There were big smiles at the Exchange Centre yesterday as Webjet Group Limited listed on the Australian
Securities Exchange (ASX).
Whilst shares for the B2C business opened at 99.5c on Monday morning, they later sank to 80c as the day progressed. They have since improved slightly to 83c upon market open on Tuesday.
Analysts are divided as to whether the drop is a genuine reflection of soft market conditions, or whether things will stabilise once the demerger has settled. The end of September is seasonally a weak period in the global stock market.
The listing followed a unanimous decision made by shareholders last week to demerge the travel bookings provider into two ASX-listed companies so they can pursue separate growth opportunities.
Webjet Group Limited – led by CEO Katrina Barry – is Webjet’s consumer offering and includes brands such as Webjet OTA, GoSee and Trip Ninja. Meanwhile, WEB Travel Group owns its global B2B travel distribution business WebBeds.
Whilst high-growth WebBeds is already one of the largest global players in the wholesale travel market with over 50,000 travel buyers across 140 source markets, the consumer brand Webjet Group Limited has seen lower growth.
Barry had previously told The Australian that the consumer-facing business had been neglected in recent years.
“This business has been the cash cow of the entire group,” she said. “It has funded the development of a $3.2bn business, but we haven’t focused on this business for seven years as we’ve been talking about WebBeds.”
The demerger would allow this side of the business to get more attention, she added.
“The demerger will unleash its full potential. We’ll have undivided attention, undivided board attention, our own balance sheet and no debt.”
“This gives us an improved ability to pursue our priorities and our growth agenda.”
The share price of 80c on Monday afternoon was significantly less than the fair value listed for the B2C business in the prospectus at between $1.20 and $1.60 a share.
Reacting to the share price drop, analysts at IG noted that the B2B business is more stable in the long term whilst the retail business is generally more cyclical.
Whilst the economic environment and the slowdown in domestic travel are also a factor in the drop in share price, Barry said that Webjet’s business model and large database means any drop will be offset by growth in international travel.
“If you think about the broader travel market, yes, it’s being affected on a macro level and softening. But we have a very different economic model to most people within the travel business, and because of that, dropping prices in terms of airfares actually stimulates demand, and that’s good for us,”she said.
Webjet shareholders approve demerger plans for travel bookings provider
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