WZR is the most oversold stock on the ASX

I just spent 2 hours talking through the market with a fund manager that is very close to management and the team at Wisr. My takeway is that Wisr is the most oversold stock in an oversold market, and the easiest 2x-3x that anyone will ever make. Here’s why:

1. The company has $46M of cash available. Compare that cash position to ANY other sub $100M value company on the asx – and NONE of them are growing at the rate wisr are. This means at its current market cap, the EV is only circa $50M for the company, which is crazily cheap.

2. Last half they reported a $6m cash loss from operations. But this was BEFORE transitioning to the new funding model with nab. As disclosed in their update, they previously made ciurca $1200 per $30k loan they wrote in their off balance sheet model. NOW, they book circa $10k revenue per $30K loan, an almost 10x revenue gain on their operations OVERNIGHT, but only commencing in the last 5 week of the previous half. I

3. If you apply this revenue run rate forward, you’re looking at wisr generating $20m-$30M revenue in FY21, WITHOUT MUCH growth at all from what they are currently doing. That easily gets them into profitable territory.

4. The non-cash items from last half were all pretty much one off’s, and wont re-occur. In fact, they did something smart and booked the next 3 years of share based incentives into that half, which means they’ve cleared the decks for the numbers for the next few halves.

5. The new accounting standard is a change yes, and that creates a impact on P&L, but if you actually work out the provision number, its only 2% provisioning of bad debts – with the new standard and auditors sign off this is what wisr are taking in full up front for the life of those loans they wrote. A signed off, audited 2% provision with the new accounting standard means there’s no hiding the quality of the loans they write. Make no mistake about it, they are writing loans as good, if not better quality than the banks.

6. Through every recession/downturn – prime consumer lending has performed well! The stats that were shown to me, and I’ve since looked up also, show that yes yield does reduce, but lenders who lend to PRIME customers still have strongly performing loan books through a crisis.

7. As a prediction, we should through a downturn expect wisr’s current NIM of 7-8% on their loan book going forward, to maybe reduce to 4-5%, as we’ve seen through the GFC on prime unsecured personal loan books. This makes wisr still VERY PROFITABLE during a downturn (when people are also looking for more credit!)

8. Good, strong businesses like wzr that lend to prime customers do well through downturns, and come out even stronger (they same cant be said for those lending into higher YIELD areas like SME, sub—prime, pay day lending etc)

I thought wzr was slightly overbought at 34c, just ahead of its time given we hadnt seen the numbers from a full half on the new model yet, though I do think long term they will be north of that. But fair value based on their cash position, and strength of business model at the moment has to be in the 22-28c range, even in the middle of all this noise and COVID. The next few reports coming out from the business, now they are running the new model, and with all the cash they have on hand will change people’s minds very quickly on this stock.

Those who have the courage to go against the sentiment here are going to be making bags on this stock (and a few others also atm). But right across the whole market, I think by far and away WZR is the most oversold stock, with people not understanding how strong the underlying business actually is, hw strong their balance sheet is, and when the tide turns, it will be pushed back through into the high 20’s in quick order.

I've backed the truck up on this stock at this price.