Munro Partners partner and portfolio manager Kieran Moore at the Sohn Hearts & Minds conference in Sydney. Picture: Renee Nowytarger
Munro Partners partner Kieran Moore believes London-listed money transfer company Wise could see its share price soar 50 per cent by 2025, as its problem-solving business model gains traction while benefiting from higher interest rates.
Global growth fund manager Munro has about $4.3bn in funds under management across four global funds, and usually invests in companies that are poised to win from massive structural change.
Pitching Wise at the 2023 Sohn Hearts & Minds Investment Leaders Conference in Sydney on Friday, Mr Moore said he believed investors were still on time to invest early in a “unique opportunity” at the start of its journey.
At its core, Wise was a company trying to solve “a huge problem” affecting millions of people transferring over $US10 trillion ($15.5 trillion) between currencies globally each year, Mr Moore said — the problem of very slow and very expensive cross-border money transfers.
“Currently, this problem is being solved by a slow, expensive and arduous process,” he said.
“If a person wants to transfer $100 to Brazil … we’ve got several days of transfers between partner banks … several days of regulatory and compliance checks, only to arrive at its destination, four or five days later, with lots of little hidden fees taken along the way.”
Wise had found a solution for that problem and had grown its customer base to over 10 million users and £100bn ($190bn) of volume since it was founded in 2011 by Estonian businessmen Kristo Käärmann and Taavet Hinrikus, Mr Moore said.
“What Kristo and Taavet effectively created was a solution to help meet those financial commitments using various currencies within the Wise network instead of physically transferring money across borders.”
Wise’s digital network, which sits outside the banking system, has enabled the company to capture customers by word of mouth and retain them, as more get lured by the low fees and quick transfers. Over 90 per cent of the company’s transfers are done within 24 hours.
Today the company operates in 170 countries, and Mr Moore said that one of the best testaments of its success was the leveraging of its network.
“White labelling the Wise business to be used by other businesses all around the world,” he said.
FULL COVERAGE: 2023 Sohn Hearts & Minds Investment Leaders Conference
Mr Moore said that in an environment with rising interest rates, Wise was also benefiting from holding balances in different currencies and getting paid the higher interest rates on them, “thereby boosting their earnings”.
Wise shares have traded sideways since listing at £8 in 2021. They last traded at £7.01 per share. The company earlier this week reaffirmed income forecasts for the 2024 financial year at £498m, up 25 per cent from the previous year.
Mr Munro believes Wise can generate just over 30 pence in earnings per share by the end of its fiscal 2025 financial year.
“The appealing part of this is we don’t have to pay for those revenue models like the other fintechs out there,” he said.
“Today we have a unique opportunity to invest in Wise that is at the start of this massive problem for only £7bn of market capitalisation.”
Munro is one of the seven core fund managers contributing the top investment ideas for the Hearts & Minds listed investment vehicle HM1, which donates parts of its fees to charities and also invests in the ideas presented at the conference.
This article was originally posted by The Australian here.
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