McMillan Shakespeare Limited (MMS), a salary packaging company, saw a significant decline in its shares today, largely driven by a bearish broker note from Bell Potter released this morning.
Bell Potter downgraded MMS from a “buy” to a “neutral” rating and slashed its price target for the stock to $15.80 from $21.00, reflecting concerns about the company’s future growth prospects. The broker expressed caution regarding the risks surrounding vehicle order growth, particularly with increasing competition in the private segment, where sales have recently decreased, and static penetration of electric vehicles (EVs).
According to Bell Potter’s analysis, MMS may show year-on-year sales growth in its upcoming interim results, attributed to improvements in vehicle supply. However, the broker cautioned that future revenue will depend heavily on vehicle orders. Bell Potter highlighted concerns about order growth in the second half of 2025, with potential challenges in maintaining strong demand for Plug-in Hybrid Electric Vehicles (PHEVs) once the FBT exemption expires in March 2025.
The downgrade reflects the broker’s view that MMS is struggling with fading support from carry-over revenue, declining volume momentum, and a potential reversion in EV sales to long-term trends. Additionally, Bell Potter warned that margin pressures could also weigh on the company’s performance moving forward.
The downgrade has triggered a sharp 10% drop in MMS’s shares, marking a 21% decline over the past year. The revised price target of $15.80 is marginally ahead of where shares closed in the previous session. The broker also noted that MMS is trading at a P/E ratio of approximately 12x for FY25, in line with historical levels.
Bell Potter’s revised earnings estimate, along with the de-rating of the company’s multiple, has resulted in a more cautious outlook for MMS in the near term.
As MMS grapples with these headwinds, investors are urged to weigh the risks carefully before making investment decisions.
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