Link Administration Holdings Ltd. – Value Analysis (ASX:LNK) : June 13, 2017

Capitalcube gives Link Administration Holdings Ltd. a score of 79.

Our analysis is based on comparing Link Administration Holdings Ltd. with the following peers – Citadel Group Ltd., Spotless Group Holdings Ltd and Servcorp Limited (CGL-AU, SPO-AU and SRV-AU).

Investment Outlook

Link Administration Holdings Ltd. has a fundamental score of 79 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • Compared to peers, relative underperformance last month is down from a median performance last year.
  • It currently trades at a Price/Book ratio of (4.69).
  • The market expects LNK-AU to grow faster than its peers and for the company to improve its current ROE.
  • LNK-AU‘s relative asset efficiency and net profit margins are both around the median level.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • The company’s margins are around the peer medians and do not suggest any benefit from a pricing or an operating cost advantage versus peers.
  • Compared with the peers chosen, LNK-AU has had faster revenue growth in prior years and a current P/E ratio that suggests faster growth in the future suggesting superior growth expectations.
  • LNK-AU has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

LNK-AU has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 10.57% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 7.59%), and a well-cushioned interest coverage level of 8.47x, LNK-AU can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • All 3 peers for the company have an outstanding debt balance.

LNK-AU has moved to a Quick & Able from a relatively high leverage profile at the prior year-end.

  • LNK-AU‘s interest coverage is its highest over the last four years and compares to a low of 2.17x in 2015.
  • While its interest coverage increased to 8.47x from 2.17x (in 2015), its peer median decreased during this period to 18.40x from 19.11x.
  • Interest coverage rose 7.01 points relative to peers.
  • LNK-AU‘s debt-EV is its lowest over the last four years and compares to a high of 105.34% in 2015.
  • The decrease in its debt-EV to 10.57% from 105.34% (in 2015) was also accompanied by a decrease in its peer median during this period to 7.59% from 12.54%.
  • Relative to peers, debt-EV fell 89.82 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Citadel Group Ltd. 4.62 1.25 28.33 1031.48
Spotless Group Holdings Ltd 46.61 1.16 4.76 36.26
Servcorp Limited 0.21 N/A 823.18 1183.81
Link Administration Holdings Ltd. 10.57 0.98 8.47 45.2
Peer Median 7.59 1.16 18.4 538.34
Best In Class 0.21 1.25 823.18 1183.81

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Company Profile

Link Administration Holdings Ltd. engages in the provision of outsourced administration services. It operates through the followings segments: Fund Administration; Corporate Markets; and Information, Digital, and Data Services. The Fund Administration segment combines its proprietary technology, process, and people to deliver a comprehensive data solution to superannuation clients. The Corporate Markets segment offers shareholder management and analytics, stakeholder engagement, share registry, employee share plans, and company secretarial support. The Information, Digital, and Data Services segment includes fund administration platform; share registry and database management; shareholder management and analytics; in-house fund administration software; data analytics; digital solutions; and digital communications. The company was founded on July 28, 2006 and is headquartered in Sydney, Australia.


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