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.

WTC Details

This report is an updated version of the report published on 17 June 2022 at ~3:35 PM GMT 

WTC Rides on Product Rollouts & Robust 1HFY22 Numbers:  The company is witnessing robust impetus in its market penetration with the global rollouts of three new CargoWise since 1 July 2021. In 1HFY22, WTC delivered 589 new CargoWise products and feature enhancements, and remained on track to create a CargoWise ecosystem, which is in line with its development priorities. Given these large customers, usage and transaction, revenues are expected to grow in the near term.

Key Focus on 1HFY22 Performance:

• Impressive Top & Bottom-Line Performance: In 1HFY22, the company’s total revenues increased 18% year over year, and 22% (excluding FX headwinds), mainly due to new customer sign-ups, and growth from its CargoWise platform. Notably, CargoWise revenue during the period stood at came in at $193 million, depicting a rise of 29% on pcp, driven by large global Freight Forwarder rollouts, and increased existing customer usage. Statutory net profit after Tax (NPAT) and underlying NPAT grew 74% and 77%, respectively, from the prior corresponding period.
• Rise in EBITDA Numbers: In 1HFY22, EBITDA stood at $137.7 million, up 54% on a year over year basis, owing to a higher revenue base and cost-cutting initiatives. EBITDA margin remained strong at 49%, up 12 percentage points YoY, indicating growing operating leverage and the extraction of acquisition synergies.
• Balance Sheet & Liquidity Position: The company exited the period with a cash balance of $380.3 million, up from $315 million reported as at 30 June 2021. 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’s free cash flow skyrocketed 85% on a YoY basis in 1HFY22. The board declared a fully franked interim dividend of 4.75 cents per share, up 76% year over year. This indicated a payout ratio of 20% of underlying NPAT.

1HFY22 Investments Highlight; Analysis by Kalkine Group

Key Metrics: For 1HFY22, the company reported an EBITDA margin of 45.7%, higher than the year-ago figure of 35.3%. In 1HFY22, the company recorded ROE of 6.7% compared to the 1HFY21 figure of 4.3%.

Liquidity Profile; Analysis by Kalkine Group  

Top 10 Shareholders: The top 10 shareholders together form around 67.03% 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 40.62%, 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  

Outlook: The company remains on track to gain continuous momentum with the global release of the new CargoWise products in 1HFY22. Since listing on the ASX in 2016, WTC has completed numerous strategic acquisitions, thus aiming for improved product capability, increased market penetration, maximising operational leverage and driving sustainable profit growth. For FY22, the company expects revenues to be $600-$635 million, depicting a rise of 18-25% on FY21. WTC upgraded its FY22 EBITDA growth guidance from the 26%-38% range to 33%-43% on FY21. In dollar terms, the company expects EBITDA in the range of $275 million – $295 million for FY22, up from $260-$285 million provided earlier. It now expects the EBITDA margin to be between 46-47% for FY22, up from the prior view of 43-45%.

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 ~40.07% in the past six-months. Currently, the stock is trading below the average of its 52-week high and low levels of $60.4 and $29.69, 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 some premium as compared to its peers, considering synergies from buyouts, rise in free cash flow, upgraded FY22 view, etc. For the purpose of valuation, peers such as Altium Ltd (ASX: ALU), Xero Ltd (ASX: XRO), and NEXTDC Ltd (ASX: NXT) have been considered. Taking into consideration decent 1H numbers, new product rollouts, buyout synergies, decent liquidity position, positive FY22 outlook, robust customer base, current trading levels, and indicative upside in the valuation, we recommend a ‘Buy’ rating on the stock at the current market price of $34.955, as on 17 June 2022, 11.00 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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