McMillan Wisely Abandons Eclipx Merger; FVE Unchanged

Our fair value estimate for no-moat McMillan Shakespeare is unchanged at AUD 14.20 per share following the company's decision to abandon its proposed merger with Eclipx Group following Eclipx’s most recent earnings downgrade made March 20. The company does not believe extending the scheme completion date will resolve the target’s issues or be in the best interest of McMillan shareholders. We agree with McMillan’s position; we had already assumed the merger would not proceed and removed it from our modelling following Eclipx’s initial earnings downgrade made Jan. 29. Accordingly, the confirmation of the abandonment of the merger does not affect our fair value estimate. At our fair value estimate, McMillan has a fiscal 2019 price/earnings of 13 times and a fully franked dividend yield of 5.1%. At current prices, the company screens as moderately undervalued.