Fiscal 2021 Earnings Weakness Likely for ASX Following Pandemic Earnings Boost in Fiscal 2020

We expect ASX to deliver a low-single-digit EPS compound annual growth rate over the next decade, with the wide economic moat protecting strong margins and enabling returns on invested capital to exceed the weighted average cost of capital. The capital-light business model and a lack of desire to undertake acquisitions should enable strong cash conversion, a 90% dividend payout ratio, and a debt-free balance sheet. The yield nature of the stock means we expect the share price to be largely driven by bond market movements and central bank interest rates. We don't expect competition to materially undermine earnings, despite the evolving regulatory and competitive landscape. We expect long-term growth in market value to underpin EPS growth. The relatively reliable nature of earnings influences our medium fair value uncertainty rating.