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Kick Off: Amcor Limited v Computershare Limited

With just a handful of matches left in Round 1 of the Motley Fool’s ASX World Cup investors are well and truly into the swing of things and will no doubt already have taken sides as they prepare to witness the showdown between two of Australia’s greatest global companies – Amcor Limited (ASX: AMC) and Computershare Limited (ASX: CPU).

Here are the stats to review before kick-off:

  Amcor Computershare
Market Cap $12.7 billion $7 billion
Revenue (FY13) $12.4 billion $2.2 billion
NPAT (FY13) $690 million $329 million
Net Margin 5.5% 15%
PE (FY14) 15.6x 19x
Yield (FY14) 4.1% 2.5%
Net Debt/ Equity (FY13) 107% 111%

Source: Morningstar Research

First Half

Despite competing in completely different industries, Amcor and Computershare still make for an entertaining match-up.

Having demerged its Australian packaging and North American packaging distribution business into Orora Ltd (ASX: ORA), the global packaging giant still boasts a market capitalisation of nearly $13 billion. In its favour Amcor often operates in duopoly-type situations which allows it to earn good returns. Over the past decade it has provided shareholders with a total return (TSR) of 11.1% per annum.

In contrast Computershare has a market capitalisation of $7 billion and like Amcor its business is dominated by large scale players who can leverage their cost base.  The lower capital requirements and higher leverage of its fixed cost base allows Computershare to earn a higher profit margin allowing for impressive earnings growth. This has helped the stock achieve a TSR of 17.6% per annum for the last 10 years.

At the first-half siren Computershare has scored 2 GOALS.

Second Half

No doubt Amcor’s supporters are nervous as these two teams take the field for the deciding half, however this blue chip stock still has a few tricks up its sleeve.

With a yield of 4.1% and a forecast dividend growth rate into FY 2015 of nearly 8%, Amcor quickly replies with a GOAL against Computershare’s 2.5% yield and 12% FY 2015 dividend growth rate.

Turning to valuation and the stocks look neck-and-neck. While neither appears to be a bargain, they also don’t look overpriced considering the quality of their earnings and their respective forecast growth rates. Both companies try but neither manages to sneak a goal past the keeper!

Full Time Tally

Amcor and Computershare are high quality businesses, run by capable managers with solid prospects for future growth. With these credentials they certainly deserve a place on investors’ watchlists as they progress through the rounds.

On the day however, the appealing business model with lower capital intensity and stronger growth profile has seen the share registry firm Computershare edge out Amcor for a 2 -1 win.

Record profits and a fast growing, fully franked dividend...

Amcor and Computershare were small companies once - and then they grew into global giants! This little known ASX company has already delivered eight consecutive years of profit and dividend growth... but with even more growth ahead, the shares are still a firm "BUY" today! Discover The Motley Fool's #1 dividend pick in our newly updated report. Simply click here for your FREE copy right now.?

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article. The Motley Fool owns shares in Computershare. 

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