Computershare: Balance sheet position provides optionality

About the author:

Author name:

By Richard Coles

Job title:

Senior Analyst

Date posted:

17 August 2023, 6:30 AM

Sectors Covered:

Insurance, Diversified Financials

• Computershare's (ASX:CPU) FY23 management EPS (US110cps, constant currency basis) was +89% on the pcp, and broadly in-line with full year guidance (+90% growth).
• In our view, there were pros and cons to this result. Clearly a ~90% lift in EPS on pcp is a strong headline performance driven by a stellar Margin Income (MI) result, whilst the announced A$750m buyback shows CPU’s significant balance sheet flexibility. However, FY23 EBIT (ex MI) did decline ~-25% on the pcp on softer event/transaction activity, and FY24 EPS guidance (+7.5%) was below consensus (~+13%).
• We downgrade CPU FY24F EPS by -3%, but lift FY25 EPS by ~2%, reflecting a combination of softened earnings forecasts offset by the impact of the announced buyback. Our PT rises to (login to view).
• CPU is currently trading on ~13x FY24F PE, yet it is producing a >20% ROIC and retains significant balance sheet optionality. We see value in this name and retain our ADD call.

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