes through a recovery.
How is the Webjet share price travelling?
The Webjet share price is almost flat over the last six months. But the last 12 months have been volatile. It’s down almost 20% from the middle of March but up 38% over the last year.
Investors seem to have been a bit disappointed that Aussies won’t be going on international holidays for a while yet. That was part of the company’s earnings.
However, other parts of the business are doing better. COVID-19 is still impacting the global travel industry. However, the business is working hard in its different business units to deliver 20% lower costs across the business once it returns to scale.
Webjet’s online travel agency (OTA) profitability continues to improve. Management said this underscores its strength as the number one OTA and the scalability of the business model. Its market share continues to increase. The OTA EBITDA margin (EBITDA explained) is now back above 30%.
WebBeds is committed to emerge from COVID-19 as the number one global business to business provider and take advantage of new revenue opportunities. When at scales, it wants to achieve an EBITDA margin of 62.5%.
The travel business reported that as markets reopen, its segments are rebounding quickly. As at April 2021, its OTA Australian domestic bookings were 95% of April 2019 levels. WebBeds USA TTV was at 83% of April 2019 levels and Online Republic bookings were 48% of April 2019 levels.
Management believe that there is strong pent-up demand for travel, particularly leisure travel.
What does this mean for the ASX travel share?
If volume has essentially returned to pre-COVID levels then that could mean that Webjet’s OTA profit can return back to normal on a month by month basis. However, there’s still the other parts of the business that need to go back to normal before total profitability and normal cashflow is restored.
But I actually think Webjet could be an interesting opportunity. Margins are rising, international borders are getting closer to opening and the COVID-19 vaccination effort is going well. Looking at CommSec numbers, Webjet is priced at 20 times the estimated earnings for the 2023 financial year. That looks pretty good value to me.
