Hi nih123, I won't be touching this one. Smartgroup relies on...

Hi nih123, I won't be touching this one. Smartgroup relies on the salary packaging tax break for almost 100% of its earnings. With MMS and SGF it's less than 50% yet they are still out of favour with the market due to regulatory risk.

After a brief pre and post budget bounce MMS is heading back down. SGF has not bounced very well either despite confirming forecasts. I actually sold all my SGF today.

Given the governments standing in the polls the market is probably thinking Labor might be back next term (unlikely in my view) and that may bring back regulatory risk.

At the moment SGF trades on 12.5x FY14 and 11x FY15 forecast NPAT. If the tax break vanishes it still has a business (albeit reduced). They are trying to price Smartgroup at 11-13x but if the tax break vanishes so does all of Smartgroups profit.