WiseTech Global Limited
 

Pause in Trading:WiseTech Global Limited (ASX: WTC) provides software solutions to the logistics industry globally. The market capitalisation of the company stood at ~A$10.63 Bn as on 17^th October 2019. The securities of the company have been placed in a trading halt at the request of WTC as the release of an announcement is pending. It was also mentioned in the release that securities would remain in a trading halt until the earlier of the commencement of normal trading on 21 October 2019 or when the announcement is released to the market. The halt has been requested to allow WTC to respond to the allegations contained in a research report and ensure that trading does not take place in an uninformed or false market. As per the release dated 15^th October 2019, the company advised the market that 46,670 fully paid ordinary shares are dueto be released from escrow with effect from 4.15 PM on 31^st October 2019. The following picture provides an idea of key statutory results for the financial year 2019:


Key Statutory Results (Source: Company Reports)

What to Expect:The company has progressed on its larger pipeline components, which include progress in the development of CargoWise NeXus, with early beta release to select BCO and 3PL customers at the end of calendar year 2020. The company expects revenue in the range of $440Mn - $460Mn, reflecting a growth of between 26% - 32% in FY20. The company anticipates EBITDA amount in the ambit of $145Mn - $153Mn, which indicates a growth in the range of 34% - 42%.
Stock Recommendation:The stock of WTC has witnessed a fall of 2.25% in the span of the previous one month, while in the time frame of the past three months, the stock has risen 12.12%. As per ASX, the stock is trading close to the higher band of its 52-week trading range of $14.885 and $38.88, with higher PE multiple of 188.70x and an annual dividend yield of 0.1%. Hence, considering the aforesaid facts and current trading levels, we advise investors to closely watch the stock at the current market price of A$30.000 (down 10.18% on 17th October 2019), and wait for further clarification on allegations, which contained information about overstated profits in the research report.
 

Northern Star Resources Ltd

A Look at September 2019 Quarter:Northern Star Resources Ltd (ASX: NST) is in production and exploration of gold and other minerals and has a market capitalisation of ~A$7.13 Bn as on 17^th October 2019. Recently, the company, with the help of a release informed the market participants with the performance of September 2019 quarter. NST stated that its Australian operations have recorded a decent performance in the quarter while the company has made more significant progress with the growth strategy at its Pogo gold mine in Alaska. The company delivered underlying free cash flow amounting to A$28 Mn in the same time period besides the investment of around A$43 million in growth capital and exploration. It added that the Australian operations have performed comfortably within the company’s annual guidance range, with gold sales of 155,043oz at an all-in sustaining cost of A$1,250/oz.


Underlying Free Cash flow (Source: Company Reports)

Future Guidance:The company has continued the key trend of increasing stoping tonnages, which accounted for 37% of total ore tonnages in the quarter, reflecting a rise from 33% in the previous quarter and virtually zero a year ago. The company is well on track to meet its aim of 60%. It added that the transition to long-hole stoping is at the centre of its growth strategy and is crucial to ensuring the mine can feed the processing plant when it is expanded to 1.3Mtpa in early 2021.

Stock Recommendation:The net margin of the company stood at 11.0% in FY19, which is in-line with the industry median of 11.0%. ROE stood at 16.0% in FY19, which is higher than the industry median of 12.3%. This implies that the company is providing a decent return to its shareholders against the broader industry. The current ratio of NST stood at 2.08x in the same time period against the industry median of 1.75x, which reflects that the company is in a decent position to address its short-term obligations in comparison to the peer group. When it comes to the past performance of the stock, it produced returns of 24.47% in the time period of six months. On a YTD basis, the stock witnessed a rise of 20.56%. Thus, considering the above-stated facts and current trading levels, we maintain our “Hold” rating on the stock at the current market price of A$10.250 per share (down 7.989% on 17th October 2019, owing to the release of quarterly updates which were not up to the market expectation).

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