CPU - Computershare Limited

[skc]

CPU chasers and folks including SO Cynical

It has been a year since I posted on CPU.
I noticed the share price has gone down since then and yes my portfolio on CPU has lost by 9% about since I bought. Motley Fool (I am losing faith on their recommendations now ) still keeping it a buy and Bell Potter has said sell .
I am confused as all comments by BP seem to be positive and so the presentation from CPU on MQ conference presentation following a big UK acquisition.

Could SC and other posters please comment ?
I am still holding CPU but confused now to retain or increase.

There are competing issues facing CPU (which company doesn't?)...

- It's struggling to find growth... nothing organic and not many targets to acquire. Yet it's been priced for growth (and has the perception of a growth stock) for some time. So some people are expecting a de-rating.

- Recent acquisitions didn't excite everyone. The mortgage processing business is labour intensive and lumpy so the earnings from these don't deserve the earning multiples being put on CPU (just reciting a broker report that I've read - can't remember who it was though).

- CPU holds a lot of customer cash. With the low interest rate they are making very little returns on that cash. On on hand that's a negative and on the other hand it's a free option play on rising rates.

- Management is forecasting lower EPS so perhaps a bit early for some to start accumulating, without any evidence of turnaround as yet.

In conclusion - DYOR

 

[pixel]

The last year has definitely been a struggle, with the chart dominated by Lower Highs and Lower Lows.



Short-term, however, the trend could be considered as reversing. Not enough for me yet to plan any longer-term holdings, but a couple of swing trades between $9 and $10, then again $9.50 to $10.30 have turned out quite profitable.

 

[Miner]

Many thanks triathlete, SKC and PIXEL for your thought provoking comment on my query.
Take care

 

[So_Cynical]

I concur with all the comments over the last few days, CPU is struggling share price wise and that's a reflection of the reality of the business, the blockchain disruption potential is another negative.

http://www.smh.com.au/business/bank...rejects-blockchain-fears-20160428-gogua4.html

I've held since the GFC low and as it has turned out CPU has been a significant underperformer in comparison to many other ASX 50 stocks since early 2009, did sell about half my holding at around the $12.50 mark a while back, and glad i did.

Buy zone under $9.60 certainly wouldn't be selling at under $11

 

[rnr]

Potential for a low risk entry perhaps?

 

[So_Cynical]

Potential for a low risk entry perhaps?

View attachment 69242

See now i would call that a high risk entry, CPU has been range bound for a decade and 13 bucks is the top of that range.

 

[peter2]

That's a great setup for a short term momentum trade and who knows it may be a good one for an investor. We'll not know for some time.

It's not a comfortable setup for "The Contrarian Averager."

 

[kid hustlr]

Boomed higher over earnings although admittedly a long way off its highs on the weekly. Hard to argue with the longer term trend though so may be worth keeping an eye on, especially if this market continue to grind higher

 

[So_Cynical]

At long last CPU finally catching up to some of the other top 50 stocks, range bound no more.

 

[rnr]

At long last CPU finally catching up to some of the other top 50 stocks, range bound no more.

Heading for another assault on the ATH?

 

[peter2]

Heading for another assault on the ATH?

Unfortunately for holders, no. CPU shareholders have had a few poor years. The share price and I suspect the business haven't progressed at all. Currently, price is at an interesting level, at recent highs, but below the 15.00 resistance level. Price is coiling for a move and the daily chart looks quite bullish. Target if it gets above 15.00, 17.75 and this is an acceptable RR for a short term trader.

 

[Trav.]

Price is coiling for a move and the daily chart looks quite bullish. Target if it gets above 15.00, 17.75 and this is an acceptable RR for a short term trader.

2 days later CPU broke through the $15 resistance level only to retrace back down to $14.59. Will we see CPU have another attempt to break the $15 resistance ?

 

[Sean K]

CPU flies under the radar a little as a long term Mum and Dad type stock. Nice chart since the bottom of Covid. All time high back in 2018 at just over $20 not far away. I suspect if Covid hadn't have come along it would have been here in mid 2020. Not sure of pe and whether it's a growth or income type stock.

 

[peter2]

Thanks for the big picture chart.
The daily chart looks promising for a BO-NH soon. I like the recent HL. Hope it holds.

 

[Dona Ferentes]

Mirrabooka has taken a stake in CPU in the last 6 months

Computershare was reintroduced into the portfolio in the early months of the financial year, before market interest rate expectations began to increase. It is a high-quality business that is relatively mature, but we felt that the market was mispricing the very significant benefit that even modestly higher interest rates would have on its earnings.

"early months of the financial year," ... around $16? Now above $20

 

[Dona Ferentes]

Lifted dividend to 24c, some 40% franked.

The promise of rising interest rates bodes well for Computershare, as its US Mortgage services business has remained subdued for some time, but Mr Irving said industry fundamentals were improving.

Unlike most tech companies who suffer from higher interest rates, Computershare benefits from the margin income it earns on cash held on behalf of its share registry clients, before dividends and other distributions are paid to the clients’ shareholders.

A 100 basis point increase in interest rates would generate an annualised earnings per share of US26¢ per share, the company said.

Despite the uncertain global picture, Computershare management upgraded its guidance and expects earnings before interest and taxes (less margin income) to increase by around 13 per cent compared with the 3 per cent guided in last August.

 

[Dona Ferentes]

and up 10% today, as high as $22.60 ... hasn't been so high for a very long time.

 

[Dona Ferentes]

CPU flies under the radar a little as a long term Mum and Dad type stock. Nice chart since the bottom of Covid. All time high back in 2018 at just over $20 not far away. ...

and keeps kicking goals. A beneficiary of rising interest rates

• Upgraded earnings per share growth guidance for financial 2023 to around 90 per cent as rising interest rates boost its income earned to an estimated $US800 million.
• For 2024, margin income is projected to be $US1.01 billion.
• EPS forecast is measured against 2022 full-year management earnings of US57.95¢ a share, and in constant currency terms.
• Also assumes 2023 earnings before interest and tax excluding margin income is lower against 2022 due to reduced transaction volumes, fewer events, and higher costs.
• The margin income forecast of $US800 million is $US280 million above the August forecast.

 

[Sean K]

and keeps kicking goals. A beneficiary of rising interest rates

• Upgraded earnings per share growth guidance for financial 2023 to around 90 per cent as rising interest rates boost its income earned to an estimated $US800 million.
• For 2024, margin income is projected to be $US1.01 billion.
• EPS forecast is measured against 2022 full-year management earnings of US57.95¢ a share, and in constant currency terms.
• Also assumes 2023 earnings before interest and tax excluding margin income is lower against 2022 due to reduced transaction volumes, fewer events, and higher costs.
• The margin income forecast of $US800 million is $US280 million above the August forecast.

View attachment 149000

Very nice BO. I'm sure @peter2 s system has lit up on this one.

Why am I not invested in this? (head banging emoji)

 

[peter2]

Price has been bumping up against the resistance level at 26.20 - 26.40 for quite some time. There's an ascending triangle on the right side of the trading range indicating a break-out soon. Looks like the AGM has provided some news that caught the fancy of some buyers.

The price of CPU has been a bit more volatile than I like, making a short term trade risky. However the medium term with a wider stop loss looks OK. Pretty sure that price will test the old R level before going higher.