Share in online travel business Webjet Limited (ASX: WEB) dropped 10 per cent this morning after the it disappointed the market with EBITDA guidance of $80 million for FY 2018.
That would represent EBITDA growth of 57% over the $51 million achieved from continuing operations in FY 2017 or 14.4% growth from the total EBITDA of $69.9 million delivered last year.
The comparisons are complicated by Webjet's decision to sell its Asia-focused Zuji travel bookings business last year and a number of new acquisitions including motorhome and cruise business Online Republic.
In fact the guidance of $80 million in EBITDA includes an additional $2.7 million of costs associated with the Thomas Cook deal, a one-off $1.7 million tax associated with the Online Republic acquisition, and $1.2 million in costs associated with the Jac Travel acquisition. While continuing losses were also flagged at the FIT Ruums business-to-business (B2B) online operation.
The group is also forecasting total transaction value of $3 billion in FY 2018 versus $1.9 billion in the prior year.
Investors are selling the shares today because the forecast EBITDA growth of $80 million is below analysts' expectations given the one off costs flagged today, although Webjet's management is smart enough to know that it's best to under-promise and over-deliver on forecasts.
As such the stock looks good value to me changing hands for $10.50 on around 19x EV to forward EBITDA given its comparable operating divisions could keep growing at compound double-digit rates over the next 3-5 years.
Webjet's growth in the B2B space as a digital middleman facilitating hotel room bookings between hotels and travel operators also offers a big growth opportunity for it over the years ahead. While the consumer-facing travel business is also growing thanks to its bundled travel packages that cannot be obtained by booking directly with airlines or hotels.
Outlook
Webjet's chief executive John Guscic as the impressive driving force behind the company's superb track record also has his financial interests heavily aligned to shareholders via three separate tranches of equity call options of 1 million shares each at strike prices of $12.50, $14 and $16 respectively out to September 2018, 2019 and 2020.
After a strong five years, Webjet's compound EBITDA growth out to 2020 won't need to be too strong to deliver the kind of share price gains that would see its chief executive cash in his options. As such I'm not betting against this stock climbing out to 2020 especially given this morning's valuation of $10.50. In fact on that valuation I would prefer Webjet to other travel rivals including Corporate Travel Management Ltd (ASX: CTD) and Flight Centre Travel Group Ltd (ASX: FLT).
