Stock Update

Wisetech Global (WTC:ASX)

21 Aug 2019
Wisetech Global Limited designs and develops cloud-based logistics software solutions. The Company offers forwarding, custom clearance, liner and agency, warehousing, and land transport solutions. Wisetech Global operates worldwide.

WTC, another one of our tech holdings in the value Strategy,reported its full year numbers this morning and it’s hard not to be impressed by this company. It is by no means cheap, but given the scalability of the business, its market leading position and the potential size of the market in which it operates, this company won’t be cheap for a long time and really should be growing at double digit plus rates for many years still.

The WTC stock has had a huge year, so a great result was needed to keep the party going, and it certainly looks like WTC has delivered by beating consensus expectations across the board and guiding to a huge year for FY20. The company’s main product, CargoWise One, continues to have an attrition rate of less than 1% and the EBITDA (earnings before interest, tax,depreciation and amortisation) margins were an incredible 48%.

And while CargoWise is already being used by 25 out of the top 25 Global Freight Forwarders it remains early in its market penetration life cycle which is the basis of its acquisitive strategy – that is, it buys into market positions that would take years to build, and then rolls out its technology into these new markets. It means that while each new acquisition is diluting its incredible margins, the dilution is temporary and ultimately expands its market reach far quicker than what would be achievable organically.

The stock has bounced this morning on the announcement which is impressive considering the market is down 1%, and with the solid numbers it seems likely WTC will remain in the portfolio for the time being.



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