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Why the Link Administration Holdings Ltd share price is going nuts today

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Leading administrator of financial ownership data Link Administration Holdings Ltd (ASX: LNK) has reported full year results that are ahead of its prospectus forecasts.

For the 12 months ending June 30 2016, revenue increased by 32% (3% better than forecast) to $776 million with management noting that Link is enjoying strong momentum across all business units.

The group’s operating earnings before interest, tax, depreciation and amortisation (EBITDA) surged 29% (5% ahead of forecast) to $191 million thanks in part to an improved operating margin of 25%.

Net profit after tax but before amortisation (NPATA) was $103 million, 8% above the prospectus forecast.

The board has declared a partially franked final dividend of 8 cents per share. The shares will trade ex-dividend on September 28 and the dividend will be paid on October 10.

Divisional highlights

At the segment level, the Fund Administration business was the standout.

Revenue leapt around $150 million to $562 million thanks to the 2014 acquisition of Superpartners and stronger fee for service activity. Meanwhile, operating EBITDA surged from $70 million in the prior period to $96 million with the group extracting synergies from the Superpartners integration.

The Corporate Markets business recorded a revenue rise of nearly $40 million to $197.5 million and operating EBITDA increased from $50 million to $57 million.

The Information, Digital and Data Services (IDDS) business achieved revenue growth of almost $60 million to $206.5 million, with operating EBITDA jumping from $34 million to $44 million thanks to the launch of a range of new digital products.

Outlook

While Link operates in similar market segments to Computershare Limited (ASX: CPU), the performance of the two companies since Link listed via initial public offer (IPO) in October 2015 has been stark.

Shares in Link are up around 20%, while Computershare’s share price has fallen around 6%.

With Computershare forecasting only a slight improvement in earnings in FY 2017 compared with Link’s comment that the group is “carrying good momentum into the 2017 financial year” the potential for Link to continue to outperform relative to Computershare appears high.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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