Wise plc.
WISE.L at 311.7 pence in London
Also:
Pink sheet WPLCF at $3.83 in the US
ADR WIZEY (even less liquid) at $3.795 in the US
This is exactly the sort of firm you wouldn’t expect me to post about.
A Europe-based fintech crashing from its highs, and I think the boss is in the news for some tax issues.
Oh, and in an industry close to that of Wirecard, the biggest financial fraud in recent European history with entertaining associated scandals.
Price crashing, but very hard to value.
Headline P/E is 10390.
But, ignoring all that sturm und drang it’s a very interesting company.
Some figures:
(in UK reporting, comprehensive income from gains/losses on investments goes on a separate line at the end after “Profit for the year”)
In millions of pounds
2019 2020 2021 2022 3y CAGR YOY
Revenue 177.9 302.6 421.0 559.9 46.5% 33.0%
Gross profit 110.4 188.1 260.5 371.9 49.9% 42.8%
Operating profit 12.2 23.6 44.9 48.7 58.6% 8.5%
Profit for the year 10.3 15.0 30.9 32.9 47.3% 6.5%
Comprehensive profit 11.9 16.6 24.1 18.4 15.6% -23.7%
Shareholders' Equity 126.4 196.8 285.3 409.2 47.9% 43.4%
So, the first perhaps surprising things to note are that this is a company that is both very fast growing, and has been profitable for five years.
It’s not just vapourware.
The other thing, since it’s the falling Knives board, is that the price is down 73.5% from its high last September, a couple of months after they went public.
If you don’t know their basic business of international money transfer, it’s very interesting.
It’s like a modern day digital “hawala” network, if you’re familiar with those.
Rather than actually moving money between countries when you ask them to, which takes time and costs money, they have a moderately capitalized subsidiary in every country.
You pay them in one country, and the subsidiary in the other country pays the payee directly right away.
So it’s a bookkeeping entry that’s moving, not your money.
I believe they later move the money themselves in big blocks from time to time to keep the subsidiaries balanced.
This process is extraordinarily cheap and efficient, so they are eating the lunch of a lot of traditional money movers by undercutting them by a mile.
You can have an account with them holding balances in multiple currencies.
They have also introduced such wonders as multi-currency credit card.
You can charge things in multiple currencies, and it creates multiple balances on the card.
You can pay off each of the multiple balances with your choice of currency.
Including paying off each one in the currency it was charged in, so there is no FX cost to you at all.
So, interesting business that is profitable and growing fast and probably worth a lot.
And the price has crashed.
Alas, I have little idea how to connect those two dots…what’s it actually worth?
Who knows if it has gone from crazy to expensive or expensive to cheap?
What metric would get you a handle on that?
They are profitable, but the profits are not yet big enough to form the basis of a valuation exercise via P/E.
I think the business is probably a good investment, at the right price.
I do not currently have a handle on what the right price might be.
I would start with this sort of approach:
Market cap is 4.44bn pounds, so they’re at about 5.8 times sales.
Operating profit margin is around 8.5%. We can estimate what fraction of that would turn into net profit on a normalized basis.
Growth rate still north of 30%/year, but we should assume that will slow.
By projecting some growth rates, revenues, operating margins, and net margins, we can estimate
what today’s price represents as a multiple of the average profits 5-10 years out.
It will be wildly off, but much better than investing just because the price is down by 3/4.
If that multiple is under 12, (and the approximations are reasonable OK), it will probably be a profitable entry.
If under 10, probably a very good move.
Jim