Smartgroup: Standing Out With Simplicity

No-moat Smartgroup is likely experiencing similar operational trends as peer McMillan Shakespeare noted at its annual general meeting in late October. Specifically, continued growth in novated leases, driven by cost-of-living pressures that encourage vehicle financing through these arrangements. Additionally, the fringe benefits tax exemption for electric vehicles supports further EV adoption through novated leases. Nonetheless, we expect future novated leasing yields will decline from 2024 levels due to increased vehicle supply, including EVs. This will likely lead to price reductions and heightened competition from peers like McMillan.