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Computershare Ltd FY19 Results Looking Good

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

Computershare (ASX: CPU) is a technology company that was founded in Melbourne in 1978. Computershare specialises in providing computer bureau services to Australian share registrars. Additionally, Computershare has expanded into employee equity plans, stakeholder communications, corporate governance, fund services, class action administration, deposit protection and most recently, mortgage servicing. Computershare is a global company that manages around 75 million customer records. Computershare has a market capitalisation of A$8.3 billion.

What are the results from Computershare FY19?

Today (Wednesday 14 August 2019) Computershare released its FY19 annual results. The main points are as follows:

  • Sales revenue for FY19 is A$2,411.4 million, up 4.8 per cent from FY18.
  • Statutory EPS for FY19 is 76.57c, up 38.8 per cent from FY18.
  • Dividend per share for FY19 is 23c, up 9.5 per cent from FY18.
  • EBITDA for FY19 is A$685.9 million, up 10.2 per cent from FY18.
  • NPAT for FY19 is A$388.0 million, up 12.6 per cent from FY18.

Specific results on company operations are as follows:

  • Total Employee Share Plans Revenue for FY19 is A$295.9 million, up 29.6 per cent from FY18.
  • Total Mortgage Services Revenue for FY19 is A$624.6 million, up 11.5 per cent from FY18.
  • Total Register Maintenance and Corporate Actions Revenue for FY19 is A$864.6 million, up 2.7 per cent from FY18.

What were the drivers of this result?

The main growth came from Employee Share Plans with an EBITDA growth of 31.6 per cent. This is in light of the completed acquisition of Equatex Group Holding AG (Equatex), a leading European employee share plan administration business on 12 November 2018 that made a strong contribution to this result.

Mortgage services showed growth. The main source of this growth was an increase of 18 per cent in revenue aided from the LenderLive acquisition on 2 January 2019. LenderLive is a leading service provider to the US mortgage industry.

What is the outlook for Computershare?

Computershare announced a new capital management strategy for an A$200 million market share buy-back and a 23c per share final dividend, up 9.5 per cent.

Computershare expects management EPS to be down by around 5.0 per cent in FY20. The two reasons for this result is the delay of platform migration for the UK Mortgage Services and the adoption of IFRS16 accounting for leases. Excluding these two factors, the management EPS forecast would be an increase of around 5 per cent.

The overall outlook for Computershare is positive. Computershare announced increases in revenue from all major operations and a strong balance sheet with leverage ratio below midpoint target range of 1.75x – 2.25x.

What is the market reaction?

The market reaction to Computershare FY19 results is slightly positive. The share price closed on Tuesday (13 August 2019) at A$15.35. Today (Wednesday 14 August 2019) the share price is trading at around A$15.65 (10.40am). This is around a 2.5 per cent increase. Computershare has a P/E ratio in the mid-teens and an annual dividend yield of 2.79 per cent (partially franked).

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978) (“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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