Tuesday, October 10, 2017

A current AIM International Fund Holding: WNS (oldings) ADR (WNS) by Matthew Holland "Still a Winning Strategy"

WNS  Holdings ADR (WNS, $35.99): “WNS Making Investors Trust the Process”
By: Matthew Holland, AIM Student at Marquette University


Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

Summary

WNS (Holdings) Limited Sponsored ADR (NYSE:WNS) offers comprehensive data, voice, analytical, and business transformation services to various industries, including travel, banking, financial services, insurance, manufacturing, retail and consumer packaged goods, shipping and logistics, healthcare, and utilities. 

• WNS is well positioned in multiple growing markets.

• Recent acquisitions of Denali Sourcing Services Inc. and HealthHelp look to improve WNS’s finance and accounting solutions and healthcare services, respectively.

WNS’s partnership with Locus Software Limited aims to update ERP systems for shipping companies.

• WNS’s recent strategic initiatives provide optimism for future prospects.

Key points: WNS is currently well positioned in the promising BPO market.  This market is expected to reach $198.9 billion by 2021, representing a CAGR of 4.7%.  As one of the top BPO providers in India, WNS is looking to reap the benefits of this growing market.  Additionally, WNS handles financial contracts to support the growth of financial service providers.  Therefore, the continued growth of the financial sector could provide additional opportunities for WNS.

In January of 2017, WNS acquired Denali Sourcing Services Inc.  This deal will add strategic procurement capability to WNS’s existing finance and accounting solutions.  This acquisition also allows WNS to add end-to-end Source-to-Pay (S2P) solutions to their existing Procure-to-Pay (P2P) capabilities.  In March, WNS acquired HealthHelp to strengthen their end-to-end Healthcare and Insurance BPM offerings.  The expectation is this will provide opportunities to cross-sell services.

WNS announced a strategic partnership with Locus Software Limited in early September.  As part of this partnership, WNS will work with Locus and their Odyssey platform to enable shipping companies to transfer their old ERP solutions to more modern cloud-based solutions.  This will allow for reduced costs, increased operational efficiencies, improved customer service, and reduced time to value for a variety of clients, including Odyssey’s accessed users in 40 plus countries.

In December of 2016, WNS introduced WNS TRAC and announced their partnership with Finnair.  WNS TRAC is an advanced BPM technology-enabled solution with the potential to provide advanced solutions to WNS’s clients.  Finnair is a passenger and cargo airline service provider that could provide improvements to WNS’s current business operations.  Additionally, WNS’s launching of eAdjudicator, InsurACE, and Broker Connect is expected to help accelerate the digitization of their business processes.

What has the stock done lately?

Since the beginning of 2017, WNS’s price has increased by over 33%.  While there are many factors in play, it is notable that roughly 30% of that increase occurred after the acquisition of HealthHelp.  That being said, first quarter organic constant currency revenue still increased 13.3% year-over-year.

Past Year Performance: WNS has increased 22% in value over the past year.  WNS remained in line with EPS estimates during the first quarter of 2017, generating an EPS of $0.45.  WNS had a strong first quarter in terms of revenues, reporting revenues of $175.3 million.   This represented a year-over-year increase of 25.5%.

Source: FactSet

My Takeaway

WNS has been strong of late, and they continue to show promise.  While WNS faces pressures being in a highly competitive environment with constant technological changes, they appear prepared to face those challenges as a competitive player in a growing market.  Recent acquisitions of Denali Sourcing Services and HealthHelp coupled with a strategic partnership with Locus Software Limited look to add to already solid foundations.  Finally, if WNS can deliver on their newest strategic initiatives, WNS can remain an impressive player in the BPO market. 



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