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09 April 2021 | Buy

BUY | Computershare Limited


Long-term rewards for shareholders

Computershare Limited (ASX:CPU)

Computershare Limited (CPU) is one of the world’s largest share registry operators, providing a full range of corporate services to companies and investors in the US, Europe (including the UK), and Australia.

Its share price has been affected by the decline in interest rates since late 2019, exacerbated by the COVID-19-related economic downturn and associated interest-rate cuts. However, although the company generates a material proportion of group earnings from the interest it earns on client-owned cash balances, it has many other businesses, some of which will benefit from the economic downturn.

Interest rate impacts aside, Computershare’s underlying earnings have performed well in recent years, and we expect this to continue. Considering the relatively defensive markets in which the company operates, a strong competitive position, good cash flow attributes, a relatively low price/earnings ratio, and exposure to foreign earnings, we think the stock is attractive at current levels.

The news last week that the company will buy Wells Fargo Corporate Trust (CTS) will position them as a top 4 market leader in the US corporate trust market. The deal is encouraging as it’s highly strategic and financially accretive, leading to an increase in the company’s recurring revenues and exposure to the US securitisation market.

The company has a long history of growth via global acquisitions and, given CTS has similar attributes to Computershare’s existing business, it provides significant economies of scale and synergy benefits that all should be rewarding for shareholders over the long term.


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