WiseTech Global Downgrades Revenue Guidance
Logistics Software Company, WiseTech Global has defied criticisms and proceeded with its acquisition spree, picking up Swiss-based logistics provider SISA Studio Informatica for $15.5 million. The decision came after repeated criticisms that its valuation is attributed to third-party acquisitions, instead of organic growth. CEO Richard White believed that the purchase would provide his firm additional annual revenues of approximately $12.4 million and earnings of $500,000.
Prior to this, WiseTech acquired South Korean peer Ready Korea for $20 million, which consisted of $13.2 million of upfront payment while the remainder depended on the financial performance of Ready Korea. Headquartered in the capital city of Seoul, Ready Korea provides a cross-border compliance solution which assists in the lodgement of electronic transactions to the Korean Customs Services, including verifications of Free Trade Agreements.
Likewise, Mr White was of the view that this particular buy would provide the company with a crucial platform in Asia. Specifically, Korea plays a vital role in Asia and the world’s supply chain, given that it is the eighth largest export market globally. While strengthening its international reach across Asia remains one of Mr White’s priority, he too expressed plans for potential targets within the region. Presently, Ready Korea’s operations will be incorporated within WiseTech Global, with the company to continue to offer its solution directly to its existing customers, along with CargoWise One overtime.
More recently, the firm bore the brunt of its first major miss, with its shares plummeting 27 per cent. In mid-February, the $6.8 billion firm issued a guidance downgrade for the 2020 full year due to the slowdown in manufacturing in China. Consequently, this led to more than $2.6 billion being wiped off the company’s market capitalisation. WiseTech lowered its earnings before interest, tax, depreciation and amortisation forecast from a range of $145 to $153 million to $114 million to $132 million. Additionally, revenue guidance was lowered by more than one-third to $420 million - $450 million.
From a broader point of view, the rate at which WiseTech acquires business has been one of the key issues highlighted by short-seller J Capital Research in its recent attacks on the company. More notably, the firm has purchased close to 40 customs and logistics software firms since it $170 million IPO in 2016. In its most recent saga, J Capital was of the view that the tech giant is using the coronavirus epidemic as an excuse to conceal the fundamental weaknesses concerning the business.
J Capital accused WiseTech of a variety of things, including shielding Australian subsidiaries from audit scrutiny, failing to properly consolidate purchased companies as well as inflation of revenues, among others. Yet, these allegations were completely denied by the firm. Despite Mr White’s reassurance that the impact of coronavirus on supply chains would be short-lived, the announcement revived fears on WiseTech’s stock which was already on a downward trajectory since the firm downgraded earnings.
By Caroline Wong
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