December Quarter CPI Data Bode Well for Financial Services Sector

Company Overview

Company Overview: McMillan Shakespeare Limited (ASX: MMS) is an ASX-listed firm that provides fleet financing and asset leasing services. The company operates in three segments: Group Remuneration Services (GRS), Asset Management Services (AMS) and Plan and Support Services (PSS). Australian Ethical Investment Limited (ASX: AEF) is one of Australia’s leading ethical investment managers. It manages a range of public offers; ethically managed investment schemes and serves as the trustee of the Australian Ethical Retail Superannuation Fund. Kalkine’s Sector Report covers the Investment Summary, Sector Overview & Supporting Catalysts, Data Insights & Analysis, Financial Metrics, Financial Commentary, Risks, Outlook, Technical Analysis along with the Valuation, Target Price, and Recommendation on selected stocks.

Investment Summary

Sector Overview and Supporting Catalysts

Data Insights and Analysis

Index Performance

Investment theme and stocks under discussion (MMS, AEF)

After understanding the sectors, let us now look at two companies from the financial services sector listed on the ASX. The price potential of the companies under discussion have been analysed based on EV/EBITDA and P/E relative valuation methods. 

1. ASX: MMS (McMillan Shakespeare Limited)

(Recommendation: ‘Speculative Buy’ at AUD 15.280; Potential Upside: Low Double-Digit; MCap: AUD 1.06bn)

MMS is an ASX-listed firm that provides fleet financing and asset leasing services. The company operates in three segments: Group Remuneration Services (GRS), Asset Management Services (AMS) and Plan and Support Services (PSS).

The stock has witnessed a correction of ~13.57% in last six months, and over the past nine months, it has declined by ~16.73%. The stock has a 52-week low and 52-week high of AUD 14.030 and AUD 22.100, respectively and is currently trading below the 52-week high-low average. MMS was last covered in a report dated ‘16 January 2025’.

2. ASX: AEF (Australian Ethical Investment Limited)

(Recommendation: ‘Speculative Buy’ at AUD 4.940; Potential Upside: Low Double-Digit; MCap: AUD 558.02mn)

AEF is one of Australia’s leading ethical investment managers. It manages a range of public offers; ethically managed investment schemes and serves as the trustee of the Australian Ethical Retail Superannuation Fund.

The stock has witnessed a correction of ~8.18% in the last one month, and over the past 12 months, it has declined by ~8.52%. The stock has a 52-week low and 52-week high of AUD 3.630 and AUD 5.770, respectively and is currently trading above the 52-week high-low average. AEF was last covered in a report dated ‘16 September 2024’.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing. 

Note 1: Past performance is neither an Indicator nor a guarantee of future performance. 

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 30 January 2025. The reference data in this report has been partly sourced from REFINITIV. 

Note 3: Investment decisions should be made depending on an individual’s appetite for upside potential, risks, holding duration, and any previous holdings. An ‘Exit’ from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above. 

Note 4: Kalkine reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 25-30 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice. 

Technical Indicators Defined: - 

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.