These Days, Pc Stands More For Profit Centre Than A Computer

Sun Herald

Sunday September 3, 2006

David Potts

The world's biggest share registry just gets bigger, David Potts writes.

IT'S name might be a relic of the dotcom boom, but Computershare has certainly moved on.

In fact, it doesn't have much more to do with computers than your average financial services business.

Computershare would be familiar to most shareholders because its name appears on holdings and dividend statements. It has long surpassed arch rival Link Market Services as Australia's biggest share registry.

But it's the way Computershare has been gobbling up overseas share registries that has put it on the map. So far it has made 45 acquisitions since 2000 and is still buying. Already it's the world's biggest share registry provider, getting away globally with what the ACCC would never tolerate here in lessening competition.

Although struggling in Britain, its US acquisitions, where it has more than 25 per cent of the market, are apparently its most profitable.

It bought Equiserve in the US last year, which makes it the registry for 1300 companies - including more than half of the 30 in the Dow Jones index that's always being quoted.

There's no doubt it was a good buy, but Computershare still has a job ahead of it integrating the five separate registries.

The biggest worry raised by analysts, apart from the risk of sooner or later making a bad buy, is the retirement of its founding chief executive, Chris Morris, in November. Forget that. He'll become executive chairman and the new CEO will do the day-to-day stuff. There's no doubt who will still be the helmsman.

Really, it's hard to see what can go wrong. Higher interest rates? Great, it earns more on the cash it holds for dividend payments. Takeovers? Bring 'em on - the more mergers and acquisitions, the more work for it.

The trend towards cantankerous shareholder meetings? Perfect - rounding up proxies for the board is its most lucrative line of business. No growth left in Australia? Who cares - Computershare just moved into Germany and has high hopes for Russia. Not to mention the gigantic New York Stock Exchange is thinking about deregulating its registry business.

Morris last week confirmed that Computershare is sticking to its target of 20 per cent earnings growth a year.

No wonder Computershare is liked by brokers, with only one out of 10 analysts covered by AspectHuntley calling it a sell, although the stock isn't cheap. Because more than three-quarters of its earnings are offshore, it's already tight dividend isn't franked.

ADVANTAGES

? World's biggest share registry

? Reported a record profit

? Target of 20 per cent profit rise a year

? Benefits from takeover mania

? Rate rises boost income

DISADVANTAGES

? Problems in UK

? Acquisitions can be risky

? Low dividend yield

? Foreign currency risk

? Depends on booming sharemarkets