There will have been a collective sigh of relief today following the receipt of an open letter to all National Automotive Leasing & Salary Packaging Association members from the Leader of the Opposition Bill Shorten.
The letter from Bill Shorten stated:
"I write regarding car Fringe Benefit Tax arrangements and confirm that a Shorten Labor government will not implement any changes to the Statutory Formula Method relating to employer provided motor vehicles. Labor will retain the current arrangements in relation to all measures regarding salary packaging and related Fringe Benefit Tax measures. There is no difference between our policy and that of the current Turnbull government."
For a long time now shares of companies involved in the salary packaging industry have been trading at lower than normal earnings multiples due to the uncertainty of what an election and potentially a new government would bring.
But all fears have been cast aside now thanks to Bill Shorten's letter and investors appear to be fighting to get their hands on shares with exposure to the industry.
At present shares in Smartgroup Corporation Ltd (ASX: SIQ), SG Fleet Group Ltd (ASX: SGF), and McMillan Shakespeare Limited (ASX: MMS) are skyrocketing higher and have so far put on gains of 8%, 7%, and 9%, respectively.
Of the three shares listed above, I believe that McMillan Shakespeare is the best of the lot to be invested in today. Despite the strong gains, the share price is still trading at just under 13x estimated FY 2016 earnings. Furthermore, the company is expected to pay a fully franked estimated 4.5% dividend.
Earnings are expected to grow by a solid 8% per annum for the next couple of years. This is thanks in part to the company being recently appointed as a vehicle leasing partner for the New South Wales government. This appointment means the company becomes one of six companies able to compete for the financing of 22,000 government-owned vehicles.
With fears of any regulatory changes now gone, I believe there is every chance the shares will start to chase down their 52-week high of $14.84 and provide investors strong returns in the process. Much like these shares might do, if you ask me.
