Link Group is a business that may be familiar to many private investors due to its work as a share registry and administration service for many of the stock exchange's most popular businesses. Although Link's main business is in the administration of superannuation funds, which is an area likely to grow strongly into the future thanks to the compulsory nature of the superannuation system.
Link hit the ASX boards today and is trading on a conditional basis at $7.07 per share – around 11% above the final $6.37 offer price institutional investors paid under the terms of the initial public offer.
On a pro forma basis the $6.37 offer price is equivalent to 28.7x FY16's net profit after tax before acquired amortisation (NPATA), or 15.9x EV/EBITDA after significant items. The company's indicative market capitalisation at the offer price is $2.29 billion, with proceeds under the offer around $946.5 million.
Evidently the market is backing Link to keep growing strongly with shares now on a rich multiple of earnings for a business that looks unlikely to shoot the lights out anytime soon. It certainly has a tailwind in the ballooning superannuation sector, but faces competition in providing administration services for this giant industry.
Investors interested in the business may be best off keeping it on their watch list to let the market value the business and to wait for it to hand in its first results as a public company.
Link's closest large-scale rival is share registry services provider Computershare Limited (ASX: CPU), a business that has successfully grown into a global player organically and via acquisition.
Another recently listed fund administration business is Mainstream BPO Ltd (ASX: MAI). It specialises in providing back office services like fund accounting, custody and unit pricing to fund managers that want to focus solely on investing and portfolio management. However, it looks to operate in a competitive space with low barriers to entry and in my opinion the risks are to the downside for this business.
