Forum Topics WTC WTC WiseTech Global Ltd General Discussion
Strawman
4 years ago

WiseTech's latest bolt-on is another reminder of the risks with their acquisition fuelled strategy.

While there's definite strategic value in strengthening the network and acquiring customers, the prices being paid are quite staggering.

This latest acquisition in SISA will cost as much as $24m, but is only generating $12m in revenue and 500k in EBITDA. 2x sales for a low margin business! They'll no doubt cut out some costs and improve efficiency, but still!

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Strawman
6 years ago

Adding Wistech to my Scorecard today. 

I am almost certainly jumping in too soon here. But I know I have no skill at timing the market, and am simply being informed by the fact that shares are now ~10% below my estimate of intrinsic value.  

If I had been given the chance to buy shares at ~$16.5 a month or two ago, I would have jumped at the chance. Nothing fundamental has changed since then -- only market sentiment.  

Would not be surprised to see shares drop a lot further, after all they are still on a forward PE of 84! But if they do, i'd be tempted to add another position to my scorecard. Somehow, I think that in 2025 I wont care that I didnt get the best possible entry point :)

 

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Strawman
6 years ago

fingers crossed!

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Strawman
6 years ago

Thanks for the great Straws Bear77.

Just a small technical note, you can create multiple Straws under the same Hashtag, which hopefully keeps things a bit 'cleaner' and helps keep various perspectives more sensibly grouped.

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Bear77
6 years ago

Yes, I realise that. I also realise that when I added my first "Risks" straw, it was placed ABOVE the previous "Risks" straw (by MrMessy I think it was) which I was replying to. Therefore I assumed that with my 2nd "Risks" straw (which was necessary because of your 2,500 character limit on straws), it would be placed ABOVE my first "Risks" straw, which would not make sense. By creating the new hashtag, it forced the straw below my previous one (due to the straws being listed in the alphabetical order of the hashtags). With this forum post, you have all the posts placed below the previous ones, as they should be. This allows flow and readability. That's what you also need to have with straws posted within the same hashtag. As things stand now, you have one system in the forums (last post appears last) and the opposite in the straws (last straw appears first).

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Strawman
6 years ago

ah, I see your point. At present, Straws are ranked according to likes, and then by time added. The idea is that -- at scale -- a user will first see the most widely endorsed perspectives. Kind of like what Reddit does. That way, you don't have to scroll through a lot of unendorsed, or even disliked, Straws to get to the better content. And new content is always marked as 'unread' (and you can filter the page to only show these), if you want to easily see what's new. The Character limit is to try and encourage concise posts (similar'ish to what twitter does). With each post being specific to a certain aspect of the company. So, for example, your Straw could have some of the content under #management, some under #Business Model etc. Of course, what I think is best, and what users prefer may be two entirely different things, and I'm really a pragmatist with these things -- give the members what they want! Either way, these things are easily changed. In this specific case, perhaps extending the character count is the easiest solution. This is why running a beta is so valuable -- you get to see exactly how users interact with the system, and what tweaks are necessary. I'll continue to monitor and will look to amend these settings if necessary. Thanks again for the feedback, it's very much appreciated.

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Strawman
6 years ago

Someone help me out -- I simply can't get my head around WiseTech's valuation.

Take the consensus EPS forecast for 2020 (25cps), which is almost double what it will earn this year. Let's double it again and give it a PE of 40 (yes, 40!). That gives a share priuce of $20 in two years time, which gives a 8.5% annual return between then and now (exc. dividends).

Maybe i'm underestimating the longer term growth potential, or what the market will be willing to pay...

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Bear77
6 years ago

You wouldn't be buying or even holding WiseTech on valuation grounds. It's a momentum play. Altium is another one. These companies that trend this well are easy to ride up, and you can jump off when you've made enough profit, or when you think the trend is turning (or when it has clearly turned). The people riding these companies aren't looking at fundamentals - they're looking at the trend, and the trend is their friend. When a company is trading at levels that assume growth that is ridiculous to expect within a reasonable investing timeframe, fundamentals become pretty meaningless, and a BIG correction is usually inevitable at some point. It's just a matter of how long it takes. Some people back themselves to pick the turning points of these trends, and so will ride these companies as long as they see that the upward trend is intact. Others, like me, will jump off when they see the downside risks as being too high. I sold my WiseTech within the last fortnight. Probably too early, but I'm happy with the 40% that I made on them this year. I also made money on WiseTech last year playing the momentum, even though I got out too early last year as well. I don't normally invest this way, but it does work, especially in companies like Altium and WiseTech which trend so well. Most of my investments ARE based on fundamentals. But not WiseTech.

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Strawman
6 years ago

Interesting, thanks Bear77. Funny you mention Altium; that was another one I couldn't justify the valuation of (as much as I also love that business). And, as such, missed out on plenty of further upside. I'm happy to admit I have no skill whatsoever with market timing, so will continue to sit on the sidelines until the valuation becomes more justified

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