This report is an updated version of the report published on 13 May 2022 at 08:48 AM GMT+1.

Wise PLC (LON: WISE)

Wise PLC (LON: WISE) is an LSE-listed global technology services provider. It offers cross-border money transfer services for personal and business customers in Europe, the United Kingdom, the Asia-Pacific, North America, and internationally.

On 28 June 2022, the Company will release FY22 results.

Growth Prospects

• Solid Customers Growth: The number of active personal customers grew by 26% to 4.1 million during Q3 FY22. Adjacently, the number of active business customers grew by 39% to 250,000 compared to the prior year.
• Quarterly Mission Update: WISE had managed to reduce fees for sending money to United Arab Emirates, South Africa, Kenya, and Ukraine during the first quarter of 2022. Moreover, around 189,000 customers got cheaper fees, while 634,000 experienced a fee increase. Thus, it led to an increase in average fees to 0.61% from 0.60% during the three months period ended 31 March 2022.

Key Risks 

• Weak UK GDP Figures: According to the Office for National Statistics, the UK GDP grew QoQ by just 0.8% during Q1 FY22. Moreover, it had declined by 0.1% in March 2022.
• Russia Sanctions: The recent sanctions put by various nations on Russia may adversely impact the global digital payments industry.
• Bank of England Warning: The Bank of England had trimmed its economic growth forecast for 2023 and is expected to show a contraction of 0.25% from a previously estimated growth of 1.25%. Moreover, it had also warned of UK inflation reaching around 10% very soon.

Key Fundamental and Shareholders Statistics of Wise PLC.

Kaarmann (Kristoi) is the most significant shareholder as it holds nearly 186.86 million shares. 

Q3 FY22 Trading Update (for the three months ended 31 December 2021, as on 19 January 2022)

(Source: Company Filings)

• Operational Progress: The Company had launched Wise card in Canada, Brazil, and Malaysia during the period.
• Take Rate: The Take rate remained around 0.73% during Q3 FY22.

Financial Highlights (for the six months ended 30 September 2021, as on 30 November 2021)

(Source: Company Filings)

• Top-line Growth: During H1 FY22, revenue and gross profit jumped by 33% and 46% year-on-year, respectively.
• Liquidity: As on 30 September 2021, the Company held £5.4 billion of cash and highly liquid investment-grade assets.

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 13 May 2022 at 08:04 AM GMT+1, WISE’s shares were trading at GBX 329.85, down by around 0.86% from the previous day closing price. Stock 52-week High and Low were GBX 1,176.50 and GBX 298.65, respectively.

On a daily chart, the stock price is sustained between the lower Bollinger band and the middle Bollinger band. Hence, there could be an uptick in the stock price in the near term. Also, the 14-days RSI of ~25.55 indicates an oversold territory.

Valuation Methodology: Price/Earnings Approach (FY22E) (Illustrative)

Business Outlook

Wise has gained momentum during Q3 FY22 despite the ongoing Covid-19 induced operational challenges and lockdown restrictions worldwide. The Company has depicted a significant upward momentum in the total revenue, volume, & number of customers and supported more than 4 million customers to complete cross-border transfers in a single quarter during Q3 FY22. In terms of guidance, WISE had anticipated a strong revenue growth of around 30%, while the gross margin is expected to remain between 65-67% during FY22.

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Considering the strong Q3 FY22 results, decent profitability, strong volumes, growth in number of customers, and support from the valuation as done using the above method, we have given a “Buy” recommendation on Wise PLC at the current market price of GBX 329.85 (as of 13 May 2022 at 08:04 AM GMT+1), with lower-double digit upside potential based on 62.14x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

Note 3: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 4:  Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice. 

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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