Welcome to the Fear and Greed business Interview. I'm Sean Almam. In recent years one of the true darlings of the local stock market has been wis Tech Global, and in just the past few months, the tracking company's share price has surged off the back of strong revenue growth forecasts. But while some investors say wise Tech and other tech stocks like Promedicus are getting too expensive, others say these companies are solving a huge efficiency problem for businesses and are setting themselves up for future growth. Remember this is general information only. You should always see professional advice before making investment decisions. Toushco Badgick is head of Australian Equery's Growth at First Centire Investors, a two hundred billion dollar active manager covering around three hundred Australian stocks. Toushco. Welcome to Fear and Greed.

Welcome to the Fear and Greed business Interview. I'm Sean Almam. In recent years one of the true darlings of the local stock market has been wis Tech Global, and in just the past few months, the tracking company's share price has surged off the back of strong revenue growth forecasts. But while some investors say wise Tech and other tech stocks like Promedicus are getting too expensive, others say these companies are solving a huge efficiency problem for businesses and are setting themselves up for future growth. Remember this is general information only. You should always see professional advice before making investment decisions. Toushco Badgick is head of Australian Equery's Growth at First Centire Investors, a two hundred billion dollar active manager covering around three hundred Australian stocks. Toushco. Welcome to Fear and Greed.

Thank you very much, Sean.

Thank you very much, Sean.

Wise Tech Wise Tech What a story it was? I mean probably twelve months ago at one point it was quite out of favor, but since then it's doubled its share price over the past twelve months or so. What is it? Why do people love wystecks so much?

Wise Tech Wise Tech What a story it was? I mean probably twelve months ago at one point it was quite out of favor, but since then it's doubled its share price over the past twelve months or so. What is it? Why do people love wystecks so much?

Well, it's interesting, I mean a lot of column inches are devoted to why whystick isn't a great idea to invest in? And what dominate there is the valuation, and I think therein lies the opportunity. A lot of people look at the high pe and that's where the work and the research stops. One hundred times pe. That's not for me, and people just walk away, Whereas I think that really is disguising the opportunity here. It's a company that listed in April twenty sixteen. It had eight and a half cents per share of EPs back then, and today we're looking at a dollar thirty one forecast of earnings per share in twenty twenty five, So we're talking about fifteen times higher earnings per share than when ipo'd a little over eight years ago. So that impressive track record of growth that it has already achieved, I think is a very good window into its future. It has about half of the world's top twenty five global freightforwarders on its books as customers, and I think has a very bright future and excellent prospects to get quite a few more on board to keep driving that twenty to thirty percent growth in revenues and earnings for share growing north of that thirty to forty percent per annum.

Well, it's interesting, I mean a lot of column inches are devoted to why whystick isn't a great idea to invest in? And what dominate there is the valuation, and I think therein lies the opportunity. A lot of people look at the high pe and that's where the work and the research stops. One hundred times pe. That's not for me, and people just walk away, Whereas I think that really is disguising the opportunity here. It's a company that listed in April twenty sixteen. It had eight and a half cents per share of EPs back then, and today we're looking at a dollar thirty one forecast of earnings per share in twenty twenty five, So we're talking about fifteen times higher earnings per share than when ipo'd a little over eight years ago. So that impressive track record of growth that it has already achieved, I think is a very good window into its future. It has about half of the world's top twenty five global freightforwarders on its books as customers, and I think has a very bright future and excellent prospects to get quite a few more on board to keep driving that twenty to thirty percent growth in revenues and earnings for share growing north of that thirty to forty percent per annum.

Is the software tracking technology better? Is that where it's competitive advantage is?

Is the software tracking technology better? Is that where it's competitive advantage is?

That's a good question. So it provides software to freight forwarders and logistics companies and effectively it's something like straight through processing for all the contract notes and the movements of the goods that need to be booked from the place of production to where the product is consumed. And what Wistek does is it really enables those freightforwards to become very efficient. It lets them grow without putting on staff. It reduces errors and fines. You know, there are a lot of rules and potential sanctions around trade flows, you know, different import and export duties at different size of containers and volume of different products that are being moved. And if you like it, it basically has a data lake where it has all of the information of the movements, all of the information in terms of customs, rules and regulations, and it uses that data to create software which means booking this through is tremendously efficient for freight forwarders. And I think probably the most potent example of how well it does for its customers is the fact that when you look at those top twelve global freight forwarding companies growth rates over the last decade plus. Their businesses have grown by eighty two percent over that decade, whereas freight forwarders that don't use ystec software, which is known as cargo wise one, they have only grown by twelve percent. So it's actually an enabler of market share gains for its customers. So it's really solving an efficiency problem and Australians being in a very high labor cost economy, I think it's actually pretty natural for good Australian software engineers to be does designing products that add to productivity and reduce the units of labor and I think that's really been the story of success for wyse Tech, and I think the decade ahead looks quite prospective as well.

That's a good question. So it provides software to freight forwarders and logistics companies and effectively it's something like straight through processing for all the contract notes and the movements of the goods that need to be booked from the place of production to where the product is consumed. And what Wistek does is it really enables those freightforwards to become very efficient. It lets them grow without putting on staff. It reduces errors and fines. You know, there are a lot of rules and potential sanctions around trade flows, you know, different import and export duties at different size of containers and volume of different products that are being moved. And if you like it, it basically has a data lake where it has all of the information of the movements, all of the information in terms of customs, rules and regulations, and it uses that data to create software which means booking this through is tremendously efficient for freight forwarders. And I think probably the most potent example of how well it does for its customers is the fact that when you look at those top twelve global freight forwarding companies growth rates over the last decade plus. Their businesses have grown by eighty two percent over that decade, whereas freight forwarders that don't use ystec software, which is known as cargo wise one, they have only grown by twelve percent. So it's actually an enabler of market share gains for its customers. So it's really solving an efficiency problem and Australians being in a very high labor cost economy, I think it's actually pretty natural for good Australian software engineers to be does designing products that add to productivity and reduce the units of labor and I think that's really been the story of success for wyse Tech, and I think the decade ahead looks quite prospective as well.

What's the risk with wys teach, Because every time you invest in something there's a plus and a minus to it all. What would you be worried about with wys Tech?

What's the risk with wys teach, Because every time you invest in something there's a plus and a minus to it all. What would you be worried about with wys Tech?

Yeah, that's a really good question. I'm less worried about its competitor set now looking at the next decade than I was seven or eight years ago when we first first started looking and researching the company and the reason being is there are very few companies that cut you know, when you get an RFP a a request for proposal, quite often these days it's only Wystech. So really, the software that Wisick is now displacing is the internal software, the internal system of a freight forwarder, and that's been stitched together over a series of decades, and it's literally breaking out the seams. Businesses don't have the budget, all the expertise to actually update the software. So really display seeing the internal piece of software or system that's been used that's now creaking out the scenes because it hasn't been developed for the best part of a decade or more so, I don't see too much in terms of the competitor set. There were a couple of competitors that you used to hear about, but they're not even showing up at these RFPs and so really the key investment risk, if you like, and this is where I do agree with the critics, is evaluation. You know, when you do have a pe of a one hundred times, you do need to deliver. And like I said, the last decade's been about cargo wise generating thirty three percent compound annual growth in revenues and higher growth in earnings per share, and you know there is an expectation in the marketplace that that continues at this kind of pee evaluation. But I think the prospects are very good and I can talk about why that's the case in a minute.

Yeah, that's a really good question. I'm less worried about its competitor set now looking at the next decade than I was seven or eight years ago when we first first started looking and researching the company and the reason being is there are very few companies that cut you know, when you get an RFP a a request for proposal, quite often these days it's only Wystech. So really, the software that Wisick is now displacing is the internal software, the internal system of a freight forwarder, and that's been stitched together over a series of decades, and it's literally breaking out the seams. Businesses don't have the budget, all the expertise to actually update the software. So really display seeing the internal piece of software or system that's been used that's now creaking out the scenes because it hasn't been developed for the best part of a decade or more so, I don't see too much in terms of the competitor set. There were a couple of competitors that you used to hear about, but they're not even showing up at these RFPs and so really the key investment risk, if you like, and this is where I do agree with the critics, is evaluation. You know, when you do have a pe of a one hundred times, you do need to deliver. And like I said, the last decade's been about cargo wise generating thirty three percent compound annual growth in revenues and higher growth in earnings per share, and you know there is an expectation in the marketplace that that continues at this kind of pee evaluation. But I think the prospects are very good and I can talk about why that's the case in a minute.

So just jump into that because I'll want to move off wise tech, but just quickly, so how can it keep sustaining this sort of growth rate?

So just jump into that because I'll want to move off wise tech, but just quickly, so how can it keep sustaining this sort of growth rate?

Yeah, just really quickly. I think it's become essentially the micro Soft Excel or the Microsoft three six five of freight forwarding. You get to a point when your product is helping you game market share so effectively that the people who don't use you have to use you as a matter of survival. It's like Excel and word word Perfect and Quatro might have been better products twenty five years ago, but you can't emailsing a Quatro or a word perfect documents to anyone off The three six five has become industry standard. I think cargo wise one and cargo Wise next, which is an next iteration, is industry standard.

Yeah, just really quickly. I think it's become essentially the micro Soft Excel or the Microsoft three six five of freight forwarding. You get to a point when your product is helping you game market share so effectively that the people who don't use you have to use you as a matter of survival. It's like Excel and word word Perfect and Quatro might have been better products twenty five years ago, but you can't emailsing a Quatro or a word perfect documents to anyone off The three six five has become industry standard. I think cargo wise one and cargo Wise next, which is an next iteration, is industry standard.

Stay with me, do We'll be back in a minute. My guest today is Doshco Bagic from First Centire investors. I want to move on to pro Medicus, the medical imaging company. That's another one of those Australian software based companies that seems to have done way beyond what anyone expected a few year years back. What's behind its run?

Stay with me, do We'll be back in a minute. My guest today is Doshco Bagic from First Centire investors. I want to move on to pro Medicus, the medical imaging company. That's another one of those Australian software based companies that seems to have done way beyond what anyone expected a few year years back. What's behind its run?

Yeah, that's a good question. Again, these are companies that are generating thirty percent plus revenue growth converting into forty percent growth in earnings. Those numbers are pretty similar to what I just quoted in terms of why stacks, So please don't think that this is something that happens commonly. They're rare assets, their prices rare assets. In the case of Promticus, you know, it's just superior image viewing software. So they design software that radiologists use to view images and diagnose images. And they have both a return on investment argument because they increase productivity. So basically a radiologist can get through twenty to thirty percent more scanned images and diagnoses per day off the back of using the viewer. The visage viewer, but also has a clinical benefit in terms of accuracy of diagnosis. So when you put those two things together, it's pretty powerful. And the other thing that's interesting is clearly it takes ten, fifteen, twenty years to create a radiologist. They're not getting created at the same rate as there is growth in terms of images being scanned and required diagnostics. So you know, it's solving an inherent bottleneck where you don't have enough radiologists to view and diagnose the amount of images which is sort of growing four or five percent peranum, and so you know, it really is solving for that equation.

Yeah, that's a good question. Again, these are companies that are generating thirty percent plus revenue growth converting into forty percent growth in earnings. Those numbers are pretty similar to what I just quoted in terms of why stacks, So please don't think that this is something that happens commonly. They're rare assets, their prices rare assets. In the case of Promticus, you know, it's just superior image viewing software. So they design software that radiologists use to view images and diagnose images. And they have both a return on investment argument because they increase productivity. So basically a radiologist can get through twenty to thirty percent more scanned images and diagnoses per day off the back of using the viewer. The visage viewer, but also has a clinical benefit in terms of accuracy of diagnosis. So when you put those two things together, it's pretty powerful. And the other thing that's interesting is clearly it takes ten, fifteen, twenty years to create a radiologist. They're not getting created at the same rate as there is growth in terms of images being scanned and required diagnostics. So you know, it's solving an inherent bottleneck where you don't have enough radiologists to view and diagnose the amount of images which is sort of growing four or five percent peranum, and so you know, it really is solving for that equation.

In both as cases Wistech and Promedicus, they're in sectors that are growing, so it's not just what they're good at, they're actually operating in areas where the demand is growing as well.

In both as cases Wistech and Promedicus, they're in sectors that are growing, so it's not just what they're good at, they're actually operating in areas where the demand is growing as well.

Yes, if I can just quickly step back, the underlying market for Promedicus is inverted commas, only growing at four to five percent in terms of volume, but because of its contract wins, the revenue for Promedicus is growing north for thirty percent peranum. And also it's also the case that within Wysteck, the underlying freight forwarding market, it's only growing one to three percent, but again it's the market share gains that means that they can convert that into thirty percent plus growth for themselves. So the underlying market while it's growing. It's not stellar growth. It's actually the product gaining tremendous market share and then allowing the customers of the product to gain market share within market that creates that explosive growth rate.

Yes, if I can just quickly step back, the underlying market for Promedicus is inverted commas, only growing at four to five percent in terms of volume, but because of its contract wins, the revenue for Promedicus is growing north for thirty percent peranum. And also it's also the case that within Wysteck, the underlying freight forwarding market, it's only growing one to three percent, but again it's the market share gains that means that they can convert that into thirty percent plus growth for themselves. So the underlying market while it's growing. It's not stellar growth. It's actually the product gaining tremendous market share and then allowing the customers of the product to gain market share within market that creates that explosive growth rate.

Okays, So what about Zero? Where's this? Where does that company sit in terms of kind of the successful Australian tech groups.

Okays, So what about Zero? Where's this? Where does that company sit in terms of kind of the successful Australian tech groups.

So I would argue Zero is close to being as dominant as Promedicus and Weistek are in their respective markets. When it comes to Australia and New Zealand, it really does own the cloud accounting SME product set in terms of market share, in terms of the efficacy of its product and how well it's growing and how hard it is to displace. But when it comes to offshore market, nowhere near as dominant, whereas Promedicus dominates in the US and wise dominates in Europe and is really gaining a lot of sharing and Asia now as well. But when it comes to Zero, it has a very good market position in the UK where we can see elements of it being able to replicate Australia New Zealand in terms of its success, but in terms of the US it is a distant second player to the dominant player which is owned by into It. Quick Books isn't the product which dominates off the back of its TurboTax product, and so we've never really put anything in our modeling or evaluation for success in the US for zero. But I think with a new management team which is largely North American based and has an amazing track record in terms of their previous careers at Silicon Valley companies, for the first time the business has reasonable prospects for gaining some market share and a decent footing in the US. So we're hopeful that that may play out over the next five to ten years, although we're not putting anything in terms of our forecast in there just.

So I would argue Zero is close to being as dominant as Promedicus and Weistek are in their respective markets. When it comes to Australia and New Zealand, it really does own the cloud accounting SME product set in terms of market share, in terms of the efficacy of its product and how well it's growing and how hard it is to displace. But when it comes to offshore market, nowhere near as dominant, whereas Promedicus dominates in the US and wise dominates in Europe and is really gaining a lot of sharing and Asia now as well. But when it comes to Zero, it has a very good market position in the UK where we can see elements of it being able to replicate Australia New Zealand in terms of its success, but in terms of the US it is a distant second player to the dominant player which is owned by into It. Quick Books isn't the product which dominates off the back of its TurboTax product, and so we've never really put anything in our modeling or evaluation for success in the US for zero. But I think with a new management team which is largely North American based and has an amazing track record in terms of their previous careers at Silicon Valley companies, for the first time the business has reasonable prospects for gaining some market share and a decent footing in the US. So we're hopeful that that may play out over the next five to ten years, although we're not putting anything in terms of our forecast in there just.

Yet to just cover we're out of time. But we've just spoken three success stories. When you're looking at tech stocks looking for growth, obviously, what is it I mean, are the common elements that you really want to see in tech stocks with long term growth prospects visa the other textocks. There's plenty of textalks around, right and there are a bunch of duds as well. What is it that you're looking for at tech stock?

Yet to just cover we're out of time. But we've just spoken three success stories. When you're looking at tech stocks looking for growth, obviously, what is it I mean, are the common elements that you really want to see in tech stocks with long term growth prospects visa the other textocks. There's plenty of textalks around, right and there are a bunch of duds as well. What is it that you're looking for at tech stock?

Well, alignment is always really important, product efficacy and what market share of a large addressable market do you have In the case of Promenicus and Wistek, we're blessed by the fact that we've got long term founders who are managing this business with a ten twenty year of you and their interests are very aligned with minority equity holder interests. You know, it's not always the case.

Well, alignment is always really important, product efficacy and what market share of a large addressable market do you have In the case of Promenicus and Wistek, we're blessed by the fact that we've got long term founders who are managing this business with a ten twenty year of you and their interests are very aligned with minority equity holder interests. You know, it's not always the case.

You know.

You know.

Probably Seek is an example of a company that was really performing well twenty years ago, but it's sort of had a lost decade. If you look at the earnings for share of Seek, it's actually twenty percent lower than it was ten years ago, compared to Wyse, whose earnings is fifteen times higher. So not all growth stocks are made equal, and so that's the lens through which we sort of try and pick the stocks that we put inside our funds.

Probably Seek is an example of a company that was really performing well twenty years ago, but it's sort of had a lost decade. If you look at the earnings for share of Seek, it's actually twenty percent lower than it was ten years ago, compared to Wyse, whose earnings is fifteen times higher. So not all growth stocks are made equal, and so that's the lens through which we sort of try and pick the stocks that we put inside our funds.

DUIs, thank you for talking to Fear and Greed.

DUIs, thank you for talking to Fear and Greed.

Thank you Sean.

Thank you Sean.

That was douschco budget head of Australian Equities Growth at First Centier Investors. This is the Fear and Greed Business Interview. Remember this is general information only, and you should seek professional advice before making investment decisions. Join us every morning for the full episode of Fear and Greed Daily business years for people who make their own decisions. I'm Sean A. Elmer. Enjoy your day.

That was douschco budget head of Australian Equities Growth at First Centier Investors. This is the Fear and Greed Business Interview. Remember this is general information only, and you should seek professional advice before making investment decisions. Join us every morning for the full episode of Fear and Greed Daily business years for people who make their own decisions. I'm Sean A. Elmer. Enjoy your day.