The WiseTech Global Ltd (ASX: WTC) share price is down 1% (and down 4% from its day-high) after giving a customer update.
WiseTech Global is a worldwide software provider of the CargoWise offering, which assists the global freight and logistics sector.
Relationship with DSV
The company said in an ASX that it noted ongoing media and online speculation about the status of its commercial relationship with DSV and wanted to provide clarification.
WiseTech said that DSV remains an active WiseTech customer and that DSV’s CargoWise transaction volumes have grown by around 20% in the last six months after the acquisition integration of DB Schenker. The user count has grown by 3%, which WiseTech said has demonstrated DSV’s ability to extract efficiency from CargoWise.
The ASX tech share also said that WiseTech and DSV are each committed under an existing contract, which includes a “substantial financial commitment until September 2028”.
The third element that WiseTech highlighted that the parties continue to discuss potential additional collaboration opportunities, including in relation to the period beyond September 2028.
WiseTech said that CargoWise’s deployment within its large global freight forwarders, can take between five and seven years to roll out and extract all available ynergies.
The company noted that factors like “powerful core capabilities, substantial carrier, port and border agency integrations, complex large customers data integrations, substantial additional logistics modules that extend well beyond international forwarding, and the transition from manual to highly automated operations, require substantial planning, training and implementation.”
It also said that CargoWise’s efficiency and execution synergies are substantial, once deployed globally, across all trade lanes, making it very sticky and hard to replace, as demonstrated by its less than 1% customer attrition rate for the last 14 years. It expects any changes to be long-term and very gradual.
Management commentary
The WiseTech CEO Zubin Appoo said:
During my recent meeting in Denmark with DSV CEO Jens Lund and his leadership team, I reiterated that we deeply value our long-standing relationship with DSV and remain committed to supporting its business and identifying opportunities to deliver additional value over time.
We have been proud to support DSV since the roll out commenced in 2007. The roll out was largely complete by late 2014, prior to the acquisition of UTi by DSV. Over nearly two decades, both organizations have grown significantly, and our partnership has evolved along with that growth.
CargoWise has expanded significantly in its global capabilities over the last two decades, in part because of DSV, and CargoWise has played an important role in supporting DSV’s world class operational efficiency and proven acquisition integration capability. DSV’s skillful use of CargoWise has contributed to WiseTech’s own progression as a leading global logistics technology provider.
We look forward to our continuing engagement with DSV’s leadership. We see meaningful opportunities to further strengthen the relationship, particularly through the potential adoption of our AI Workflow Automation and the New Commercial Model, which have the ability to deliver further significant productivity improvements and operational efficiencies across DSV’s global business.
Final thoughts on the WiseTech share price
Clearly, the WiseTech share price has dropped a long way over the last year – around 70% in the past six months. It’s a lot cheaper, but management seem to be suggesting investors can still be positive about its outlook with customers.
There are other ASX growth shares that may not face as much potential adjustment from AI, but the company could benefit from implementing AI through its business, rather than it being a pure negative.
It’s possible WiseTech could be undervalued, though the scrutiny about Richard White isn’t helping investor optimism. I’d still prefer to buy other ASX growth shares.
