Markets: A Shakespearean tragedy

Shares in McMillan Shakespeare suffered their worst ever one-day decline after the motor vehicle lease management company said the government’s proposed change to the fringe benefits tax on vehicles will “have a material adverse impact on future earnings”.

The amount of the impact on McMillan’s bottom line “will be dependent on the outcome of the pending Federal election,” says the company. “The government appears determined.”

At 1208 AEST the stock had plunged $7.35, or 48 per cent, to $8.01, after earlier falling as much as 56 per cent to $6.75. It is the worst performing stock on the S&P/ASX200 index today, according to Bloomberg data. The stock had been suspended from trading, at its own request, between Tuesday, July 16 and yesterday. 

Citigroup analyst Ross Barrows has, not surprisingly, downgraded the stock to a “sell”. Barrows has lowered his 12-month target price on the shares to $12.60. He has cut his earnings per share forecast for McMillan’s 2014 financial year by 34 per cent and 26 per cent in 2015.

McMillan says the revenue derived upfront from its motor vehicle lease business including finance, insurance and commission sales in its 2013 financial year was $81 million. “The proposed legislative changes impacting this revenue stream would apply to novated leases written after July 16, 2013,” it says.