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WNS (Holdings) Ltd. (WNS)
Neutral Equity Research
In-line 2Q and outlook confirm improved growth prospects; Neutral
What's changed
WNS reported September-quarter operating results that were largely in
line with expectations. Management updated its FY12 revenue guidance
slightly to $388-$404 mn (+5%-9% yoy) vs. $387-$407 mn previously.
Guidance for adjusted net income was also relatively unchanged at $44-
$47 mn ($43-$47 mn prior). Organic revenue growth for the quarter
finished at +5.3% yoy, above our 3.3% estimate, while the adjusted
operating margin of 15.4% was a touch lower than our forecast (-30 bp) on
a comparable basis. We raise our FY12/FY13/FY14 adjusted EPS (excluding
amortization and stock comp) modestly to $1.00/$1.12/$1.21
($0.99/$1.10/$1.21 prior) reflecting reported results and updated currency
assumptions. Our 12-month price target of $11 remains unchanged.
Implications
We maintain our Neutral rating, as we believe WNS’s growth profile will
continue to trail its offshore BPO peers in the near to medium term. That
said, 2Q results confirm that its organic revenue has turned the corner
given two consecutive quarters of positive growth, and its business has
stabilized given improving margins, operating metrics, and free cash flow.
In addition, we view the company’s recently filed shelf-registration as a
positive step toward increasing its free float, as we believe that low trading
liquidity and associated risks have been one of the investing deterrents for
existing and new shareholders since WNS’s IPO.
Valuation
Our 12-month price target of $11 is based on a weighted average model
incorporating our sector relative Investment Framework, CY12E P/E, CY12E
EV/EBITDA, and an M&A value; it implies a CY12 P/E of 10.1X our adjusted
EPS of $1.09 (+4% yoy).
Key risks
Downside: (1) Lower revenue growth and margins. Upside: (1) Higher
revenue growth and margins. (2) M&A.
INVESTMENT LIST MEMBERSHIP
Neutral
Coverage View: Neutral
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
WNS (Holdings) Ltd. (WNS)
Neutral Equity Research
In-line 2Q and outlook confirm improved growth prospects; Neutral
What's changed
WNS reported September-quarter operating results that were largely in
line with expectations. Management updated its FY12 revenue guidance
slightly to $388-$404 mn (+5%-9% yoy) vs. $387-$407 mn previously.
Guidance for adjusted net income was also relatively unchanged at $44-
$47 mn ($43-$47 mn prior). Organic revenue growth for the quarter
finished at +5.3% yoy, above our 3.3% estimate, while the adjusted
operating margin of 15.4% was a touch lower than our forecast (-30 bp) on
a comparable basis. We raise our FY12/FY13/FY14 adjusted EPS (excluding
amortization and stock comp) modestly to $1.00/$1.12/$1.21
($0.99/$1.10/$1.21 prior) reflecting reported results and updated currency
assumptions. Our 12-month price target of $11 remains unchanged.
Implications
We maintain our Neutral rating, as we believe WNS’s growth profile will
continue to trail its offshore BPO peers in the near to medium term. That
said, 2Q results confirm that its organic revenue has turned the corner
given two consecutive quarters of positive growth, and its business has
stabilized given improving margins, operating metrics, and free cash flow.
In addition, we view the company’s recently filed shelf-registration as a
positive step toward increasing its free float, as we believe that low trading
liquidity and associated risks have been one of the investing deterrents for
existing and new shareholders since WNS’s IPO.
Valuation
Our 12-month price target of $11 is based on a weighted average model
incorporating our sector relative Investment Framework, CY12E P/E, CY12E
EV/EBITDA, and an M&A value; it implies a CY12 P/E of 10.1X our adjusted
EPS of $1.09 (+4% yoy).
Key risks
Downside: (1) Lower revenue growth and margins. Upside: (1) Higher
revenue growth and margins. (2) M&A.
INVESTMENT LIST MEMBERSHIP
Neutral
Coverage View: Neutral
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