Computershare Still Undervalued Despite Share Price Rally

Narrow-moat-rated Computershare has risen by 21% since its fiscal 2019 financial result on Aug. 14, 2019, significantly narrowing the discount to our unchanged AUD 19.40 fair value estimate but remains undervalued at the current market price AUD 17.41 per share. Management has announced little since the fiscal 2019 result, other than to reiterate fiscal 2020 guidance of a decline in "management EPS" of around 5% in constant currency terms. This is broadly in line with our forecast for a 2% decline, which assumes low-single-digit EBIT growth, offset by higher finance and taxation costs. We expect recent share price strength reflects the increase in the United States, United Kingdom, and Australian government bond yields which are an important determinant of Computershare’s earnings.