Morningstar | Wisetech's FVE Increased to AUD 6.60 Following More Acquisitions and Guidance Upgrade
We have increased our fair value estimate for narrow-moat Wisetech Global to AUD 6.60 per share following two further acquisitions and an increase in earnings guidance. At the current market price of AUD 15.59, we still believe the shares are significantly overvalued despite the 37% share price fall since August. The price/earnings ratio is 68 based on the market price, or 27 if based on our fair value estimate. However, Wisetech capitalises a large proportion of research and development costs, and if these were expensed, the market-implied P/E would increase to 119 and the fair-value-based P/E to 48.The acquisitions of DataFreight and SmartFreight increase the number of acquisitions undertaken in 2018 to 12. Further acquisitions are likely as the company seeks to expand its global platform, but we don’t explicitly factor any into our financial model. Like previous acquisitions, DataFreight and SmartFreight are relatively small, costing just AUD 24 million versus Wisetech’s market value of AUD 4.7 billion, and they contribute just AUD 1.4 million in EBITDA. On the surface, these acquisitions look expensive, but Wisetech aims to quickly establish footholds and expertise in new geographies in order to increase sales of its CargoWise One software and expand its global expertise and capabilities.
Although management only increased revenue and EBITDA guidance by 2%, we have increased our fiscal 2019 revenue forecast by 5% to 358 million (10% above guidance) and our EBITDA forecast by 5% to AUD 125 million (20% above guidance). Our forecasts were already higher than guidance, and we are comfortable remaining above guidance, as Wisetech has consistently increased and exceeded guidance over the past three years and we expect it to continue undertaking acquisitions. We estimate organic revenue growth was 29% in fiscal 2018, versus the headline rate of 44%, and our new fiscal 2019 forecast assumes a headline revenue growth rate of 62% and an organic growth rate of 25%.
WiseTech Global is engaged in providing software solutions to the logistics industry across more than 125 countries. Co. develops, sells and implements software solutions that enable logistics service providers to facilitate the movement and storage of goods and information domestically and internationally. Co.'s customers range from small and mid-sized regional or domestic enterprises to large multi-national companies.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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