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Link Administration (ASX:LNK) shares – buy, hold or sell?

Drew Meredith from Wattle Partners takes a look at Link Administration Holdings Ltd (ASX: LNK) shares.

This week we settled the sale of our first home. It would have been an interesting experience at the best of times, let alone amid the COVID-19 shutdown.

The property’s settlement was completed virtually via the PEXA platform and could not have been more seamless. Given the positive experience, it would not surprise me if all settlements are completed online sooner rather than later. So I decided to see who owns PEXA, and it happens to be Link Administration Services, which has become my stock of the week.

What you need to know about Link

LNK has become a monopolistic provider of outsourced administration services for superannuation funds, corporate markets and other services including data management and communication. It is far bigger than the share registry business for which it is best-known.

The company is split across three divisions, being fund administration; corporate markets and information; and digital and data services. Following a series of acquisitions before and after its float, LNK has become the dominant provider of outsourced administration for industry and corporate superannuation funds, holding 30% market share and counting AustralianSuper, REST and Energy Super among its long-term clients.

This defensive business is complemented by the more cyclical corporate market operations, which assist with administering managed funds, shareholder registries and other important market functions. The digital division, where LNK is offering technology-enabled data analytics and digital solutions to traditionally paper-based processes, represents the greatest growth opportunity.


Based on the FY19 dividend of 20.5 cents, LNK at $3.58 currently offers an attractive fully franked dividend yield of 5.7%, or 8.2% grossed-up. LNK’s substantial recurring revenue, estimated at $1.123 billion in 2019 (or 80% of total revenue), is in our view being undervalued by the market due to short-term concerns regarding the impacts of Brexit and more volatile markets on the company’s other divisions.

LNK was among the worst performers during the March quarter, falling more than 50%, with investors seemingly concerned about the company’s debt position following a number of acquisitions in recent years. These concerns appear overstated, something reiterated by management and highlighted by the company’s cash balance of about $125 million and interest cover ratio of 15 times, versus debt repayments of just $20 million.

Interestingly, LNK recently increased its stake in PEXA, the technology-enabled property settlement platform that was previously owned by Australian state governments, to 44%. PEXA has an effective monopoly over the electronic conveyancing and settlement of all properties in Australia, and saw $1.754 billion in transactions processed in 2019, more than 100% up on 2018.

Buy, Hold or Sell

LNK offers investors a unique opportunity to purchase an annuity-like income stream supported by consolidation within the industry fund sector, but with exposure to important growth assets in its technology divisions. Listed companies are placing increasing importance and value on the data they collect and harness, meaning established businesses like LNK have a competitive advantage compared to newer competitors.

This report was written by Drew Meredith, Director of Wattle Partners.

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The Golden Rules of Investing

We might be experts in retirement, but with combined financial advice experience of 35+ years, we’ve nearly seen it all. 

In mid-2023, our senior team at Wattle Partners Financial Planning put the finishing touches on a brand-new report “The Golden Rules of Investing“.

In this free report, we outline the key principles that determine all of the portfolio construction and investment decisions of Wattle Partners. Collated over decades, this paper should be seen as a work-in-progress, constantly under review in light of the ever-evolving nature of markets. 

You’ll find the free report on my Author page. Simply click the button below to view the Golden Rules.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

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Wattle Partners is a financial advice firm, servicing clients around Australia, specialising in retirement planning (pre and post retirement). 

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