Capita PLC (CPI)

Image credits CPI website

Capita PLC is a rather interesting company and as I was doing the research and slides (Capita PLC Profile) on it, I thought to myself that maybe this is the way going forward. By the way, there are other ppt slides posted on my Slideshare account so please ignore it! Of late, the share price has been heading south after a very strong up up and away for many months. Which was why it piqued my interest given that ACCICB asked me to look at stocks on LSE when I was reading the Jimmy Choo IPO which is set to start today. I'll be watching the market today to see whether any gains can be made! Woo hoo!

CPI has been acquiring companies for many years and this trend seems set to continue. Being a business process outsourcing and professional services firm, their revenue is rather evenly spilt between private and public sectors which I particularly like as it means that there's no over-reliance on 1 sector. However its core weakness as described by many analysts is that almost all its revenue comes from UK.

To me, I wouldn't find that like a very bad thing as FX risk is most likely to be limited. Plus, there are times that I do prefer a company that is strong domestically before venturing overseas. It's wide array of BPO and professional services are really quite staggering from the mundane accounting, IT services to the more sophisticated fund and trust services. To me, they are gearing up to be a 1 stop shop for all sorts of BPO and professional services firm so they are always buying over companies that could open up a new market segment for them etc.

I am sure that they are looking to enter new markets and reduce their revenue reliance on UK. It only makes sense as the growth is in Asia. This would bring much gains to shareholders over the long term as it takes time to integrate a newly acquired firm into such a behemoth giant such as Capita. Not forgetting the potential cultural clashes, legal and political landscape that has to be contended with, this is definitely a stock pick for the long term.


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