Morningstar

Smartgroup Corporation Ltd SIQ

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Stock XASX Rating as of
A$8.40 +0.06 (0.72%)
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As of Delayed Price Closed

Company Report

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Smartgroup Earnings: Positioned Well for Organic Growth and Better Margins

Shaun Ler

No-moat Smartgroup’s first-half 2024 results slightly exceeded expectations, with underlying net profit after tax and acquisition amortization and EBITDA growing by 16% and 20%, respectively, from the previous corresponding period. The compression in EBITDA margins to 38% from 40% in the PCP was anticipated, as it includes investment to service a large contract win from McMillan Shakespeare, which commenced June 30, 2024. Excluding these investments, EBITDA margins would have been flat. We maintain our fair value estimate of AUD 8.30 per share, with shares close to fairly valued at current prices.

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Price vs Fair Value

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SIQ is trading at a 848% premium.
Price
A$8.40
Fair Value
A$5.40
Uncertainty
High
1-Star Price
A$94.31
5-Star Price
A$7.52
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

As one of the largest salary packaging and novated lease providers in Australia, Smartgroup benefits from some scale advantages. A majority of Smartgroup’s clients are in defensive industries, and the firm has long-standing relationships with many of its clients.

Bears

Smartgroup’s business can be disrupted by many external factors beyond its control. Regulation is one example, which had disrupted its commissions and rebate income streams in recent periods. Its business relies on favorable FBT concessions, which may be removed by a future Australian government.

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Trading Information

Previous Close Price
A$8.34
Day Range
A$8.30–8.48
52-Week Range
A$7.48–10.97
Bid/Ask
A$8.34 / A$8.49
Market Cap
A$1.13 Bil
Volume/Avg
290,438 / 324,172

Key Statistics

Price/Earnings (Normalized)
15.99
Price/Sales
3.84
Dividend Yield (Trailing)
3.99%
Dividend Yield (Forward)
4.17%
Total Yield
3.99%

Company Profile

Smartgroup Corporation is an Australia-based company that provides specialist employee management services. Its services include salary packaging, novated leasing, vehicle fleet management, payroll administration, employee share plan administration and workforce optimization. The operating segments of the company are: outsourced administration, vehicle services, and software, distribution and group services. Most of the group's revenue is generated from the OA segment which provides outsourced salary packaging services, novated leasing, share plan administration and outsourced payroll services. The VS segment provides end-to-end vehicle fleet management services.
Sector
Industrials
Industry
Specialty Business Services
Stock Style Box
Small Core
Total Number of Employees
785
Website
https://www.smartgroup.com.au

Competitors

Valuation

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Metric
SIQ
MMS
Price/Earnings (Normalized)
 15.9911.21
Price/Book Value
 4.568.14
Price/Sales
 3.842.54
Price/Cash Flow
 14.32—
Price/Earnings
SIQ
MMS

Financial Strength

Metric
SIQ
MMS
Quick Ratio
 0.920.33
Current Ratio
 0.971.18
Interest Coverage
 20.935.32
Quick Ratio
SIQ
MMS

Profitability

Metric
SIQ
MMS
Return on Assets (Normalized)
 14.93%7.09%
Return on Equity (Normalized)
 28.49%61.75%
Return on Invested Capital (Normalized)
 22.58%14.56%
Return on Assets
SIQ
MMS

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