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WNS on the Verge of Seeing Reaccelerated Growth in Gross Sales

David Mackey, WNS’ Senior VP of Finance and Head of Investor Relations, was recently at an investor meeting where a lot of interest was shown in the overall story. Investors focused on the company’s efforts to move away from its main travel client as well as the factors that will drive long-term growth.
Analysts felt that the meeting revealed four essential points. Firstly, the company’s effort to move away from the main travel client is going as planned with most the obstacles having been removed. Secondly, analysts feel that the higher concentration on execution WNS is exhibiting will lead to reaccelerated gross sales gains. Thirdly, the company has margin levers as gross sales improve and lastly, WNS will be able to take advantage of its fundamental expertise when moving into nearby verticals and markets, thus increasing its addressable market.

WNS is currently trading at a discount in comparison to its BPO peers, especially against ExlService (EXLS $26.89, rated at Market Perform) and Genpack (G $17.49 rated at Outperform), which analysts feel is baseless considering that trends are improving, especially in relation to gains, significant customer obstacles and execution. The BPO peer group is currently trading at 15 times future earnings, so based just on the expansion multiple, analysts feel the stock can gain an advantage of 30 percent from current trading levels. Also taking into account potential upward adjustments as analysts foresee EPS of $1.9 for FY 2016, with a multiple increase slightly above the peer group, which analysts believe is warranted, stock might gain as much as 50 percent from its current trading level.

Essentially, analysts like WNS shares and recommend a buy. They are maintaining their rating of “Outperform.” In FY2014, approximately 28 percent of sales and a quarter of the company’s travel business was generated by a single client that decided to work with another company. WNS’ management claimed that the transition would have an impact of 4 percent year over year in FY2015, with a majority of the move being completed by the quarter starting in September.

While the reduction of business from a single client is a positive in itself, the company’s management pointed out that WNS was a favored supplier for the company where they are moving these processes. Thus, analysts believe they will be able to recuperate part of the volumes they lost and maybe even gradual wallet share with their new partner. Essentially, analysts expect the travel and leisure business, which is expected to fall by 23 percent in FY2015, to recover in FY2016 and generate 2014 levels of $100 million in revenues.

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