Wise PLC

Wise PLC (LON: WISE) is a global technology services provider. It offers payment network and money transfer services. It processes over £5 billion cross-border transactions every month.

On 28 June 2022, Wise expects to release its FY22 results.

Investment Rationale – Buy at GBX 432.40

• 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.
• Revenue Guidance: WISE had anticipated strong revenue growth of around 30%, while the gross margin is expected to remain between 65-67% during FY22.
• Financial Growth: During H1 FY22, revenue and free cash flow showed a year-on-year jump of 33% and 39%, respectively.
• Technical Indicator: From a technical standpoint, the momentum oscillator, 14-day RSI (31.07) is in the oversold position, while the stock price is trading around the lower Bollinger Band.
• Stronger Margins: In comparison with the industry median, Wise reported a higher net margin and EBITDA margin in FY21 of 7.3% and 17.2%, respectively.

Recent News

Board Appointment: On 1 April 2022, Wise appointed Clare Gilmartin, as Chair of the Remuneration Committee, effective from 1 April 2022.

Risk Assessments

• Record UK Inflation: British inflation hit a 30-year high of around 6.2% during February 2022, which may cause a further interest rate hike. Moreover, the ongoing geopolitical tension in Ukraine and Russia can exacerbate inflation concerns and impact the risk appetite of investors.
• Gloomy Outlook: The year 2022 is expected to be the year of inflation, Central Bank tightening, and wage pressure. All these factors can hurt the corporate profits and equity markets.

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

 (Source: Company Website)

• Top-Line Business: The Company’s revenue grew year-on-year by about 34% and quarter-on-quarter by around 13% during Q3 FY22.
• Increased Operational Presence: The Company had launched the Wise card in Canada, Brazil, and Malaysia, with the Wise account, and going live in Malaysia.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY23E)

*Peers: Endava PLC, Tungsten Corp PLC, and Smart Metering Systems PLC.

*All selected peers are LSE-listed Companies from the Industrials sector.

Conclusion

Wise has given a strong start to Q3 FY22 despite the ongoing Covid-19 induced operational challenges and lockdown restrictions worldwide. Moreover, the Company had shown a significant year-on-year and quarter-on-quarter growth in top-line revenue and volumes during Q3 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.

Based on strong Q3 FY22 trading update, strong guidance, 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 432.40 (as of 12 April 2022, at 8:05 AM GMT+1), with lower double-digit upside potential based on 57.34x Price/NTM Earnings (approx.) on FY23 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.’

Note 5: Dividend Yield may vary as per the stock price movement.

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 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 unfavorable movement in the stock prices.

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