Just one further comment for perspective given the share price changes in recent days.
On Feb 8, 2022 the company updated its forecast for FY22 with key points as listed below and the SP rose from $21.50 to $23 then onto $26 in following weeks:
FY22 MANAGEMENT EPS IS NOW EXPECTED TO INCREASE BY AROUND 9% VERSUS PCP
FY22 MARGIN INCOME GUIDANCE UPGRADED BY 5% TO $152 MILLION
Yesterday they announcement something substantially better (see below) and the SP dropped below $21.50:
FY23 Management EPS expected to be up around 90%
FY23 Margin income guidance $800m
FY24 Margin income guidance $860m
MI forecast for this year (FY23) is $650m higher than FY22. The FY24 forecast is higher again. EPS up another massive 90% this year alone vs a 9% increase last year. MI locked in for many years to come due to hedging. Upon this news the SP dropped below the Pre-Feb 2022 announcement price. Go figure.
My assumption is that the market was either expecting another upgrade in FY24 guidance or didn't like something on page 7 re the hedging strategy. Having had another look at the hedging announced yesterday, it looks good to me. Increasing the hedge book from $7.8b (now) to $9.7b (June 2024) and an increased yield up from 2.58% to 3.25%. Furthermore an increase of the weighted average life of the hedge book up from 4 years to 5-6 to lock in hedged MI to a minimum of $300m through to 2030. Given that total MI was well below $100m only 2 years ago, and these new hedge positions only represent 51% of the exposed book it appears that there is plenty of upside from the unhedged balances to add to the min $300m annual MI expected to be locked in.
Debt levels dropping dramatically and predicted to be extinguished by end of FY24 is also good news in the current environment also. Most companies would be envious. Lets just hope that they don't use this strong financial position to buy some piece of crap business which adds nothing but integration costs and gets offloaded in years to come as has happened numerous times before.
Obviously some in the market saw something different to me. I would be keen to hear what others saw, or didn't see, which may have resulted in the price reaction yesterday.
CPU Price at posting:
$21.92 Sentiment: Hold Disclosure: Held
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)