Wisetech Global Limited (ASX WTC) published its Investor conference and briefing materials today.
The WTC share price rallied 4.59% to $26.30 today on the back of the company’s presentation. It detailed the scope of the company’s business and the impressive growth in revenue and EBITDA expected for FY19.
About WiseTech Global (ASX WTC)
WiseTech Global is an innovative global developer of cloud-based software solutions for the international and domestic logistics industries. Since 1994 it has helped logistics companies efficiently manage the movement of goods and information.
With over 12,000 logistics organizations using its software across 130 countries, its solutions are designed to enhance productivity, functionality, integration, and compliance capabilities.
The company’s flagship product is CargoWise One, an end-to-end logistics solution that forms an integral link in the global supply chain.
Solid growth outlook for FY2019
For FY19, WiseTech Global expects revenue to grow between 47% to 53% to the range $326 million to $339 million compared to FY18.
The chart below shows WiseTech’s impressive trajectory of revenue growth FY2013 onwards.
EBITDA is forecast to leap 28% to 35% to the range $100 million to $105 million.
WiseTech’s growth strategy
WiseTech’s software suite and CargoWise One platform are a globally integrated customs & border-compliance ecosystem that can service 90% of the world’s manufactured trade flows. The company also offers globally integrated international fulfilment e-commerce execution for parcel shipments.
The global logistics mapping and WiseTech’s role is shown below:
The company seeks to enhance its globally successful reach through innovation and expansion of its platform, greater usage by existing customers, getting new customers onto the platform, stimulation of network effects and acquisitions.
Is WiseTech’s strategy working?
WiseTech Global is doing well on various growth parameters. During the first half of 2019, revenue is up 68% over the same period last year to $156.7 million.
The revenue mix is excellent with CargoWise One generating 100% recurring revenue. Overall the company boasts of 89% recurring revenue. For CargoWise One, the annual customer attrition rate has been less than 1% for the last 6.5 years.
The company’s operations are profitable with a high EBITDA margin and cash generative.
EBITDA has grown at a CAGR of 47% over the four years from 1H15PF–1H19.
The company’s relentless innovation drive is visible from its investment in product development, which is 33% of revenue, 47% of headcount and $260 million spends. As a result, WiseTech Global added 3000 new products and enhancements during the last 5 years.
The company has already made three acquisitions this year.
“We continued to deliver high-quality growth in 1H19 with revenues up 68% to $156.7m and EBITDA up 52% to $48.5m, a reflection of our strategy to accelerate WiseTech’s global growth and industry penetration, driven by geographic expansion, relentless innovation and deepening product capability, all of which saw usage by the world’s largest logistics provider increase,” said CEO, Mr Richard White, on the release of the half-yearly results.
The WTC share price has been on a tear since October 2017 and is currently at all-time highs.
The share is therefore expensive compared to peers as shown in the table below:
Even though high growth stocks such as these are expected to trade at a premium, 153x PE is excessively high. It may be prudent to wait for the WTC share price to pull back before considering taking a stake in the company.
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