Equiniti (EQN) is a payments and administration company and offers a variety of essential services to its blue chip clients. It counts 70 of the FTSE 100 among its customer base which offers an idea of its quality.

These FTSE 100 clients use Equiniti to handle their dividend payments among other services.

The business was spun out of Lloyds (LLOY) in 2007 and floated in 2015.

The company has its origins in the creation of the British Army’s paymaster general in 1836. The army is still a client for its payroll and pension administration, as well the NHS, which is the largest pension scheme in Europe.

The company picked up some more top tier clients this year. These include household names such as Sainsbury’s (SBRY), House of Fraser and it has also entered into a partnership with Aon Hewitt for public sector pension administration.

In January this year, Equiniti acquired Gateway2Finance. This Halifax-based loan brokerage is hoped to support Equiniti’s plan to promote loan, mortgage and technology solutions.

Equiniti recently added Nostrum to its list of acquisitions at the end of June. The firm is a provider of end-to-end loan management technology and further bolsters Equiniti’s position in the lending sector.

Keeping up the pace

Equiniti’s share price has increased by 37% since its full year results were released in March. The profile of its client base provides confidence on its future earnings profile.

And, as many of Equiniti’s services are non-discretionary, it has some protection from what is happening in the wider economy. Net debt is also being trimmed, down 4.4% year-on-year in 2016 to £251m.

The company’s house broker Liberum is confident that the sale of one its competitor’s divisions will support the investment case. Capita (CPI) announced the sale of its Capita Asset Services (CAS) businesses to Australia’s Link Group at the end of June.

Rahim Karim, analyst at Liberum, says: ‘This transaction provides an important valuation benchmark for Equiniti, given the operational overlap between the two companies. CAS provides a number of services which compete with Equiniti’s Investment and Pension Solutions businesses including: Shareholder Solutions (including share registrar services), Pension Solutions, and Corporate and Private Client Services’.

On 12 July, Equiniti revealed plans to buy WFSS, the third largest share registrar in the US by number of clients. It intends to hold a £122m rights issue in September to help fund the £176m acquisition.

Existing investors will have the chance to buy new shares at a price to be determined in the near future, most likely at a discount to the market price.

Buy this essential company at 257.5p. With an enviable client list, it is diversified and also deleveraging.

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