Key Points: 

  • We believe the market still underestimates how much CargoWise, WiseTech’s (ASX:WTC) core product, helps its customers outperform their competition.
  • We believe WiseTech is a kingmaker and greatly influences the success or failure of industry players.
  • In our studies of long-term CargoWise customers, we found their share prices significantly outperformed peers and that CargoWise customers took significant market share. 
  • We reiterate our AUD 90 per share fair value estimate for narrow-moat WiseTech.
  • WiseTech shares continue to screen as undervalued despite the recent rally.

Investor subscribers can view the analysis in full here.

Transcript:


Roy Van Keulen: What you mean by a kingmaker is a company whose products deliver such a boost to their customers that their customers outperform their competition and thereby these kingmakers effectively determine who succeeds or fails within the industry. And to give some famous examples of this Alphabet's Google or Meta's Facebook and Instagram provide such targeted advertising, that customers of theirs outperform competition that uses different products. And we believe WiseTech in a similar vein provides business productivity software that helps their customers outperform their competition.

And when you think about it, it makes sense for productivity software that really works to help deliver that outperformance, because the logistics sector is very focused on cost, right? So if you increase productivity in that sector, your customers will either be taking market share, increasing their margins or taking over competitors. But that's a theory. So we looked to see what this looks like in practice. So we conducted a study into WiseTech's customers and what we found is WiseTech's long term customers outperforms the peer group average in share price performance.

And this peer group is not a group of slouches they outperformed the S&P 500. But WiseTech's customers basically doubled the performance of the S&P 500. So we think it provides strong evidence that WiseTech in fact is a kingmaker. And the reason why that is important as an investor is it just means that there's latent growth within the model even if you don't send out your sales staff or develop new products, both of which WiseTech does do, you still have about 15% growth within the model. So we think there's a lot of hidden strength in the model that the market doesn't fully understand or appreciate.