Does MM still have faith with SIQ?
Hi James, I know SIQ has been a bit of a favourite of yours in the past and I wonder if the turbulence of the past couple of weeks has changed this view or simply made it all the more attractive! thanks Alain
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Answer
Hi Alain,
SIQ has endured a poor week after missing out on renewing a contract for one of their top 20 clients, the Department of Education & Training in Victoria. There had been a competitive tender and the award was given to their competitor, Maxxia which is owned by McMillan Shakespeare (MMS). The exclusive contract currently has approximately 4,000 novated leases and 9,000 salary packages that would be transitioned to Maxxia
The novated leasing and salary packaging business said that it will have no material impact on FY22 revenue and will impact revenue by less than 5% in FY23. MMS also said the financial impact would not be material. While it’s a blow for SIQ, they have retained all top 20 clients that fell due in 2021 and the bulk of those that fell in FY22.
However more importantly for the share price this week was their guidance, they said that 1H22 revenue and EBITDA would be inline with H1 2021. The market had factored in growth of ~8%, this contract loss + an unrelated downgrade led to a painful drop for SIQ which has left MM reviewing our position.
We like SIQ less than we previously did and are more inclined to cut the position than add to it given this weeks news.
