This morning WiseTech Global Ltd (ASX: WTC) reported its half-year results for the period ending December 31 2018. Below is a summary of the results with comparisons to the prior corresponding half.
- Total revenue of $156.7 million, up 68%
- EBITDA of $48.5 million, up 42%
- EBITDA margin of 31%, down from 34%
- Operating profit of $35.9 million, up 59%
- Net profit of $23.1 million, up 48%
- Earnings per share of 7.6 cents, up 43%
- Dividends per share of 1.5 cents, up 43%
- Maintained guidance for full year revenue between $332m to $335m, representing growth of 45%-51%
- Maintained guidance for full year EBITDA of $102m – $107m, representing growth of 31%-37%
This is another strong result from the software-as-service business that continues to pursue an organic and acquisitive strategy under its founder and major shareholder Richard White.
The business is a market leader in software logistics via its CargoWise One product and continues to invest heavily in tech and product development as it still has a large global market opportunity ahead of it.
While the headline numbers are strong, there are a couple of points for investors to consider.
One minor negative is that the company's EBITDA margin has fallen around 300 basis points or close to 10% largely as a result of its acquisitions reducing margins. This is not a good result, although over the medium term management will want to turn this around.
The second point to note is beyond the company's control.
WiseTech's valuation looks sky high even compared to software-as-a-service rivals such as Altium Limited (ASX: ALU), Nearmap Ltd (ASX: NEA), or peers in the tech-heavy NASDAQ index.
According to its latest Appendix 3B regulatory filing WiseTech has 301,088,405 shares on issue (and another 1.655 million unquoted share rights under the employee long-term equity plan) to give it market value of $6.04 billion even after today's 14% share price fall to $20.09.
In other words at $20.09 it trades close to 18x forward revenue guidance and around 58x forward the mid-point of EBITDA guidance, or around 130x annualised profit of $46.2 million.
Even for a sexy SaaS share this is expensive given it will be hard to maintain growth rates as the business scales further.
So while this looks a high-quality business with attractive economics I'm not a buyer of WiseTech shares given its valuation.
