Computershare Ltd

      CPU Dividend Details
 
Static FY16 guidance: Computershare Ltd (ASX: CPU) reported its total operating revenues, actual, of $ 1.97 billion down by 2.3% and constant currency of $ 2.05 billion up by 1.4% in FY15. Management EBITDA actual was $ 554.1 million up by 2.5% and constant currency was $ 569.1 million up by 5.3%. Management earnings per share were actual 59.82 cents per share and constant currency 61.39 cents per share up by 1.9%. Dividend per share came to 31 cents per share with an interim dividend of 15 cents per share followed by a final dividend of 16 cents per share. The franking credit was increased from 20% for the interim dividend to 25% for the final dividend and continues to be affected by the substantial level of group earnings from non-Australian businesses.
 

Group Strategy and Priorities (Source: Company Reports)
 
Among the major achievements during the year were driving synergies by completion of the integration of global acquisitions, the opening of a centre in Louisville Kentucky which is a lower cost region of the United States outside the snow and hurricane belt, and the rollout of a global service delivery model with virtual desktop platform now servicing Europe, the UK and Asia. Total technology spending was $ 236.1 million which amounts to 11.9% of revenues and includes $ 80.4 million spent on research and development. The integrated IPO solution used inbound document processing capabilities and multichannel integration to handle the biggest Australian IPO in 10 years. Particularly, 400,000 calls were processed over 12 weeks with 82% of the calls being answered within 30 seconds.
 

EPS (Source: Company Reports)
 
The company also provided its disclosures at the 2015 AGM wherein it reconfirmed the guidance for management EPS to be down 7.5% on FY15 at the back of impact from stronger US dollar along with lower yields on client balances. The company also commented about cost savings and one-off project costs with regards to the Louisville migration. CPU expects to realize the cost savings in a progressive manner from FY17 to FY19. However, CPU has witnessed few contract losses. The stock is also trading at a high P/E ratio while the annual dividend yield is only 2.78%. We believe that at the current stock price levels, the stock is expensive.
 
  

 

Iress Ltd

     IRE Dividend Details
 
Momentum from UK Operations while segment profit growth remains unattractive: Iress Ltd (ASX: IRE) announced the successful completion of the strategic acquisition of two established UK fintech companies, Proquote Limited and Pulse Software Systems and the integration is in progress. The former company is a leading provider of trading, market data and connectivity while the latter is a leading provider of portfolio management software for private asset managers. The strategic focus is the increasing need for unified, flexible and integrated technology driven by UK regulatory change and market demands. This will allow the company to accelerate its response to additional opportunities in complementary client segments where the integrated product suite can be seen to be attractive. UK operations will be further developed by expanding capabilities and the client base and provide the basis for broader functionality and solutions to be offered to clients. IRE’s UK Business update seems to bring momentum building into CY16 with more than 20 active XPLAN implementation projects underway. With regards to the above transactions, net of acquired surplus cash, the combined net purchase price GBP 35.6 million has been reported and the acquisitions will be accretive in FY 2016 in constant currency terms. The transactions have been funded through new and refinanced debt, and net debt on completion will be around $ 182 million. There will be additional revenue with 90% on a recurring basis and there will be combined revenue of GBP 15 million and EBITDA of GBP 2.5 million in 2015 on a pro forma basis.
 

Operating Revenue and Segment Profit (Source: Company Reports)
 
Meanwhile, the results for the first half of FY15 show total revenues of $ 173.2 million up 9% with respect to the second half of 2014 and 2% on the first half of 2014. The financial markets business has been highly resilient and there is growing momentum in wealth management as well as progress in Enterprise lending. The operating revenue in the UK was flat over the second half of 2014 though there has been significant investment in implementation capabilities and there has been strong demand in pre- sales and implementation activity. The outlook considers implementation activities supporting recurring revenues and growth over time and Enterprise Lending, though potentially high-growth, is difficult to predict due to the dependence on business driven by clients and long lead times. Assuming foreign exchange rates in constant terms, segment profit growth in 2015 is expected to be at the lower end of the previously indicated range (segment profit growth estimated to be 3-5% in 2015). The outlook remains focused on the medium and long term, and includes organic and acquisition opportunities that will build regional businesses. Given the above, we believe that the stock is overvalued at the current price.
 
 

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