Mainstream Group’s Share Price YoYo’s upon Half-Year Results

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Despite releasing encouraging results for the last six months ending 31 December 2018 (half-year 2019) and  Mainstream Group Holdings Ltd [ASX:MAI] shares initially trading 66 cents higher before quickly dropping.

At the time of writing, Mainstream Group’s share price is trading at $0.60 cents per share, losing 6.92%.

But a spike in share price after a big announcement such as a company’s half-year results, naturally makes a stock more sensitive to shifts.

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Mainstream Group’s share price helped by organic growth

The main driving force behind MAI’s rising share price largely comes from organic growth, which also set the tone for strong increases to revenue and EBITDA (earnings before interest, tax, depreciation and amortisation).

Investors will also enjoy the full impact of the Trinity Administration and IRESS’ superannuation administration secured in 2017. Growth does call for expenditure. And during the 2017 period MAI spent $4.1 million on technology, $3.4 million on IT expenditure, $0.4 million on IT capitalisation and $0.3 million on automation as well as client reporting projects, as stated in MAI’s media release today.

Mainstream Group’s Chief Executive Officer, Martin Smith said:

Our results for the half year reflect continued execution of our growth strategy alongside ongoing investment in our technology and key client relationships. We expect to see further benefits from our scale and improved operational processes in the second half the year.

While a key superannuation client merged with another fund during the period, any lost revenue is expected to be more than offset by transition and exit fees in the short term and growth in our US private equity fund administration and Australian custody businesses over the longer term. We have accelerated the amortisation of intangible assets relating to our superannuation administration business.

It seems MAI’s progress is on track for 2019, but investors will have to wait for its share price to keep more consistent.

Mainstream Group’s share price 2019 outlook

In its ASX media announcement released today, Mainstream Group confirmed that the company is expecting to reach its revenue guidance of about $50 million, as well as its EBITDA guidance of around $7.5–9 million for 2019 final year results.

Mr Smith commented on MAI’s achievements and the direction of the company:

We are pleased with the progress of our business and have good earnings momentum as we consolidate our strong position in our core business of fund administration as well as expand into higher margin business such as custody and digital platforms. In addition we continue to assess a pipeline of strategic acquisition and ‘lift and shift’ opportunities in our key markets. In January we completed the transition of a $5 billion fund manager to our fund administration services and we believe Mainstream is well placed to capture further opportunities within the markets we operate in.’

Things are looking pretty comfortable for Mainstream’s half-year results, the real challenge will be to see if they can improve on this into next year and beyond.


Ryan Clarkson-Ledward,
For Money Morning

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