Wisetech Global Placement - Past Deal Did Well but Valuations Looks Stretched

SELL WiseTech (WTC AU): Slowing Growth, Negative Real Cashflow and Blackbox Accounting

Director | Exposing Creative Accounting, Bucephalus Research Partnership

Robert Medd

Director | Exposing Creative Accounting

Exposing Creative Accounting

Bucephalus Research Partnership

Bucephalus Research Partnership Limited. Exposing Creative Accounting.

At the Bucephalus Research Partnership (BRP) we analyse financial statements using our accountant's practical experience and our own quantitative algorithms for corporate governance, accounting risk and peer performance.

Our thematic research refines our unique algorithms while our single stock research focuses on examples where we discover a significant gap between published accounts and business reality.

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Forensic Accounting

<p>WiseTech trumpeted its H1 results: revenue +31% and EBITDA +29% as vindication of the model.  The problem is that growth is M&amp;A driven, revenue at key customers was flat or down, like-for-like profit margin fell, pre-financing cashflow was negative, acquisitions are performing worse than expected and, having said “no capital raises” in April, they issued equity in May. The metrics they use are obtuse and useless for measuring their real performance, but it is quite clear that asset returns are collapsing. A roll-up with a 4% return on investment on 15x sales and 300x business cashflow looks over-priced. SELL</p>

WiseTech trumpeted its H1 results: revenue +31% and EBITDA +29% as vindication of the model.  The problem is that growth is M&amp;A driven, revenue at key customers was flat or down, like-for-like profit margin fell, pre-financing cashflow was negative, acquisitions are performing worse than expected and, having said “no capital raises” in April, they issued equity in May. The metrics they use are obtuse and useless for measuring their real performance, but it is quite clear that asset returns are collapsing. A roll-up with a 4% return on investment on 15x sales and 300x business cashflow looks over-priced. SELL

WiseTech (WTC AU): Smoke and Mirrors, Sell