Active Member Straws
#Trading Update
Added 5 months ago

Wisetech has reaffrimed its full year guidance, sayimg it expects revenue growth of 21-29% in FY20, with EBITDA to increase by between 5-22%.

The company said it has $230m in net cash, with a $390m in undrawn debt facilities. It does not intend to raise further cash.

Wisetech said it expects its business to remain resilient, but said its customers faced a great dela of uncertainty.

You can read the full update here

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#FY20 Results
Last edited a month ago

The market likes Wisetech's results.

  • Revenue up 23% in line with  guidance
  • EBITDA up 17%
  • 38% of revenue was from acquired businesses
  • NPAT flat at $52.6m due to increased D&A. With new shares issues, per share earnings were down 4% to 16.4c
  • Cash at $223m and $190m in undrawn debt
  • Reduced trade volmues probably took $10-20m off second half revenue
  • Expecting roughly 9-19% revenue growth in FY21 and 22-42% EBITDA growth

At face value, results appear very strong and the business very resiliant.

But as noted elsewhere, there are concerns over various accounting issues (capitalisation of a large amount of R&D and customer acquisition among others. See here for the Bucephalus Short thesis).

I simply havent done the deep dive to really have a firm view one way or the other. Even if the issues pointed out by the shorts are largely correct, so long as Wisetech can continue to raise cheap capital and successfully integrate and upsell new customers, it could still ultimately succeed.

If the share price weakens considerably, it'll be much harder to sustain the current aggressive acquisition led model and there is much greater dilution potential for existing shareholders.

On latest numbers, shares now trade at a PE of 152 and P/S of 18. Though that's ostensibly high, if the business is indeed cash profitable and considerably larger in 5-10 years, with attractive margins, there's actually a reasonable argument for value. They have a great position in a very large and fast growing market and favourable operating leverage potential.

Of course, if growth ambitions fall short, and the expected SaaS scale benefits -- in terms of real, fully accounted for cash operating costs -- don't materialise, shareholders will likely face significant loss. 

For me, the risk/reward dynamic is not attractive enough at the current price.

Results presentation here 

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#New Acquisition Earnout Arrang
Last edited 4 months ago

28-May-2020:  WTC updates acquisition earnout arrangements

On the surface of it, this seems prudent enough, mostly reducing or closing out future earnouts with 17 of their acquired businesses and replacing significant cash payments with equity (WTC shares).  These negotiations resulted in:

  • Reduction in contingent liabilities overall from $215.5m to $68.5m;
  • Removal of $151.5m of future contingent cash liabilities;
  • Equity issuance of $81.4m of which $45.7m remains escrowed for 12 months;
  • Complete close-out of all future earnouts for ABM Data, CargoIT, Cargoguide, CargoSphere, CustomsMatters, DataFreight (LSI), Microlistics, Pierbridge, SmartFreight, Softcargo, SaaS Trans, Trinium, and Xware; and
  • Replacement of cash earnouts with equity for Cypress, Depot Systems, Forward, and SISA: part immediate equity close-out, and part future equity earnouts of $10.9m based on product development.

In the coming months, they plan to embark on a similar earnout review for a number of remaining acquisitions, which are primarily geographic footholds with product development targets already in place. 

The change in fair value estimate of contingent consideration is expected to necessitate a one-off A$69.5m fair value gain in the 2H20, however this non-cash, non-taxed item does not affect revenue nor EBITDA.   Wisetech Global does not anticipate any impairment of goodwill as a result of these earnout changes.

--- click on link above for more ---

I like the debt and future liability reduction aspect of this, however WTC is around 3.8% down today as I type this.  Maybe the market has been reminded of just how many acquisitions WTC have made over recent years - and the associated risks of that strategy.

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#Trading Update
Added 5 months ago
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