WZR Significantly Undervalued vs Market Leader, page-69

That was a nice run.

Traders probably got a little bit ahead of themselves here. I don’t know anything about technicals/charts but the fundamentals in my view can definitely support a price above 10c. It started to go vertical (perhaps off the SPT hype?) so a pullback was pretty normal.

I’d rather it trade sideways around this level for a while and allow some larger investors to accumulate, instead of just taking off on low volume. That would set it up for another run.

The ASX query is fair enough although WZR did originally explain the delay in loans sold exaggerating outflows for the qtr. Outside of that the cash burn was as expected and there doesn’t appear an imminent need to raise unless they see an opportunity to do so. Perhaps mid year. 

It’s open for debate but I think this is a company where you don’t necessarily want them to push for cash flow break even too quickly if the opportunity to grow remains so attractive. They’re capturing customers cheaply through their personal loan product and particularly Wisr Credit with approaching 20k customers. They’ve had over $1 billion of applications for loans, which shows you the extent of the growth opportunity but also how strict they are being on lending only to prime borrowers. The App launches soon and the national marketing campaign just got underway. If Wisr can become a recognisable brand then the stock is massively undervalued.

In the US similar businesses are valued on a multiple of the user base to reflect the LTV of the customers acquired while the business runs at a loss due to heavy investment in growth, meaning profit multiples can’t be applied. If the market started to do this to WZR the stock would move a lot higher. No guarantee it will though and you could probably argue some of the VC funded companies in that space are overvalued so a direct comparison may not be appropriate.

But without a doubt if they continue to approach Society One in size then the valuation gap will have to close between the current $35m (WZR) and Society One ($200m).

The ‘corporate transaction’ mention is interesting. There is an opportunity to consolidate the sector although I expected WZR to do it medium term when they are larger. If they think now is the right time then I’m all for it.It could also relate to new funding agreements or strategic equity stakes.

It would be interesting if a VC/tech firm took a stake at a premium as it would highlight the valuation discrepancy for WZR as a public entity vs if it was VC funded. Similar to how Matrix with APT set a bit of a price floor.Let’s wait and see, but it sounds positive.

The good thing about the recent run is that it is now on the market’s radar. Investors will see it as a way of playing the fintech thematic which I think has further to play out. And it should get a good response if they release any positive news flow.I’m happy to take some profits along the way but I intend to hold a material position for as long as these guys continue to execute as I think there is the opportunity to build a sizeable company here, albeit with the usual risks.

I still stand by the view it will trade above 10c, it just won’t get there in a straight line! I think it has the potential to go on a BID type run eventually.

Just my opinion, reassess after half yearly report.