22 August 2024

Update my valuation range to $103 ($92 - $123) based on full model update, anchored of 2024 result and FY25 guidance.

In this case I have dropped more highly leveraged scenarios on the basis that RW maintains a conservative balance sheet, as $WTC continues to invest heavily (organically and inorganically) as it seeks to build the operating system for global logistics.

4 March 2024

Changing my valuation range to $80.00 ($62.00 - $96.00)

I'll try and keep a very long story short here: I know its only two weeks since I updated my $WTC valuation, But after watching the CommSec interview with Rickard White, I realised that with the major exapnsion into landside logistics, as well as AI exploitation, $WTC is significantly stepping up its rate of investment in the platform - both in absolute terms and as a % revenue. (see figure below) with capitalisaed development actually increasing 30% ove the PCP, I actually missed this last week, and was only prompted by the interview to go back and look at my model.

Graph from 1H FY24 Results

However, ORGANIC revenue for the half grew only 15% and organic revenue for Cargowise grew only 19%, and the delay of the new release of Cargowise means that we might reasonably expect this to flow through to H2.

I missed the full implications of this in my re-run of my valuation model last week, and was probably lulled into a false sense of security by seeing all the broker vals. moving significantly upwards (Confirmation Bias?).

So, I took a harder look at my revenue growth and margin evolution scenarios, generating the following distribution of valuations.

In the valuation range quoted above,I've ignored the levered valulation in the higest growth scenario, because in this case the reinvestment rate is higher and management is more likely to run a more conservative balance sheet.

My Mean (p10% - p90%) ranges as shown is $80.00 ($62.00-$96.00)

Minor tweaks to other parameters, but model largely as below (WACC 9%; growth in CV is 3.5% from 2043)

21-Feb-2024

Updated DCF model following 1H FY24, with major revisions to my valuation posted 11 months ago $71.00 ($49 - $98)

Valuation scenarios combining two sets of scenarios:

a. Unlevered: ($70.30 to $99.50), with one higher scenario of $130, which is rejected as starting revenue growth of 22% is considered too high for now, given the lower report organic revenue growth today, albeit it is noted that Cargowise organic is still growing at 19%.

b. Levered at 1.0x EBIDTA (phased in to 2029): ($77.55 to $111.02) rejecting high value of $147, as above)

Revenue Growth: Range of scenarios for annual revenue growth of 20% and 17% in 2024 tapering down to 16% - 14.5% (2032) and 11% (2042)

Margin Evolution ($84.64 unlevered scenario) - see graph below

Other Model Updates

• Continuing Value growth rate 3.5% (unchanged)
• WACC = 9% (updated from review of sources. Note last valuation used 10%, so reduction in WACC in line with market is offset by reduced revenue growth scenarios). You really can get whatever you want!

Observations

• With $WTC having spent c. $800m in acquisitions since the last model update, the revenue profile is uplifted and flattened.
• Margins are eroded in the next next two years, but recover over time in line with guidance indicated today for FY25.
• Will recalibrate based on the FY24 result - should only require minor adjustments, given the guidance provided.
• Premium over analyst models appears mainly due to longer term model horizon, which is justifiable given the analysis performed in last year's $WTC deep dive, assuming $WTC succeeds in building the "operating system for global logistics).

Important Disclaimer:

Prepared for my personal use and information only. Not to be used as a basis for investment decisions. The underlying models are not validated to be free from error.