Servcorp Limited (SRV)
Views and News
Provider of Serviced and Virtual Offices Poised for Global Upturn
Servcorp, arguably the world’s leading provider of executive serviced offices, virtual offices and superior IT and business infrastructure solutions, operates 119 floors in 51 cities across 21 countries.
Over a number of years, Servcorp built a strong global suite of serviced offices and attained comparison with the world's largest provider of such facilities. It recognised the coming move to virtual offices and so developed IT systems and became proficient at providing global IT services for such an environment.
Servcorp began to roll out its leading edge system and found it could fulfil client needs highly effectively and profitably, ahead of any competition. It raised significant funds from shareholders for this roll-out combined with extension of its global office footprint, focused on its developed smaller and better equipped IT-connected floor profile.
The roll-out was impacted heavily by the GFC and deliberately slowed to suit the changed circumstances. Servcorp is partway through the intended, slower rollout, is now just comfortably profitable and has substantial cash available to complete its plans. Investors can look to steady and improving performance near term and significant potential upside as global, and particularly emerging, economies improve in due course.
Recent News Highlights
As at 15/06/2012 : see details at www.servcorp.net (new window? Shift+Click)
| 21/02/2012 Half Year Results |
| 16/11/2011 Annual General Meeting 2011 |
| 13/10/2011 Annual Report FY11 |
| 24/08/2011 Full Year FY11 Results |
Half-yearly Performance & Estimates - SRV
| Year-end June | FY11A | 1H12A | FY12A | 1H13A | FY13A | FY14E | FY15E |
|---|---|---|---|---|---|---|---|
| Sales, $m | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 221.0 | 236.0 |
| EBITDA, $m | 0.00 | 0.00 | 0.00 | 10.5 | 0.00 | 45.5 | 52.5 |
| EBIT, $m | 0.00 | 0.00 | 0.00 | 10.5 | 0.00 | 30.4 | 36.4 |
| Report NPAT, $m | 3.9 | 6.4 | 15.9 | 10.0 | 21.4 | ||
| Adj. NPAT, $m | 21.4 | 25.2 | 30.0 | ||||
| Reported EPS, ¢ | 4.00 | 7.00 | 16.00 | 10.00 | 22.00 | ||
| Adjusted EPS, ¢ | 22.00 | 25.60 | 30.50 | ||||
| EPS %FY/Growth | 44% | 300% | 45% | 38% | 16% | 19% | |
| Dividend, ¢ | 10.0 | 7.5 | 15.0 | 7.5 | 15.0 | 16.00 | 18.00 |
| Franking, % | 100% | 50% | 68% | 100% | 100% | 100% | 100% |
| EBITDA Margin | 0 | 0 | 0 | ******% | ******% | 20.6% | 22.2% |
| NPAT Margin | 0 | 0 | 0 | ******% | ******% | 11.4% | 12.7% |
| ROE, % | 2% | 0 | 8% | 5 | 10% | ||
| EBIT/Interest | 0.1 | 0.0 | -3.0 | -4.93 | -6.25 | ||
| Net Debt / Equity | -0.43 | 0 | -0.43 | -0.48 | -0.38 | ||
| CashFlow/Sh, ¢ | 19.1 | 15.4 | 32.6 | 11.4 | 27.5 | 0.00 | 0.00 |
| Y/E Shares, m | 98.5 | 98.5 | 98.5 | 98.5 | 98.5 |
| Notes |
| Data sourced from IRESS Market Technology Limited. EPS Growth compared with the pcp is shown in most columns, except 1H11A and 1H12A which show the first half % of full year EPS. In a handful of cases, unadjusted share splits may give strange changes in ratios. |
Half-year Performance & Estimates - SRV
| Year-end June | 1H11A | FY11A | 1H12A | FY12A | 1H13A | FY13E | FY14E |
|---|---|---|---|---|---|---|---|
| Sales, $m | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 259.0 | 281.0 |
| EBITDA, $m | 0.00 | 0.00 | 0.00 | 0.00 | 10.5 | 48.4 | 58.7 |
| EBIT, $m | 0.82 | 0.00 | 0.00 | 0.00 | 10.5 | 27.3 | 38.8 |
| Report NPAT, $m | 0.82 | 3.9 | 6.4 | 15.9 | 10.0 | ||
| Adj. NPAT, $m | 10.0 | 23.3 | 32.2 | ||||
| Reported EPS, ¢ | 1.00 | 4.00 | 7.00 | 16.00 | 10.00 | ||
| Adjusted EPS, ¢ | 10.00 | 23.65 | 32.70 | ||||
| EPS %FY/Growth | 25% | 44% | 300% | 43% | 48% | 38% | |
| Dividend, ¢ | 5.0 | 10.0 | 7.5 | 15.0 | 7.5 | 17.50 | 23.00 |
| Franking, % | 100% | 100% | 50% | 68% | 100% | 68% | 68% |
| EBITDA Margin | 0 | 0 | 0 | 0 | ******% | 18.7% | 20.9% |
| NPAT Margin | 0 | 0 | 0 | 0 | ******% | 9.0% | 11.5% |
| ROE, % | 2% | 2% | 0 | 8% | 5% | ||
| EBIT/Interest | -0.4 | 0.1 | 0.0 | -3.0 | -4.93 | ||
| Net Debt / Equity | -0.61 | -0.43 | 0 | -0.43 | -0.48 | ||
| CashFlow/Sh, ¢ | 9.0 | 19.1 | 15.4 | 32.6 | 11.4 | 61.6 | 53.8 |
| Y/E Shares, m | 98.5 | 98.5 | 98.5 | 98.5 | 98.5 |
| Notes |
| EPS Growth compared with the pcp is shown in most columns, except 1H10A and 1H11A which show the first half % of full year EPS. |
Half-year Performance & Estimates - SRV
| Year-end June | 1H10A | FY10A | 1H11A | FY11A | 1H12A | FY12E | FY13E |
|---|---|---|---|---|---|---|---|
| Sales, $m | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 195.0 | 237.0 |
| EBITDA, $m | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 31.4 | 54.2 |
| EBIT, $m | 0.00 | 0.00 | 0.82 | 0.00 | 0.00 | 12.9 | 32.6 |
| Report NPAT, $m | 1.7 | 5.2 | 0.82 | 3.9 | 6.4 | ||
| Adj. NPAT, $m | 6.4 | 13.1 | 26.2 | ||||
| Reported EPS, ¢ | 2.00 | 6.00 | 1.00 | 4.00 | 7.00 | ||
| Adjusted EPS, ¢ | 7.00 | 13.30 | 26.60 | ||||
| EPS %FY/Growth | 33% | 25% | -33% | 600% | 233% | 100% | |
| Dividend, ¢ | 5.0 | 10.0 | 5.0 | 10.0 | 7.5 | 15.00 | 20.00 |
| Franking, % | 100% | 100% | 100% | 100% | 50% | 100% | 100% |
| EBITDA Margin | 0 | 0 | 0 | 0 | ******% | 16.1% | 22.9% |
| NPAT Margin | 0 | 0 | 0 | 0 | ******% | 6.7% | 11.1% |
| ROE, % | 2% | 2% | 2% | 2% | |||
| EBIT/Interest | -0.4 | -0.4 | -0.4 | 0.1 | ****** | ||
| Net Debt / Equity | -0.61 | -0.61 | -0.61 | -0.43 | 0.00 | ||
| CashFlow/Sh, ¢ | 0.9 | 9.6 | 9.0 | 19.1 | 15.4 | 35.2 | 61.6 |
| Y/E Shares, m | 98.5 | 98.5 | 98.5 | 98.5 | 98.5 |
| Notes |
| EPS Growth compared with the pcp is shown in most columns, except 1H10A and 1H11A which show the first half % of full year EPS. |
On 21 February, Servcorp announced 1H12 results :
• Mature floor net profit before tax of $18.5m, up 38% on 1H11 and in line with guidance of $37.0m for FY12. • Immature floor losses of $10.4m, in line with full year guidance and down 22% on 1H11. • Pre tax profit of $8.2m, up from $0.1m in 1H11. • NPAT of $6.4m, up from $0.8m in 1H11. • Operating revenue up 11% on 1H11 to $99.4m and up 16% in constant currency. • Strong unencumbered cash balances of $97.0m at 31 December 2011. • Interim dividend up 50% to 7.50 cents, 50% franked. • Servcorp reaffirmed FY12 guidance of mature floor pre tax profit of approx $37.0m and immature floor losses of approx $20.0m, subject to constant currencies, stable global financial markets and no unforeseen circumstances.
The Mature business
• Revenues and margins improved across most geographic segments in 1H12, despite A$ strength. • In 1H12, three floors reached maturity, in Jeddah, London and Fukuoka. Those in Jeddah and London are contributing positively at the mature profit line. Fukuoka is trading close to cash flow breakeven. The performance of these floors is encouraging. • Average mature floor occupancy remained stable at 78%.
The Immature business
• 47 floors were immature at 31 December 2011. • Immature floor revenue continues to increase modestly each month. • Management is satisfied with overall progress of the immature floor portfolio.
Expansion
• As previously advised, SRV's current strategy is to slow the pace of expansion in FY12 and consolidate operations in new and existing markets. It is limiting new openings, beyond those already committed, to floors in established locations where expansion is expected to be expeditiously profitable. • The original intention was to open no more than 15 floors in FY12. Given the continued volatility in global markets and the continuing uncertainty in the USA and Europe, SRV has slowed the pace of growth and now anticipate opening a total of 9 floors in FY12. This will bring the total expected floor openings to 62 by 30 June 2012 as part of this expansion phase. In addition to new floor openings, SRV is expanding 2 current floors in Jeddah and New York.
Outlook for FY12
• Margins are expected to hold at 1H12 levels through the second half of the year. • Focus is on consolidating immature business and raising utilisation of services. • Mature floor pre tax profit guidance for FY12 is reaffirmed at approx $37.0m. • Reaffirmed that forecast immature floor losses will be approx $20.0m for FY12. • Directors expect 2HY12 dividends of 15.0 cents, partly franked, 50% above FY11. • Guidance assumes no unforeseen changes in currency or financial markets.
Company Overview
See above and website.
Wave Chart
Profile
Servcorp
Rating:
Category: Potent Stock ; Midcaps
Action:
Website: www.servcorp.net
| ASX code: | SRV |
| Closing Price, 30/12/2013: | $ 3.990 |
| Market Capitalisation: | $ 393 million |
| 52 Week High: | $ 4.15 |
| 52 Week Low: | $ 3.04 |
| Sector: | Real Estate Operating Companies |
| Index: | S&P/ASX All Index |
Summary of Fundamentals
| Year-end June | FY12A | FY13A | FY14E | FY15E |
|---|---|---|---|---|
| NPAT, $m | 15.8 | 21.4 | 25.2 | 30.1 |
| Reported EPS, ¢ | 16.00 | 22.00 | ||
| Adjusted EPS, ¢ | 21.60 | 25.60 | 30.50 | |
| EPS Growth, % | 300% | 35% | 19% | 19% |
| P/E Ratio, x | 24.94 | 18.47 | 15.59 | 13.08 |
| Dividend, ¢ | 15.0 | 15.0 | 16.00 | 18.00 |
| Franking, % | 68% | 100% | 100% | 100% |
| Div. Yield, % | 3.76 | 3.76 | 4.01 | 4.51 |
Notes
| Our Adjusted EPS is used for the last year and forward estimates and as basis for EPS Growth and P/E Ratio. We currently use Reported data for all historic NPAT, for the prior year EPS and as base for last year EPS growth. |
| Data & Chart sourced from IRESS Market Technology Ltd. |
One Year Chart
As at 30 December 2013
Other Highlights
| Sector: | Real Estate Operating Companies |
| Return on Equity, FY13 : | 10% |
| Net Debt to Equity, FY13 : | -38 % |
| EBIT / Interest Cover, FY13 : | -6.25 x |
| Gicscode: | 40403020 |
| First Listed: | 6-Dec-99 |
Business Activities
Servcorp Limited (SRV) provides and rents out executive serviced and virtual offices with IT, communication and secretarial services, in Australia and a number of overseas cities, in Japan, the USA, UK, Europe, and Asia.
Glossary:
| ♠ | "A Core Stock" - reliable long-term yield & growth |
| ♥ | "We like it" - a seasoned performer, growth & yield |
| ♦ | "A tough scout" - creating a potential breakthrough |
| ♣ | "A steady performer" - giving reliable yield or growth |
| Best Stocks | Portfolio of selected attractive investments |
| Potential | Stocks that may have good improvement prospects |
| Speculative | More risky usually smaller stocks with spec. upside |
| Midcaps | In RR Midcap Index, $ 70m to 1,500m market cap. |
| Large Stocks | Larger Stocks upwards of $ 1,500m market cap |