Stocks’ Details

Computershare Limited

FY20 Guidance Revised:Computershare Limited (ASX: CPU) is engaged in the provision of investor services, employee share plan services, business services, communication services, etc. The company has a network of transfer agencies, licenses dealers, corporate trusts, etc, which provide the above services to the clients. In a recent announcement, the company updated that Abigail Pip Cleland acquired 181 ordinary shares for a total consideration of $2,753.01, on account of securities allocated under the dividend reinvestment plan.

1HFY20 Highlights: During the half-year ended 31^st December 2019, the company reported revenue amounting to $1,141.7 million, up 1.2% on the prior corresponding half. EBITDA went up by 2.2% and stood at $338.7 million. EPS for the period stood at 29.12 cents, down 16.7% on pcp. During the period, the company reported strong revenue growth from Employee Share Plans and US Mortgage Services, with a rise of 24% and 43%, respectively. The period was also marked by a strong performance of US Register Maintenance services, that outperformed industry trends.


1HFY20 Results Summary (Source: Company Reports)

Guidance Update: The company notified that due to significant changes in interest rate markets and volatility of financial markets, the company revised its margin income revenue guidance and earnings guidance for FY20. Margin income revenue is expected to go down by ~25% on FY19, as compared to the previously guided decline of 8-10%. Management EPS which was earlier expected to go down by ~5%, will now be down around 15% in comparison to FY19. For FY20 and FY21, the company is expected to report margin income revenue around $185 million and $115 million, respectively. For FY22, the revenue is expected to be modestly lower on pcp.

Valuation Methodology:Price to Earnings Multiple Based Relative Valuation

Price to Earnings Based Multiple Approach (Source: Thomson Reuters), *1 USD=1.73 AUD

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of the company corrected by ~46% in the last one month and is currently trading close to its 52-week low level of $8.270. The company reported a resilient result in 1HFY20, with high-quality businesses taking over the operating challenges during the period. The company is focused on executing its long-term strategies to build a strong position against competitors. We have valued the stock using EV/Sales based relative valuation method and arrived at a target price with low double-digit upside (in percentage terms). For the said purpose, we have considered Link Administration Holdings Ltd (ASX: LNK), Altium Ltd (ASX: ALU), WiseTech Global Ltd (ASX: WTC), etc., as peers. Hence, we give a “Buy” recommendation on the stock at the current market price of $8.690, down 6.358% on 23^rd March 2020.
 

Link Administration Holdings Limited

Withdrawal of Guidance:Link Administration Holdings Limited (ASX: LNK) provides technology-enabled administration, securities registration and asset services to its customers across the globe. The company has recently withdrawn its FY20 guidance due to difficulty in estimating the financial result for some of the businesses. However, the company believes in the resilience of the business with 80% of the revenue being recurring in nature. Moreover, the company is also taking cost cutting initiatives to survive the current crisis.

In another update, the company notified that it will be paying a dividend amounting to $0.065 per security, on 9^th April 2020.

Half Yearly Results: During the six months ended 31^st December 2019, the company reported revenue amounting to $624 million, down 4% on pcp. Operating EBITDA came in at $163 million, down 11% on pcp. Operating NPATA also went down at the same rate and stood at $81 million. The company has undertaken a simplification and transformation plan by realigning its five global business units and expects around $50 of annualised savings over the next 2.5 years.


Performance Highlights (Source: Company Reports)

Valuation Methodology:EV/Sales Multiple Based Relative Valuation

EV/Sales Based Valuation (Source: Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of the company corrected by ~51% in the last one month and is currently trading close to its 52-week low level of $2.640. Going forward, the company expects continued positive momentum from PEXA, wherein it holds 44.2% equity interest. Performance in the medium to long-term will be supported by a geographically strong and diverse business and savings arising out of the global transformation program. We have valued the stock using EV/Sales multiple based relative valuation method and arrived at a target price with low double-digit upside (in percentage terms). For the said purpose, we have considered Computershare Ltd (ASX: CPU), WiseTech Global Ltd (ASX: WTC), Perpetual Ltd (ASX: PPT), etc., as peers.Hence, we give a “Hold” recommendation on the stock at the current market price of $2.700, down 13.462% on 23^rd March 2020 due to withdrawal of FY20 guidance.
 

WiseTech Global Limited

Double Digit Revenue Growth Expected in FY20:WiseTech Global Limited (ASX: WTC) is a provider of software solutions to the logistics industry, to enable movement and storage of goods and information, domestically and internationally. In a recent announcement, the company notified that it will be paying a dividend amounting to $0.017 per security, on 3^rd April 2020.

1HFY20 Highlights: During the half-year ended 31^st December 2019, the company reported revenue amounting to $205.9 million, up 31% on the prior corresponding period. Net profit went up by 160% and stood at $59.9 million. The company was focused on investing in its technology platform to enhance its capabilities and boost the pipeline for future growth. Existing and new customers contributed to 24% growth in organic revenue, primarily driven by increased usage of CargoWise.


Results Summary (Source: Company Reports)

FY20 Guidance: Taking the challenges due to COVID-19 into account, the company revised its FY20 revenue and EBITDA guidance. Revenue is expected between $420 million - $450 million, representing y-o-y growth between 21% - 29%. EBITDA is anticipated between $114 million - $132 million, representing y-o-y growth between 5% - 22%.

Stock Recommendation: The stock of the company corrected by ~37% in the last one month and is currently trading close to its 52-week low level of $9.970. During 1HFY20, the company came up with numerous enhancements and upgrades to its products through an investment of $73.3 million. Moreover, strategic acquisitions have also been a key catalyst for growth with revenue contribution rising by $24.9 million during the half. To capitalise on future opportunities, the company expects to increase its R&D investment by 30-40% in FY20. Considering the above factors, we give a “Buy” recommendation on the stock at the current market price of $12.0, up 1.695% on 23^rd March 2020.

 
Comparative Price Chart (Source: Thomson Reuters)

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