Link a kink in Computershare's moat?

Computershare stands alone as the world's only global share registrar. It maintains the share register for thousands of companies, keeping their shareholders' details up to date, dispersing dividends, helping with annual meeting administration and providing a point of contact for shareholders, online and through its call centres.

Seasoned investors will boast folders filled with paperwork bearing the purple Computershare logo. And regular annual meeting attendees will have signed into many meetings with the aid of one of its helpful staff.

Computershare is one of Australia's great success stories. From humble beginnings, founder Chris Morris turned Computershare into a share registry giant by gobbling up back office services once owned by accounting firms.

By cobbling these businesses together during a technological revolution, Morris built a hugely profitable business with few competitors, unrivalled scale and pricing power.

Computershare something special

In a review last November I wrote, 'apart from its incredible share price performance, there are other financial clues that Computershare is something special.

'Take its profit margins, for example. Over the course of a full financial cycle, we estimate its registry business generates an operating profit margin of at least 11%. Let's compare that figure to the margins generated by ordinary communications company Salmat; a company offering plain old call centre and mail house services.

'Salmat's pre-tax margins are rather thin; 4.9% for its call centres and 5.4% for its mail house division. By combining similar services with its share registry technology 'platform', Computershare generates twice those margins; a powerful clue that there is some kind of competitive advantage in Computershare's customer proposition.'

Winds of change

I then considered some bourgeoning competition. 'In the ultimate show of respect, private equity group Pacific Equity Partners (PEP) is imitating Computershare's strategy [through Link Market Services].

'Computershare's high margins also suggest PEP may have some wiggle room on price. Though Computershare's customers are quite 'sticky', the depth of the current downturn may see them opt for the cheapest alternative. Computershare might then be forced to cut its fees to maintain its dominant market shares (for a high fixed cost business it's better to have less profitable revenue than none at all).'

Over the past twelve months I've noticed numerous companies changing registrars, and the provider benefiting most seems to be Link Market Services.

Have you also noticed this trend? Perhaps you even work for a company that has changed registrars. If so, I'd love to hear why. Is it because Link is cheaper than Computershare? Has Computershare's customer service dropped? What are the differences between the two service offerings from a customer's point of view?

If you have any experiences that you'd like to share, perhaps excluding personal administration hassles that we've all experienced from time to time, please leave your comment below.