WiseTech Global Limited

 

WTC Details
 
Sale of Shares by Founder & CEO, Richard White: WiseTech Global Limited (ASX: WTC) is a leading developer and provider of software solutions to the logistics execution industry globally.
 
Change in Shareholding: In a recent announcement to the exchange, the company updated that RealWise Holdings Pty Ltd, a company controlled by WiseTech Global Founder and CEO, Richard White, has disposed 2,445,653 shares for a consideration of $18.4 per share via off-market trade.The shares sold form ~0.76% of the total issued capital of WiseTech Global Ltd. Mr. White confirmed his intent to remain a significant shareholder of the company for a long-term, with voting control over ~151 million WiseTech Global shares, representing ~46.9% of the issued capital. Since listing, the CEO has disposed WiseTech Global shares only once in December 2017, to facilitate liquidity. The recent release of shares via RealWise represents a step to fulfil his personal financial commitments. He further added that he confides in the company’s long-term potential and is committed to its growth strategy. Earlier, Mr. White offloaded 206,439 shares for an average price of $22.02 per share between 22 to 26 June 2020 via on-market trades.

Acquisition Earnout Arrangements Updated: The company recently restructured previously agreed acquisition earnouts, to accelerate their contribution to CargoWise development, and further improved commercial efficiency. The arrangements were closed out efficiently, removing significant contingent cash obligations and reducing future contingent liabilities. Overall contingent liabilities were reduced from $215.5 million to $68.5 million. Future contingent cash liabilities worth $151.5 million were removed. Future earnouts for ABM Data, CargoIT, Cargoguide, CargoSphere, etc., were completely closed.
 
1HFY20 Highlights: During the half-year ended December 2019, the company reported a 31% increase in revenue, with 99% of recurring revenue for its CargoWise platform.EBITDA margin for the period stood at 30%. Organic revenues from existing and new CargoWise customers delivered growth of $24.3 million on pcp, reflecting revenue from new products and features, increased usage by existing customers, onboarding of new sales, etc.
 

Financial Highlights (Source: Company Reports)
 
Trading Update: In a recent trading update for the 3 months to 31^st March 2020, the company stated that performance has been in-line with expectations, reflecting continued growth in revenue, cash generation from operations and further onboarding of additional users, offsetting COVID-19 disruptions. As on 31^st March 2020, the company had net cash amounting to $230 million and an undrawn debt facility of $190 million.
 
Outlook:With accelerated digital transformation, the company expects demand for global technology and integrated platforms such a CargoWise, to increase. The business is tracking in-line with expectations, with near-term focus on critical technology development, cost, cash and capital efficiency, and establishment of a competitive position, globally. The company also reaffirmed its FY20 revenue guidance of $420 million - $450 million, representing growth in the range of 21% - 29%. EBITDA for the year is expected between $114 million and $132 million, with growth ranging between 5% and 22%.
 
Key Risks: In the recent years, the company has completed a number of strategic acquisitions, which requires product development and transitioning of customers to the CargoWise One platform. As a result, the company is exposed to the risk of failure in such transition due to lack of resources. Moreover, the acquisition strategy has resulted in an expanded presence in international markets, exposing the company to political, legal or economic instability in different jurisdictions. Another key risk relates to the continuously evolving technological landscape, which can render the company’s products obsolete in a highly competitive market.

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


EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of the company gave positive returns of 24.86% in the last three months as at 29 June 2020. At the current market price of $19.350, the stock has a high P/E multiple of 403.88x. We have valued the stock using the EV/Sales multiple based illustrative relative valuation method and have arrived at a price correction of lower double-digit (in percentage terms). Considering the valuation, a high P/E multiple, and suspicion around the disposal of shares by the founders, we advise investors to book profits and give a “Sell” recommendation on the stock at the current market price of $19.35, down 2.223% on 30^th June 2020.

 
WTC Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.