{"id":3790,"date":"2019-10-17T15:57:31","date_gmt":"2019-10-17T05:27:31","guid":{"rendered":"https:\/\/strawman.com\/blog\/?p=3790"},"modified":"2019-10-17T15:57:33","modified_gmt":"2019-10-17T05:27:33","slug":"the-short-attack-on-wisetech-wtcasx","status":"publish","type":"post","link":"https:\/\/strawman.com\/blog\/the-short-attack-on-wisetech-wtcasx\/","title":{"rendered":"The Short Attack on Wisetech (WTC:ASX)"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Market darling <a href=\"https:\/\/strawman.com\/member\/company\/forecasts\/WTC\"><strong>Wisetech<\/strong><\/a> (ASX:WTC) is the biggest listed Australian tech company and a leading provider of software solutions to the logistics industry globally. They develop the software solutions that enable logistics service providers to facilitate the movement and storage of goods and information, domestically and internationally.<\/p>\n\n\n\n<p>Today, two hours after market open, a short seller report from research house J Capital was released and quickly sent the share price down 10% before Wisetech requested a trading halt. The following shows the main accusations: a possible 178% overstatement of profit since listing, and disguising of slowing organic growth. <\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img fetchpriority=\"high\" decoding=\"async\" width=\"359\" height=\"494\" src=\"https:\/\/strawman.com\/blog\/wp-content\/uploads\/2019\/10\/WTC-1.png\" alt=\"\" class=\"wp-image-3791\" srcset=\"https:\/\/strawman.com\/blog\/wp-content\/uploads\/2019\/10\/WTC-1.png 359w, https:\/\/strawman.com\/blog\/wp-content\/uploads\/2019\/10\/WTC-1-218x300.png 218w, https:\/\/strawman.com\/blog\/wp-content\/uploads\/2019\/10\/WTC-1-45x62.png 45w\" sizes=\"(max-width: 359px) 100vw, 359px\" \/><\/figure><\/div>\n\n\n\n<p>There is also an interesting breakdown of a calculation the company made comparing revenues of acquired platforms. This  allegedly involved comparing the sum of the last two years of acquired revenue to just that of the previous year, giving a larger than realistic 200% increase. <\/p>\n\n\n\n<p>The legitimacy of the claims will take some time to determine and there is, of course, two sides to every story. WiseTech will no doubt be working feverishly to defend the allegations and provide a counter-narrative. As such, the decision to suspend trading in the company&#8217;s shares is certainly a sensible move.<\/p>\n\n\n\n<p><strong>Is Wisetech a sell?<\/strong><\/p>\n\n\n\n<p>The business has many attractive characteristics in the eyes of investors, as it&#8217;s largely software based product has very low attrition, a high proportion of recurring revenues and high gross margins. Although the history of acquisition led growth is rife with disappointment, WiseTech has ostensibly managed to prosecute the strategy well, so far (these allegations notwithstanding).<\/p>\n\n\n\n<p>They are also clear leaders in their industry and have significant market penetration already, calling 43 of the top 50 third party logistic companies, and all of top 25 global freight forwarders their customers.<\/p>\n\n\n\n<p>As a result, Wisetech has seen a 49% compounded annual growth rate in both revenues and operating profit (EBITDA) since FY15 &#8211; certainly well above most ASX listed companies. However, such growth has resulted in investors placing the $9.51 billion company on a highly elevated P\/E multiple of 170, even after today\u2019s fall.<\/p>\n\n\n\n<p>By \u201cnormal\u201d valuation metrics, it would seem the potential downside is significant &#8211; especially if the legitimacy of the books is under question. On the other hand, though, it must be remembered that with FY20 guidance of $450 million revenue (up 29%), and $149 million EBITDA (up 38%), such a premium may well be warranted if the high rate of growth can be sustained. <\/p>\n\n\n\n<p>Wisetech is currently ranked at #36 on Strawman, but is trading well above the community consensus valuation. Create your free member profile to dig deeper into what other investors are saying.<\/p>\n\n\n\n<div class=\"wp-block-button aligncenter\"><a class=\"wp-block-button__link has-background has-secondary-background-color\" href=\"https:\/\/strawman.com\/member\/company\/forecasts\/WTC\">Click here for Wisetech (ASX:WTC) share price &amp; research<\/a><\/div>\n\n\n\n<p class=\"has-text-color has-background has-very-dark-gray-color has-very-light-gray-background-color\"><em>Strawman is Australia&#8217;s premier online investment club. Join for free to access independent &amp; actionable recommendations from proven private investors.<\/em><\/p>\n\n\n\n<div class=\"wp-block-button aligncenter\"><a class=\"wp-block-button__link has-text-color has-very-light-gray-color has-background has-tertiary-background-color\" href=\"https:\/\/strawman.com\/member\/landing\/signup\">Register for free ASX recommendations<\/a><\/div>\n\n\n\n<p><em><strong>Disclaimer\u2013<\/strong> The author may hold positions in the stocks mentioned in this publication, at the time of writing. The information contained in the publication and the links shared are general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. For errors that warrant correction please contact the editor at admin@strawman.com.<\/em><\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p style=\"text-align:center\" class=\"has-text-color has-cyan-bluish-gray-color\">This Service provides general financial advice only, and has not taken your personal circumstances into account. Strawman Pty Ltd operates under AFSL 501223 . For more information please see our <a href=\"https:\/\/strawman.com\/member\/landing\/terms\">Terms of use<\/a>. Please remember that share market investments can go up and down and that past performance is not necessarily indicative of future returns. Strawman Pty Ltd does not guarantee the performance of, or returns on any investment.<\/p>\n\n\n\n<p style=\"text-align:center\" class=\"has-text-color has-cyan-bluish-gray-color\">\u00a9 2019 Strawman Pty Ltd. All rights reserved.<\/p>\n\n\n\n<p style=\"text-align:center\">| <a href=\"https:\/\/strawman.com\/member\/landing\/privacy\">Privacy Policy<\/a>&nbsp;|&nbsp;<a href=\"https:\/\/strawman.com\/member\/landing\/terms\">Terms of Service<\/a> | <a href=\"https:\/\/strawman.com\/member\/landing\/fsg\">Financial Services Guide<\/a> | <\/p>\n\n\n\n<p style=\"text-align:center\" class=\"has-text-color has-cyan-bluish-gray-color\">ACN: 610 908 211 | Australian Financial Services Licence (AFSL): 501223<\/p>\n","protected":false},"excerpt":{"rendered":"<p>what does this mean for shareholders?<\/p>\n","protected":false},"author":13,"featured_media":3792,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-3790","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - 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