Computershare Limited

CPU Details

Acquisition of Wells Fargo Corporate Trust Services: Computershare Limited (ASX: CPU) is a leading provider of transfer agency, employee equity plans, mortgage servicing, proxy solicitation, stakeholder communications and other diversified financial and governance services. The company is present in Asia, Australia, the US, UK, New Zealand, and Africa. On 24 March 2021, the company announced that it has entered into an agreement to acquire the assets of Wells Fargo Corporate Trust Services (CTS) for a total purchase price of US$ 750 million. With the acquisition of CTS, CPU will be strategically placed in the US for custody and trustee services for specialised markets and trustee, agency, and fiduciary services for corporate and government debt programmes. Moreover, this will improve the ranking for CPU in the US corporate trust market. The acquisition is expected to be completed in Q2FY22, subject to regulatory approvals and other customary closing conditions. 

Entitlement Offer: In order to fund the acquisition, the company has announced a fully underwritten pro rata accelerated renounceable entitlement offer of new CPU shares to raise approximately ~A$835 million. The Entitlement Offer comprises an institutional entitlement offer under which eligible institutional shareholders will be invited to subscribe for a pro-rata number of new shares. It also includes a retail entitlement offer under which the eligible retail shareholders in Australia and New Zealand will be invited to subscribe for a pro-rata number of new shares. It is expected that approximately 61.6 million new shares will be issued under the Entitlement Offer, which represents 11.4% of the existing issued capital. The company has decided the following dates for the entitlement offer –

Key Dates (Source: Company Reports) 

Financial Highlights for 1HFY21: The company has posted a decline in its total revenues to $1,092.35mn in 1HFY21 as compared with $1,121.25mn in 1HFY20, mainly on the back of decline in margin income. The company has posted a decline of 41.8% YoY in its net profit to ~$72.49mn in 1HFY21 due to overall higher costs.

1HFY21 Results (Source: Company Reports)

Key Risks: The company operates in a regulatory environment. Any change in the regulatory policies or structure may impact the business and may lead to financial losses. The revenues of the company depend on the movement in interest rates mainly comes from margin income, any significant decline in interest rates may impact the revenues and profitability of the company. 

Outlook: The acquisition of CTS will add a recurring revenue stream for the company and will provide exposure to long term growth in trust and securitisation products. For FY21, the company expects its FY21 Management EPS to be down by around 8% on a pre-Entitlement Offer basis. Further, it expects its EBIT ex margin income to be up by around 14%.

Stock Update: On 24 March 2021, CPU requested ASX to place its shares in a trading halt, pending the release of an announcement related to the outcome of the institutional component of the accelerated entitlement offer. The trading halt will remain in place until the completion of institutional component of the Entitlement Offer or the commencement of trading on Monday, 29 March 2021. The stock last traded at $14.990.

CPU Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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