Wise PLC (LON: WISE)

Wise Plc is an FTSE listed Information Technology Company based out of the United Kingdom. WISE was founded in 2010 and is headquartered in London, the United Kingdom. It offers cross-border money transfer services to both business and retail customers. Geographically, it provides services in the UK, Europe, North America, the Asia-Pacific, and the Rest of the World. Its products include Wise Account, Wise Transfer, Wise Platform and Wise Business. Through Wise Account, the Company offers multi-currency banking services. Customers can send money abroad using Wise Transfer. Wise Platform offers account features and payments to the customers such as banks, financial institutions, credit unions, etc. Small and medium businesses can use Wise Business to open business accounts with mass pay-outs, multi-user access, bank feeds, etc.

Technological trend and advancements

Wise Plc strives to build convenient, instant, transparent and eventually free cross-border money transfer. WISE’s money transfer technology replaced the outdated slow corresponding banking system for international money transfer. The Company built its own global payment infrastructure and connects directly to the banks by eliminating intermediaries. It makes the process both faster and cost-saving. After a customer initiates an international money transfer, WISE’s system makes the international payment immediately to the recipient. WISE maintains close relationships with regulators globally. The Company has a global customer support function to maintain its global operations. Overall, WISE’s operations reduce cost, increase speed and provide transparency and convenience to its customers. The management strives to achieve zero cost of international money transfer in future.

Growth Prospects

• Efficient and faster international money transfer: WISE bypasses the intermediaries while transferring money internationally unlike the traditional banking system worldwide. By connecting directly to the banks, the Company delivers money instantly to the international recipient.
• Much lower cost: WISE’s transaction costs are much lower than leading traditional banks as well as PayPal. Driven by its unit cost reducing infrastructure, WISE charges eight and six times less than traditional banks and PayPal, respectively. The Company plans to achieve zero cost of transfer eventually.
• Multi-currency transfer facility: The Company enables customers to convert their currencies instantly. Customers could handle money digitally in more than 50 currencies without using a debit card.
• FCA licence: The Company received licence from FCA to offer a new product. This could lead to WISE offering its business and retail customers the option of holding their money in different asset types on their WISE account.

Key Risks

• Disruptive technologies: Any disruptive product or service by a competitor could take away the market share of the Company, unless it continuously innovates and progresses as per the evolving customer requirements.
• Macro-economic shocks: Macroeconomic changes could reduce the demand for WISE’s offerings. If businesses materially alter the way they operate, it could have an impact on the Company’s business.
• Legal and regulatory changes: The Company is reliant on licences in different geographies. Hence, any changes in laws and regulations of countries where WISE operates or plans to operate, could have a material impact on strategic execution.
• Data security: As the Company processes sensitive data, any breach in data security could damage the reputation of the Company. Also, it could affect the future revenue streams of Wise Plc.
  

Now we will analyse some key fundamental and shareholders statistics of Wise PLC.

Recent Development 

Admission to the London Stock Exchange: On 7 July 2021, Wise Plc announced the listing of its entire issued class A ordinary share capital to the London Stock Exchange.

Financial and Operational Highlights (for three months ended 30 June 2021 as of 20 July 2021)

(Source: LSE Website)

• Wise Plc in Q1 FY2022 launched its operations in India, allowing Indians to transfer money internationally with lower fees and at the real exchange rate.
• The Company has partnered recently with Temenos, Shinhan Bank, Thought Machine, Google Pay, etc. It would allow more businesses and retail customers to use WISE’s international money transfer mechanism.
• WISE has reduced its pricing by 2bps to 0.67% in 19 currencies in Q1 FY2022.
• Driven by an uptick in average volume per customer as well as a surge in the number of customers, total volume in Q1 FY2022 rose 54% YoY.
• However, due to 6bps reduction in the take rate, YoY revenue growth was lower than the YoY volume growth. Revenue in Q1 FY2022 surged 43% YoY.
• WISE has made it more convenient for its customers to receive money, with more than 1 million customers could receive money using just their email addresses.
  

Financial Ratios (FY2021)

 Share Price Performance Analysis

  (Source: Refinitiv, Research done by Kalkine Group)

On 6 August 2021, at 7:35 AM GMT, WISE’s shares were trading at GBX 970.40, up by 0.04% against the previous day closing price. Stock 52-week High and Low were GBX 1,029.80 and GBX 796.00, respectively.

On a daily chart, WISE's price is sustaining above 20-day EMA of about GBX 961.60 and 20-day SMA of about GBX 963.70, indicating the possibility of an upward movement.

In the last three months, WISE’s stock price has delivered a decent positive return of ~10.23%. It has outperformed the FTSE All-Share Industrial Support Services index with a return of around 3.75%.

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

Business Outlook Scenario

WISE delivered an excellent performance in Q1 FY2022, with revenues rising 43% YoY. It was achieved with a volume increase of 54% YoY. The management has made several partnerships to reach out to more people. It has also reduced its average fees. The management remains focused on continuous investments in product and technology, which provides further confidence for FY2022 and beyond. The Company is benefitting from its efficient and faster international money transfer, much lower cost leading to lower pricing, multi-currency transfer facility, and FCA licence to offer new innovative product going into FY2022. The listing of WISE on the London Stock Exchange is an important step towards achieving the company’s next phase of growth.

Considering the excellent performance in Q1 FY2022, the reduction in pricing, increasing demand from customers, the Company’s investment in technology and products, improved profitability of the business, and support from the valuation as done using the above method, we have given a “BUY” recommendation on Wise Plc at the current price of GBX 970.40 (as on 6 August 2021 at 7:35 AM GMT), with lower-double digit upside potential based on 204.53x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

 

*All forecasted figures and Peer information have been taken from Refinitiv.

*The reference data in this report has been partly sourced from Refinitiv.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached. Resistance level 2 is at 52 week high and if Wise Plc attains momentum or breach it, then target price as per valuation table could be seen in the near term as per technical chart analysis.

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