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Markus Bihler, Builders Union - Stock pick: Wise

Cliona O'Dowd and Glenda Korporaal
The Australian
Dec 3, 2021

Founded by Taavet Hinrikus, who was one of the first employees of Skype and Kristo Kaarman, in London, Wise was created out of a shared frustration over the excessive fees charged by banks to transfer money internationally which would take days to clear.

Whereas a bank would typically charge $40 to 50 to transfer $1000 overseas, Wise charges an all-in fee of $5 to transfer cash via its platform with the money arriving at its destination almost instantaneously. Ten years on, fintech is listed in the UK with a market of 11 billion pounds and this year growing is just under 40 per cent of revenue or 25 percent EBITDA margin.

According to Bihler, the market is poised to grow to over $20trn of money transferred internationally by the end of the decade, driven by personal remittances, cross border ecommerce, international tuition fees medical tourism and real estate investment. That’s up from $12trn in 2020.

“We invest in companies that over proportionally benefit from that expenditure of young consumers,” says Bihler.

They are estimating that the structural shift in consumer behaviors of young people that are typically born between 1981 and 2012, will benefit the potential top line of a company like Wise, because of the 20 per cent structural long term growthspending patterns and the changing behaviours of consumers that are shifting towards fintechs like Wise.

Bihler says the company has strong customer economics that is driving high profitability, with EBITDA margins of 25 per cent and a free cash flow to equity of 20 cents and above per dollar of revenue. Over the next five years, the fund manager expects the target share price to hit 30 pounds by 2027, a 27 per cent five year annualised return.

This article was originally posted by The Australian here.

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