Webjet Group extends gains as Jarden initiates coverage at 'overweight'
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The news: Shares in Webjet's newly listed spin-off B2C company Webjet Group extended gains on the ASX after its market debut at the start of the week, as Jarden initiated its coverage of the stock with an 'overweight' rating.
The numbers: Webjet Group, which encapsulates the travel bookings provider's B2C businesses, was up 6.7% to $1.16 by 2pm AEST. The stock has gained more than 45% since it debuted at 80 cents per share on Monday.
Jarden initiated its coverage of Webjet Group with an 'overweight' rating and $1.10 target price.
The original listed company, renamed 'Web Travel Group' and comprising the WebBeds wholesale bookings business, lowered 1.5% to $7.32, continuing declines this week since the demerger.
Jarden downgraded its rating on Web Travel Group from 'buy' to 'overweight' and slashed it target price from $9.45 to $7.70.
The context: Jarden analysts noted that travel is an attractive sector, benefitting from improving demand as airfares moderate, an ageing population and consolidation towards scale players.
They believe Webjet Group is well positioned to benefit from this trend, though the near-term outlook remains less certain, as new management establishes strategic priorities, refreshes the brand, and looks to lift both transaction and mix.
Meanwhile, Jarden analysts said its large target price reduction on Web Travel Group reflected the demerger of the B2C business, additional costs for both businesses upon becoming separate entities, and Jarden's new risk-free-rate assumptions.
However, they flagged that Web Travel Group is "executing well" and return on invested capital should rise.
The source: Jarden research
