Earnings surge and outlook upgrade lift Computershare to 17-year high

Shares in Computershar have hit their highest point since the dotcom bubble bust.

Computershare

Shares in Computershare, the ASX-listed global share registry and mortgage servicing business, have hit their highest point since the dotcom bubble bust, after the group revealed bullish growth in its debt-servicing business.

Computershare yesterday booked a net profit of $150.2 million for the six months to the end of December, a 78 per cent increase year on year. The company also upgraded its outlook for its full-year earnings per share.

Revenue for the group, which focuses on software for financial administration, rose 7 per cent to just under $1 billion, with the company’s aggressive push into the mortgage processing and servicing market beginning to bear fruit.

Shares shot 5 per cent higher to $13.58, pushing the stock to its strongest point in 17 years — just before the dotcom bubble burst in 1999.

The $7.5bn Computershare has been one of the major beneficiaries of the Trump rally, with shares in the group soaring 34 per cent since the US election.

Although historically based in Melbourne, about three-quarters of Computershare’s earning are sourced offshore after it spent almost four decades turning itself into a global corporation with a string of acquisitions.

Despite seeing softer revenue from corporate merger activity, Computershare’s earnings were underpinned by its contact with UK Asset Resolution and its US mortgage servicing business.

“Having set clear strategies to deliver sustained earnings growth it is encouraging to see our execution is on track and earnings growth is emerging,” chief executive Stuart Irving said.

After acquiring US mortgage servicing companies Specialized Loan Servicing group and Capital Markets Co-operative, Computershare has pledged to double the size of its mortgage servicing book to $US100bn of unpaid principle balances. The group’s US mortgage servicing revenue was up 16 per cent during the period

“We are focused on building our two main organic growth engines, mortgage services and employee share plans,” Mr Irving said.

The stock was recently trading around 3½-year lows in August last year, in the wake of Britain’s vote to exit the European Union and the prospect that blockchain could disrupt its share registry business. The results mark a strong turnaround from when the company first pushed into the mortgage servicing market.

Computershare’s mortgage book is poised to become a prime earnings generator with a host of upside risks on the prospect that US President Donald Trump’s promised stimulus package of tax cuts and infrastructure spending will lead to higher interest rates.

Computershare will pay a 17c interim dividend.