Computershare Limited (ASX: CPU) is arguably one of the best companies listed on the ASX. The firm's investor services operations have expanded from their home base in Australia, to New Zealand, Asia, UK, Europe and North America. Unlike firms such as QBE Insurance Group Ltd (ASX: QBE) and National Australia Bank Ltd (ASX: NAB), which have run into all sorts of trouble with their international expansion plans, Computershare has managed to avoid many of the pitfalls which other Australian companies have experienced.
Results
Given the significant global operations of the firm, Computershare reports its results in US dollars. While reported operating revenues were down 1.1% on the prior corresponding period (pcp), on a constant currency basis revenues were up 2.3%. Impressively, operating expenses declined 5%, or 1.3% at constant currency on the pcp.
The company provides "management adjusted" results which smooth out a number of non-cash and one-off items (particularly amortisation charges) to give a clearer picture of the underlying earnings power of the business. Based on these adjusted numbers, earnings per share (EPS) increased 9.5% to US 29.41 cents per share (cps).
The company declared an interim dividend of 14 cps (in Australian dollars) which was in line with the pcp.
Changing of the Guard
Computershare also announced that long-serving CEO Stuart Crosby would retire. Crosby will be succeeded by the current CIO Stuart Irving. Under Crosby's leadership (8 years) Computershare's earnings per share grew 140% from 22.7 cents in 2006 to 54.9 cents in 2013 – Irving has big shoes to fill!
Shareholders have little to worry about from a change in CEO. Founder Chris Morris remains the chairman of Computershare. With a significant stake in the company, Morris' interests are closely aligned with those of shareholders.
Foolish takeaway
Annualising the "management adjusted" first-half EPS equates to 58.8 cps. This estimate sits comfortably within management's guidance for a 5% to 10% lift in EPS for FY 2014.
At today's average exchange rate of US$0.901, with the share price at $11.80 on the ASX this converts to a US dollar share price of $10.63; implying a price-to-earnings ratio of 18.1. Given the quality of the company and the better than average growth opportunities, a premium to the market would appear justified. Having said that, at current levels Computershare is arguably close to fully valued with limited further upside from these levels.
