Company Overview: WiseTech Global Limited (ASX: WTC) is engaged in developing and providing software solutions globally to the logistics execution industry. WTC’s customers include 18,000 of the world’s logistics companies across 165 countries. The company’s flagship platform, CargoWise, forms a vital link in the global supply chain and implements more than 72 billion data transactions yearly. The company was listed on ASX in April 2016.

WTC Details

Decent Fundamentals & Product Enhancements Aids WTC: The company has completed ~39 acquisitions since its IPO in 2016, thus assembling resources and development skills to drive the CargoWise technology pipeline. WTC also completed the product integration via the CargoSphere and Cargoguide acquisitions onto the CargoWise platform. The company also remains on track to gain continuous momentum with the global release of six new CargoWise in FY21.

Spotlight on FY21 Key Numbers & Past Performance:

• Robust Top Line Performance: In FY21, the company’s total revenues increased 18% year over year, mainly due to new customer sign-ups and increased usage by existing customers. CargoWise revenue in FY21 came in at $331.6 million, depicting a rise of 26% on pcp.
• Rise in Acquisition Revenues: WTC’s strategic acquisitions also contributed to its top-line growth, with acquisition revenues (included the completion of one small acquisition in Asia) increasing 6% on pcp in FY21.
• Impressive EBITDA Growth: In FY21, EBITDA stood at $206.7 million, up 63% on a year over year basis. EBITDA margin remained strong at 41%, indicating growing operating leverage and the extraction of acquisition synergies.
• Enhancing Shareholder’s Value: In FY21, the management declared a fully franked final dividend of 3.85 cents per share, up 141% year over year. This equated the total FY21 dividend of 6.55cps, indicative of a payout ratio of 20% of underlying NPAT.
• Balance Sheet & Liquidity Position: The company has a strong balance sheet and remains well-financed with a cash balance of $315.0 million as at 30 June 2021, with lease liability amounting to only $35 million. The company recently refinanced its debt facility and now has an unsecured four-year $225 million bi-lateral facility, delivering flexibility to sustain a growing business. The company also reported a robust free cash flow of $139.2 million in FY21, up 149% on FY20.
• Key Developments: During the year, the company’s enduring product development, aided WTC to expand its geographic reach of the CargoWise customs functionality, integration of real-time global rates onto CargoWise and implementation of the beta testing of CargoWise Neo. Given these large customers, usage and transaction revenues are expected to grow in the near term.

Financial Metrics Highlight; Analysis by Kalkine Group 

What Should Investors Know About the AGM Update?

The company’s vision and mission involve leveraging the structural changes accelerated by COVID-19 and delivering an operating system for global logistics by focusing on the 3Ps: Product, Penetration and Profitability.

Key Strategies; Analysis by Kalkine Group

Key Metrics: For FY21, the company reported a gross margin of 83.1%, higher than the year-ago figure of 80.6%. In FY21, the company recorded a current ratio of 2.21x compared to the FY20 figure of 1.97x.

Profitability and Liquidity Profile; Analysis by Kalkine Group  

Top 10 Shareholders: The top 10 shareholders together form around 59.47% of the total shareholdings, while the top 4 constitute the maximum holding. Realwise Holdings Pty. Ltd. held the maximum number of shares with a percentage holding of 40.67%, followed by Gibbon (Charles) holding 5.32%, as also highlighted in the chart below: 

Top 10 Shareholders; Analysis by Kalkine Group 

Risk Analysis:

Key Risks; Analysis by Kalkine Group  

Future View:

With increased usage by existing customers, new global rollout wins, and accelerated digital transformation, the company expects demand for worldwide technology and integrated platforms such as CargoWise, to increase.  The company remains on track to benefit from the acceleration in structural shifts from legacy systems to integrated global software solutions. Looking ahead, WTC remains focused on R&D to offer integrated products and deliver long-term sustainable shareholder value. Together with significant acquisition opportunities and a focus on expanding the CargoWise ecosystem, WTC aims to maximise operational leverage and drive scalability. The company expects to report its 1HFY22 results on 23 February 2022.

Outlook for FY22; Analysis by Kalkine Group  

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative) 

Source: Analysis by Kalkine Group 

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: The stock of the company has been corrected by ~26.39% in the past one-months. Currently, the stock is trading close to the average of its 52-week high and low levels of $60.4 and $25, respectively. The stock has been valued using an EV/EBITDA multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight premium as compared to its peers, considering the synergies from buyouts, rise in free cash flow, decent FY22 view, etc. For the purpose of valuation, peers such as Altium Ltd (ASX: ALU), Xero Ltd (ASX: XRO), NEXTDC Ltd (ASX: NXT), and others have been considered. Considering decent liquidity position, rise in topline, positive outlook, robust customer base, product launches, current trading levels, and indicative upside in the valuation, we recommend a ‘Buy’ rating on the stock at the current market price of $42.72,  as on 04 February 2022, 11:45 AM (GMT+10), Sydney, Eastern Australia.

WTC Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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