Macquarie: CPU - The Stars Are Aligning9/01/06The stars are...

Macquarie: CPU - The Stars Are Aligning
9/01/06

The stars are aligning for Computershare (CPU), after a relatively lacklustre 2005 for the company’s share price. The share registry and computer technology services company announced on Friday that it had acquired German-based AGM service provider, SLS Group for $24 million. Macquarie Research Equities (MRE) believe that the acquisition creates solid shareholder value and is expected to be EPS accretive in FY06. CPU is MRE’s preferred diversified financials exposure. MRE have an Outperform recommendation on the stock with a $7.50 price target – this represents 12% upside to Friday’s closing share price of $6.70.



Bolt-on acquisitions continue, with a focus on Europe. CPU’s announcement of the purchase of Germany based SLS Group for a cash consideration of A$24m (€14.9m), complements the recent purchase of UK firm, Interactive Meetings Limited (IML). The acquisition is expected to be EPS positive in FY06.

Acquisitive growth is a strategic mainstay. CPU has a history of growing its revenue and cost base through acquisition. By minimising acquired costs through in-market synergy benefits, and maximising revenues through product enhancements and customer cross-sell, shareholder value is created.

On the right side of the cycle. After bottoming in FY03, CPU is now on the right side of the cycle. Significant margin expansion is forecast over the next three years, partly through improved economic and equity market activity. MRE’s forecast of three more 25bp US Fed rate rises bodes well.

MRE have a 12-month price target of $7.50 on CPU, a 12% premium to the current share price. MRE see the continued upturn in cyclical drivers, including corporate actions and interest rates and further industry consolidation, as a further catalyst for the share price.

Overall, the stars continue to align for CPU, with key profit drivers simultaneously moving in a positive direction in FY06. Momentum is likely into FY07 and possibly FY08. CPU remains MRE’s preferred diversified financials exposure.

**********

Yeah i bought some CPUWMB on 9/1/06 for 10 cents each.

Big time gambler I am, hehehe :)

cheers.