Salary packaging and vehicle leasing company McMillan Shakespeare Limited (ASX: MMS) has seen its shares crash more than 6% in late afternoon trading. By comparison the S&P / ASX 200 Index (Index: ^AXJO) (ASX: XJO) is up 0.5%.
Here are three reasons why investors might be punishing McMillan today…
1) CEO and Managing Director Michael Kay has announced his retirement, after 6 years with the company. Investors may be worried he is deserting a sinking ship. McMillan has faced some major issues in the past year, with the share price halving at one stage.
2) Lingering issues over laws relating to fringe benefits tax (FBT) affecting salary packaging and vehicle leasing. While the Coalition government has vowed not to push through changes to FBT proposed by the previous government, investors may feel it's only a matter of time before they are raised again.
3) Mooted changes have devastated McMillan's earnings over the past year. The company's full year results are likely to be lower than the previous year, including a cut to the dividend. Investors may also be switching to similar ASX-listed companies such as SG Fleet Group Ltd (ASX: SGF) which has lower regulatory risk than McMillan, and a newcomer yet to list, Smartsalary.
An even better bet than McMillan
My SMSF happily owns McMillan shares. I believe the issues facing the company are short term in nature, and as such, the company looks undervalued at these prices. Another company that looks very tempting, particularly after recent price falls, is one the Motley Fool's top analysts have identified as their number one stock pick for 2014.
