Chal­lenges on all fronts

Finweek English Edition - - MARKETPLACE HOUSE VIEW - By Si­mon Brown

Since the com­pany listed out of a com­plex pref­er­ence share struc­ture just over two years ago, it has been a rough ride for Alexan­der Forbes share­hold­ers. The share price has lost some 20%, although a de­cent div­i­dend yield of around 5% has helped ease the pain.

The com­pany fo­cuses on em­ployee ben­e­fits and in­vest­ment so­lu­tions for in­sti­tu­tional clients. The em­ployee ben­e­fit space is typ­i­cally very sticky as it is not a sim­ple process for a com­pany to move all its staff to a new provider.

But re­cent re­sults were very mod­est with head­line earn­ings per share (HEPS) growth of only 3%. One gets the sense that apart from the chal­lenges Alexan­der Forbes al­ready faces, its other worry is newly listed Syg­nia, which op­er­ates in the same space. With its much cheaper of­fer­ing, Syg­nia would be gob­bling up some of the mar­ket share. For Alexan­der Forbes to com­pete on re­duced pric­ing is not a sim­ple process as it has legacy sys­tems, whereas Syg­nia started life with low costs at the core of its DNA.

Alexan­der Forbes is find­ing it very tough to op­er­ate in the new lower cost in­dex track­ing world and I would exit any po­si­tion.

The share price has lost some 20%, although a de­cent div­i­dend yield of around 5% has helped ease the pain.

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