By Martin Kelly

ONLINE travel in Australia has reached a milestone of sorts with the stockmarket capitalisation of Webjet (WEB) surging past traditional retailers – including significant share holder Harvey World Travel (HWT).

Webjet, valued at just four cents 12 months ago, raced to an all-time high of 34 cents on the Australian Stock Exchange following recent strong growth and a maiden net profit A$1.44 million.

Its price seems to have settled above 30 cents, giving it a market value north of A$75 million, compared with Harvey World’s recent average capitalization of around $65 million.

Yet HWT – which has more than 500 franchised agencies throughout Australia, New Zealand and South Africa – made more money, recording a A$2.52 million net profit for 2004/05.

This traditional and well-run travel company also pays investors a healthy annual dividend of more than five per cent.

So what gives – why are investors ascribing a greater value to Webjet than HWT?

Basically, they are betting that Webjet has much better growth prospects than traditional franchise retailers like HWT or Jetset.

And there’s definitely something to that.

The online travel market is still relatively immature and companies in this space – provided they have the technology – can operate much more effectively in a low commission environment.

It is also easier for them to expand because they are starting from a lower base and – like the Low Cost Carriers – have a fresh business model.

Of course, the stock market gets it wrong all the time and there are currently faint echoes of the dot bomb era in some valutaions.

However, the difference now is that many online companies such as Webjet are real businesses making real money.

Not that HWT Managing Director Barry Mayo would care about the differing valuations – his company’s 19 per cent Webjet holding, which cost just A$1.9 million, is now worth A$13 million.
HWT also has the option to take its Webjet stake to 35 per cent.

The Webjet share price rises come on the back of consistently strong business performance.  In July and August, Webjet’s turnover exceeded A$23 million, more than three times last year’s figures.

“The increase strongly validates our business model,” said Managing Director David Clarke.

However, the Webjet results failed to detail the comany’s revenue mix and growth prospects.


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