Morningstar wrote that they expected WiseTech to maintain strong growth as they rolled out their service at large third-party logistics clients like DHL, forecasting a compound annual growth rate of 13 per cent over the next decade.
One of the company’s other advantages was a narrow economic moat based on customer switching costs, which has led to a high customer retention rate – 99 per cent – over the past four years.
Also in their favour is a capital-light business model that should keep their balance sheet debt free.
The report will come as some comfort to WiseTech’s champions who were left reeling after an attack by short seller J Capital wiped over $2 billion from the company’s valuation.
J Capital released two reports accusing WiseTech of inflating revenue and growth rates, while making a number of other more outlandish claims, including that some acquisitions had been entirely faked.
Morningstar now believes that J Capital has run out of ammunition and that they and their clients will have already closed out their short positions following the drop in WiseTech’s price.
But Morningstar’s fair value estimate of WiseTech remains at $8.10, substantially below its listed price.
Some of the key risks facing the company were its much larger competitors, including SAP and Oracle, while Morningstar also wrote that disclosure was not extensive as they would like.
One of the other main risks for WiseTech was its dependence on CEO Richard White.
White would be difficult to replace if he were to lose the ability to effectively manage the company or attempt to execute a flawed strategy.
Other risks facing the company included security breach, disruption by new technology and business models, a failure to integrate acquisitions (one of the key accusations in the J Cap reports), legislative risk, decline in trade volumes, and foreign exchange risk.
