technological disruption, page-3

@MarsC

In any industry selling commoditised products/services such as the share registry industry, it is important to be the lowest cost producer. Since listing in 2008, ASW has managed to show a very consistent performance in this regard with its Operating Expense Ratio staying at the 50% mark, even during the downturn period of 2011 - 2015, this level is markedly lower than its competitors'.

If you look at the history of number of employees at year end, we can also witness ASW's ability to adjust staffing level as demand requires.

Before 2011, during the mining boom, ASW prepared for the expected continuation of the boom by:
- Opening an office in Sydney. At the time ASW even considered opening an office in Melbourne (lucky they didn't)
- Buying an office in Sydney in December 2010.
- Hiring more staff (Employee number went from 14 in 2009 to 22 in 2011)


But as the boom imploded between 2011 to 2015, ASW let go a few of its staff:
- Employee number dropped from 22 in 2011 to 15 in 2015.
- They purchased a smaller office in Sydney and moved the Sydney office to the new property and rent out the old property

2016 year saw business starting to boom again. ASW now has 23 staff as of June 2016. If this hiring spree is followed with increased business activity in the coming years, then we can expect increased profitability in the future.

As we know, it is very hard to offer big enough incentive to companies to move their registries to ASW. This is because the registry fee is a small expense for most companies, even for small junior miners which are ASW's bread and butter.

Therefore the easiest way to get a new client is to get them during IPO. Unfortunately, on this matter, I am of the opinion that ASW is too laid back and not aggresive/hungry enough. We lost a lot of potential clients to Security Transfer, Boardroom, Atomic, etc.

If some of the new hires in 2016 are sales & marketing staff, then hopefully we'll be able to see ASW winning more share of new IPOs in the future.

The only thing that I can think of that might affect future profitability is future changes in payment technology and regulation. At the moment, ASW earns 22% of revenue from interests earned on clients' monies that were transferred to ASW for dividend disbursements. The longer the monies sit in ASW's bank account, the more interests ASW earns.

RBA is currently considering a new payment platform which will enable instantaneous payments. I imagine that one day when this technology is up and running, ASW's clients might make the transfer to ASW on the morning of the day of dividend payments and ASW will need to transfer the dividends to various shareholders later in the day.

If this happens, then ASW will no longer be able to earn interests on clients' monies and its profitability will be affected.

When this will happen or if will happen at all, I'm not too sure!

In the mean time, I'm very content to keep receiving my dividends every 6 months. Even after @madamswer 's buying which pushes the share price to $0.76, ASW is still yielding 5.6% fully franked!