Servcorp: AGM 2015

America's two speed economy, independence for Western Australia and fishing: a wide range of topics, clearly, but they all got a mention during Servcorp's 2015 AGM.

The recently opened office at One World Trade Center is performing well, with occupancy levels hitting 70% within the first two months of operation and virtual office growth also strong. The company has already raised prices in response to this strong demand.

Despite the success of the WTC office, however, results in the American division have been mixed. Mid-town Manhattan and San Francisco have been stand-outs and Boston and Houston also performing well. By contrast, Servcorp's offices in Washington DC, Chicago, Houston and Los Angeles have been 'tough'.

Overall, however, the US division is cash flow positive and this despite the US being 'more competitive and vicious' (in the words of chief executive Alf Moufarrige) than the Australian market.

Elsewhere overseas, the company is seeing better results coming through in South East Asia following the recent management restructure, with Thailand being the standout and Singapore also improving. The UK and the Middle East also are tracking well and Japan 'continues to power on'.

Closer to home, chief operating officer Marcus Moufarrige happily proclaimed that 'Australia is back' with the caveat that Australia doesn't include Perth, whose market is still struggling. However, Servcorp's offices in the eastern states are performing well.

WeWork

In response to a question about shared office space startup WeWork recently being valued at US$10bn, Alf Moufarrige responded that, 'at $10bn, either they're way overpriced or we're way underpriced'.

The two companies' strategies differ – Servcorp concentrates on premium buildings while WeWork's offices tend to be located in lower grade buildings, amongst other differences – but we'd lean towards the WeWork overpriced side of the argument at the moment.

With trading in the first quarter of 2016 'encouraging', management confirmed guidance for 2016 profit before tax of 'not less than' $48m. Servcorp also intends to pay a dividend of around 22 cents per share, with franking expected to at least match last year's 30%. HOLD.

Note: Our Growth Portfolio and Equity Income Portfolio each own shares in Servcorp.