Here's why Servcorp Limited continues to be an awesome investment

Servcorp Limited (ASX:SRV) reports profit growth of 24%, improved margins and strong cashflow – but is it too late to buy?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Serviced office provider Servcorp Limited (ASX: SRV) was up over 4% yesterday on the back of profit growth of 24%.

To quote from the report: "Servcorp has more than doubled its size over the past five years, and due to the respective size of the immature losses, it was historically appropriate to segregate the performance of the existing mature business from the new immature business. "

These days the company reports like-for-like occupancy rates, to qualify for which, a floor must have been open for more than a year. Like-for-like occupancy was 79%, a figure management believe can be improved upon. Pleasingly, the number of occupied offices was up 10%.

Personally, I was also happy to see that the virtual office package deal business is continuing to improve, recording growth of 7% in FY 2014.

Back in November 2013, I was apparently of the opinion that COO, "Marcus [Moufarrige] is known to be a proponent of the virtual office services offered by the company. This is an important part of the business in my view, because it can generate higher margins and demonstrates that the company is continuing to innovate." 

More importantly, all shareholders expect to benefit from a 22c dividend for FY 2015, which would put the company on a 4.3% (only partially franked) dividend yield. Operating cash-flow was up to over $40 million, although capital expenditure also increased to over $24 million in property, plant and equipment.

Finally, I favour a tailwind investing philosophy: so what is the tailwind assisting Servcorp?

My belief is that the increasing mobility of big business and the global elite will drive demand for both serviced offices, and the top notch telecommunications advantages provided by the virtual office package.

Motley Fool contributor Claude Walker (@claudedwalker) owns shares in Servcorp.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »