Computershare eyes ASIC registry sale by government

COMPUTERSHARE wants to pursue an acquisition of the ASIC registry should it be placed on the market by the government.

Computershare performance

LOWER interest rates may be hurting Computershare’s earnings due to the reduced income it receives from its cash deposits, but that will not stop chief executive Stuart Irving from pursuing an acquisition of the Australian Securities & Investments Commission registry should it be placed on the market by the government.

“Computershare is an Aussie company through and through and we would be a very natural operator for that business, but it will be contested fiercely,” said Mr Irving, who runs what is the largest computer share registry service provider in the world.

Last week, Computershare’s security price rallied to a high of $13.52 and the stock is now trading at $13.24 or about 16.5 times earnings, as the market bets major deals up ahead and favourable currency movements will drive its earnings higher.

Much of Computershare’s interest in the ASIC registry would depend on what parts of the business the government decides to privatise, Mr Irving said. Valuation estimates of the business, which has been subject to a scoping study by adviser Greenhill, have ranged from $4 billion to $7bn.

ASIC’s registry business is a target of acquisition by credit reference agency Veda, which has publicly stated its interest.

Veda buys data from ASIC before selling it as part of its information service. One view held is that the credit checking business will be lobbying the government to sell off the information and registration services division separately to other ASIC registry functions, so that it would be able to acquire the business and fend off competition from a new participant in the marketplace.

Superannuation funds are also likely to express interest, and already Borealis is planning a pursuit. Computershare may partner with one of those parties.

As well as the ASIC registry, the land titles offices in Victoria and NSW, which have been subject to scoping studies, are of interest to Computershare, while global acquisitions for mortgage servicing products could also be on the agenda.

The earnings of the software, services and share registry firm have been growing and despite a recent profit downgrade and an 88.9 per cent fall in its interim net profit to $15.5 million, the company has flagged full year earnings growth of at least 3 per cent.

Hampering reported earnings had been the stronger US dollar and the weakening interest rate markets, although in real terms, the weaker dollar was helping earnings for its overall business.

“The weaker Australian dollar is supportive of our share price, because most of our earnings are outside Australia,” Mr Irving said.

In the past four reporting periods, the business had dropped about $60m of pre-tax profit because of the lower interest rate environment.

“We hold a significant amount of cash and that is a significant headwind for us,” Mr Irving said.

However, the company stood to benefit in a material way when rates increased, although that was not expected to be for some time.

Cash deposits held by Computershare for the payment of shareholder distributions to be made from its customers in the past half year were about $US15bn on any given day, with about $US5.5bn exposed to floating interest rates.

Founded in Melbourne in 1978 as a pure technology company by those including current chairman Chris Morris, Computershare started when computers were being shared by various users.

Mr Morris branched into providing specialised computer platforms to handle the share registers of listed companies.

The company went on to list on the stock exchange in May 1994, with a market capitalisation of $36m.

Today, the business operates in 21 countries globally has a market value of at least $7.4bn.

Mr Irving said more corporate activity such as mergers and acquisitions, initial public offerings and also capital railings would propel earnings higher, with all activities requiring much back office share registry work.

About half of the company’s revenue was derived from its share registry business globally and within that only 7 per cent came from Australia.

Bridget Carter