Computershare Ltd (ASX: CPU) shares are pushing higher again on Wednesday.
In afternoon trade, the issuer services company's shares are up 1% to $39.75.
This means that its shares are now up 50% since this time last year.
Can they keep rising? Let's see what the team at Macquarie Group Ltd (ASX: MQG) is saying about this high-flying blue chip.
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What is the broker saying about this blue chip?
Macquarie has been looking at short duration yields that Computershare is exposed to. It commented:
The blended OIS/BBSW rate forward curve, weighted for CPU's geographic mix, is projected to be 0bps higher in FY25 compared to the curves as at 11 Feb '25 (1H25 result) and +9bps higher for FY26. However, it is important to note that the curves peaked in 2H24, followed by a downward shift across all geographies, which is significant for analysts forecasting rates on a spot basis.
The broker has also been looking at its margin income and feels that Computershare is positioned to deliver on its guidance for FY 2025. It adds:
Our forecast for FY25 Margin Income is $748m on an actual currency basis, based on forward curves as of 1 Jul '25 ($750m on a constant currency basis, which compares with $750m guidance provided at the Macquarie conference in May '25).
Computershare has been buying back shares this year. Unfortunately, Macquarie thinks that the announcement of another buyback is unlikely with its full year results. Instead, it believes that the pay down of debt is more likely and would be supportive of this decision. It said:
The FY25 buy-back is complete. We do not expect further returns due to tax reasons. Under US accounting rules, buy-backs are treated as reductions to retained earnings. When retained earnings go negative, the company incurs "franking debit tax" at a 30% tax rate. When franking credits go negative the company is required to pay this tax in cash, which is CPU's position at present.
As a result, CPU is faced with the choice of conducting additional buy-backs, which would incur cash tax, or pay down debt (there is $200m of US debt due in Dec '25 which would assist Group EPS by ~1cps) which is in our forecasts. We think this is a savvy choice by management, but not well understood by investors.
Where next for Computershare shares?
Macquarie thinks that the company's shares are fully valued now.
As a result, the broker has reaffirmed its neutral rating with a $38.00 price target. This is a touch below where its shares currently trade.
