Should you buy more Link shares?

Co-founder of the Switzer Report
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The “rule of three” goes that good and bad things come in threes. As a fan of beaten up fund administration and registry services provider Link Administration Holdings (LNK), I am hoping that it is only three because I (and many others) have considerable “egg on face”.

The three “bad” things that have hit Link are:

  • The announcement by the Government in May 18 of the Protecting Your Super Package, which caps administration fees on low balance super accounts and sponsors the consolidation of inactive super accounts. For Link, which provides back office services to Australian Super, REST and other retail and industry super funds, this means fewer accounts to administer and a hit to fee revenue;
  • An earnings downgrade on 31 May, with operating EBITDA expected to be approximately $350-$360m in FY19, compared to a broker forecast of around $385m. Link blamed two main issues – lower business volumes impacting the operation of its European businesses primarily due to the impact of the Brexit outcome in the UK; and super funds preparing for the Protecting Your Super Package by facilitating earlier-than-expected account consolidation and higher costs for Link as the transition gets under way; and
  • The shock collapse in early June of the celebrity stock picker Neil Woodford’s $13bn investment funds. Link’s UK Link Asset Services was the Authorised Corporate Director of the flagship LF Woodford Equity Income Fund and is being investigated by the UK’s Financial Conduct Authority. If Link has been negligent in not keeping the Fund within its approved investment mandates or in the processing of investment redemption requests, it could face a fine from the FCA and/or claims from investors who have lost money. Link says that it “has at all times acted in accordance with applicable rules and in the best interests of all investors of the Fund and it will continue to do so” and that it is “co-operating fully with the FCA”.

Link’s share price has been trashed. After trading up near $9 in early 2018, the shares closed on Friday at a paltry $5.41.

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