Today Wisetech Global (WTC) had its AGM...
Today Wisetech Global (WTC) had its AGM at which it reiterated its FY20 guidance of revenue growth of between 26 and 32% and EBITDA growth of between 34-42%. While these numbers are very impressive, the recent short seller report from J Capital research still casts a pall over the stock. After already releasing two rounds of negative reports on the stock, J Cap was back today to reiterate questions it believes are still unanswered despite WTCs detailed rebuttals to those reports. In particular, J Cap is still concerned about related party transactions and stands by its analysis that shows organic revenue growth of just 10% compared to WTCs assessment of 33% growth.
Since don’t have the resources to investigate these claims in detail, and given the fact we hold/held WTC in two of our strategies (ASX Value and ASX Momentum), we decided to reduce our risk exposure to this company by selling the ASX Momentum position (which would have fallen out at the most recent rebalance anyway) and trim by half our ASX Value position. One reason for this decision was the possibility (which we considered to be far from remote) that J Capital would come back with further revelations and contribute to high volatility in the stock. This is precisely what occurred today with the release of this third round of questioning and in response WTC is currently down around 10% on the day. Although the price is still only around the level of our sale price, avoiding this volatility was our main goal.
WTC is still held as a half weighting in our ASX Value strategy and as such today’s decline is an unwelcome development. WTC still well and truly appears in our Value scan and so we are comfortable holding this half position for the time being although we do want to keep open the option of deciding to fully exit the position independently from the model. We will keep members informed but for the time being please continue to hold WTC as a half weighting in the ASX Value portfolio.
Rivkin does not ever provide financial advice. Please consider your own circumstances before purchasing any of our products or acting on our general advice, for any Rivkin product or recommendation.
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