Builders Union’s Markus Bihler has picked the freshly listed London-based fintech Wise as his top pick at the 2021 Sohn Hearts & Minds Conference.
Bihler believes Wise, which listed on the London Stock Exchange in July, offers a superior product to most local banks when transferring money across borders.
“If you compare Wise’s solution to traditional banks, we’re talking about superiority in terms of customer experience across a number of factors, be that price, be that speed, be that convenience or be that transparency,” he says.
Builders Union believes Wise is poised to capture the tailwind of the growing expenditure of young consumers. It expects this demographic will experience 20 per cent growth in its income and expenditure over the next 10 years.
“We’re asserting that the structural shift in consumer behaviour benefits the potential top line of a company like Wise given the 20 per cent structural long-term growth in young consumer spend, but also by the nature of the changing behaviour, shifting wallet shares towards companies like Wise,” Bihler says.
Wise’s net promoter score (NPS) of 76 illustrates the quality of its offering, Bihler says. This compares with an NPS of 18 for traditional banks, and even tops Afterpay’s score of 55 and Apple’s of 68.
“I think the picture here is that customer adoption for Wise, with regards to customer feedback, is more in line with the Apples and Amazons, than with your traditional financial services and banking sector,” Bihler says.
Wise’s high profitability is fuelled by 65 per cent gross margins, or 25 per cent EBITDA margins across the business, which drives attractive free cash flow generation of 20¢ and above, per dollar of revenue. This combines to create an estimated 30 per cent top-line compound annual growth rate over the next three years.
Builders Union expects Wise’s share price will climb to about £30 by 2027, which gives a 27 per cent five-year annualised return.
Bihler warns of three risks Wise could face. The first is the pace of fee compression in the industry and the company; the second is the management’s ability to execute an “arguably ambitious” growth plan; and the third is the development of cryptocurrencies.
This article was originally posted by The AFR here.
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