Webjet is a buy on a dip

by Michael Gable

The following is an extract from our complete client report earlier in the week:

INVESTMENT VIEW
 
WEB is well placed to continue benefitting from the growth in international bookings outpacing domestic bookings, as well as its ability to capture the shift to booking international travel online, in light of the Company’s increased market share and presence.
The Company has previously experienced periods where it has struggled to gain market share in the core Webjet business, as a result of intense competition. While the latter remains a factor, the key factors underpinning the strong levels of TTV growth in core

Webjet business include:
 
i. The significant investment undertaken in technology and branding and
 
ii. The growth experienced in the Packages segment. As recently as a couple of years ago, the Company had modest success with Packages and since that time, this segment has grown significantly given that Packages are a logical extension of the aggregation of air and hotel supply, and Packages have migrated from a bricks-and-mortar model to online.

In light of the share price’s strong rally since the trading update last week, we consider that weakness from current levels would present a more attractive entry opportunity. We also note that a key share price catalyst is another accretive B2B acquisition, with the capacity for further acquisitions supported by the Company holding a net cash position of ~$30m on the balance sheet.
 
CHART VIEW
 
WEB was trending up nicely for the last year, most recently hitting that support line two weeks ago. From there it rallied impulsively, making 30% in 4 days. The stock is clearly looking bullish but we would like to grab it on a pullback instead of chasing it up here. There appears to be an obvious support level near $3.50, so if some short-term profit taking starts to take hold, then that would be the buy zone. We would then expect WEB to make a new high for the year, finding resistance near $4.50.

Disclaimer

Disclaimer: Michael Gable is an Authorised Representative (No. 376892) and Fairmont Equities is a Corporate Authorised Representative (No. 444397) of Novus Capital Limited (AFS Licence No. 238168). The information contained in this report is general information only and is copy write to Fairmont Equities. Fairmont Equities reserves all intellectual property rights. This report should not be interpreted as one that provides personal financial or investment advice. Any examples presented are for illustration purposes only. Past performance is not a reliable indicator of future performance. No person, persons or organisation should invest monies or take action on the reliance of the material contained in this report, but instead should satisfy themselves independently (whether by expert advice or others) of the appropriateness of any such action. Fairmont Equities, it directors and/or officers accept no responsibility for the accuracy, completeness or timeliness of the information contained in the report.