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Edge7
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I am an Australian value investor. I have gone to full time investing this year (2012) at age 36 and am passionate about helping other Aussie investors succeed. My website is www.edgeseven.com.au
My company:
Edge Seven Pty Ltd
My blog:
Edge Seven Value Investing
  • ASX: ASW - Advanced Share Registry Limited 2 comments
    Oct 23, 2012 2:35 AM

    Advanced Share Registry Limited (ASX:ASW) is a share registry service business operating in Perth, Western Australia. Advanced Share Registry provides services to listed and unlisted clients on a state and national basis. The business was established in 1996.

    ASW has an exclusive focus on the provision of share registry services. The company has steadily built its registry operations over a number of years, having typically focused on servicing smaller companies. Providing an efficient, cost effective service is a key driver for customers.

    Does this business have a sustainable competitive advantage?

    Advanced Share Registry present that they have built its registry operations through its reputation and delivery as an efficient, cost effective service provider, especially for smaller companies.

    The key competitive advantage appears to be a low cost alternative particularly for smaller and newly listed companies on the ASX.

    The business is Perth based and this location has served the company well with many of the newly listed businesses on the ASX happening to be mining and mining related businesses based in Western Australia.

    What are the risks facing this business?

    The company is heavily exposed to a large number of smaller listed companies located in Western Australia.

    The company has worked to mitigate this geographic risk by opening an office in Sydney in 2011. And, it appears Advanced Share Registry is in the process of opening an office in Melbourne too.

    Another risk is the Advanced Share Registry's ability to attract business away from their larger rivals being Computershare and Link Market Services. A listed company changing their registry service is a bit akin to the general public changing their personal bank account. Even though there might be some savings on offer to switch provider, there is a large perceived cost of inconvenience to make a switch. This will make it difficult for Advanced Share Registry to take business off their competitors.

    Is it run by able and trustworthy management?

    The founder and CEO of the company Kim Chong owns about 56% of the business and no doubt brings decades of experience in running and building this business.

    Advanced Share Registry is run with a strong balance sheet with a strong net cash position of $4 million and positive cash flow reflective of net profit levels in recent years.

    Is it trading at a bargain price?

    This business appears to be expensive on an intrinsic valuation basis for a couple of reasons. One reason is with the top 3 shareholders owning about 76% of the business, shares are not traded regularly or in large volumes. A second reason is that the 'yield play' of recent times attracts some investors as all company earnings are paid out as dividends giving the company about a 5% dividend plus franking credits per annum. Using a couple of differing valuation methods gives a valuation ranging between 29 and 37 cents for this financial year. The most conservative valuation is presented in the table below.

    Rank2012 Actual ValuationToday's Share PriceMargin of Safety2013 Forecast Valuation
    Silver 2$0.27$0.73-152%$0.29

    *Please note that forecast estimates of intrinsic value are subject to change on a daily/weekly basis.

    Here is a chart of the company's share price over the past six months.

    (click to enlarge)

    Summary

    In summary, Advanced Share Registry is a profitable business that is taking steps to expand its geographic presence and customer base. The business generates cash flow in line with profit levels and has a strong balance sheet. Advanced Share Registry has experienced management but is expensive at the moment.

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Comments (2)
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  • Johnny251
    , contributor
    Comment (1) | Send Message
     
    Interesting read, where have you gotten the information from? Do you know if the Melbourne office is going to be opened?
    As an investor, this will prove further confidence in the company and its ability to grow amongst the registry giants.
    19 Feb 2013, 11:11 PM Reply Like
  • Edge7
    , contributor
    Comments (3) | Send Message
     
    Author’s reply » Hi Johnny251, thanks for your message.
    Looks like they are getting closer on the Melbourne office. They have a phone number listed but no office disclosed yet.
    Agree, that another office location will improve their ability to grow new business. However, I am not 'investing' in this one at current prices.
    20 Feb 2013, 06:57 PM Reply Like
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