Smartgroup Corporation Ltd (SIQ)
BUY

Positive Outlook

 3 May 2023
Sector: Industrials

MQ CONFERENCE AND BUSINESS UPDATE

Need To Know

  • Avg monthly NPATA in line with H2 2022. Revenue growth largely offsetting cost inflation 
  • Interest in electric vehicles seeing significant uplift. Now >20% of group leasing quotes
  • Excess vehicle order pipeline revenue at ~A$16m vs ~A$15m at Dec 22. 

Smartgroup released its business update ahead of its presentation at the Macquarie conference. 

Overall, NPATA is continuing to churn away in-line with levels mentioned at the FY22 result. 

Operational momentum is continuing to pick up for 2023, with leasing enquiries and group orders remaining notably strong. Revenue growth also remained strong despite the transition out of the Department of Education. 

Net debt looks to be in a fine position at ~A$55m. Capitalised IT development costs remained minimal and cash conversion was robust for the period. 

Novated leasing leads+31%, new lease vehicle orders +7% and settlements +12% versus the prior comparable period (pcp). 

Investment View

Overall, a solid release with a solid outlook. 

Progress is continuing with the new Smartsalary website, and the Car leasing portal has been live as of Feb 2023. These are all a part of the groups ‘smart future’ goal and are expected to help increase traffic through Smartgroup. 

Federal government policies have lifted demand for new Electric Vehicles (EV’s). EV quotes now make up >20% of novated leases with management expecting this trend to continue to grow over the period.

With the search for a new CEO over following the appointing of Scott Wharton, we believe SIQ should be strategically positioned to benefit from ongoing improvements in car supply and increased leasing demand. 

We re-iterate our BUY rating for SIQ.

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Stock Overview

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Company Overview

SIQ is an Australian firm that provides outsourced employee benefits and admin services including salary packaging, novated leasing, fleet management, payroll admin and workforce optimization.

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