{"id":20497,"date":"2020-05-11T03:49:05","date_gmt":"2020-05-11T03:49:05","guid":{"rendered":"https:\/\/thepatientinvestor.com\/?p=20497"},"modified":"2020-05-13T06:18:49","modified_gmt":"2020-05-13T06:18:49","slug":"macquarie-group-ltd-mqg-2","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2020\/05\/11\/macquarie-group-ltd-mqg-2\/","title":{"rendered":"Macquarie Group Ltd (MQG)"},"content":{"rendered":"\n\n\n\n\n\n\n\n\n\n\n
Stock:<\/td>\nMacquarie Group Ltd<\/strong><\/td>\n<\/tr>\n
Exchange:<\/td>\nASX<\/td>\nSymbol:<\/td>\nMQG<\/strong><\/td>\n<\/tr>\n
Date:<\/td>\n11-May-20<\/td>\nLatest price:<\/td>\n$108.50<\/strong><\/td>\n<\/tr>\n
Market Cap:<\/td>\n$38.8 bn<\/td>\nFair Value:<\/td>\n$125.42<\/strong><\/td>\n<\/tr>\n
Forward P\/E:<\/td>\n15.6<\/td>\nFV Payback (Years):<\/td>\n11<\/td>\n<\/tr>\n
Forward Dividend Yield:<\/td>\n4.09%<\/td>\nCET1 Capital Ratio:<\/td>\n12.2%<\/td>\n<\/tr>\n
Financial Y\/E:<\/td>\n31-Mar-21<\/td>\nRating:<\/td>\nHOLD<\/strong><\/td>\n<\/tr>\n
Sector:<\/td>\nFinancial Services<\/td>\nIndustry:<\/td>\nCapital Markets<\/td>\n<\/tr>\n
Investment Theme:<\/td>\nDividends & Growth<\/td>\nLT Trends:<\/td>\nnone<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Summary<\/h2>\n

We consider Macquarie (MQG) to be priced at below fair value, but the technical outlook is bearish.<\/p>\n

We rate the stock as a long-term HOLD<\/em> because of its strong cash flows and competitive position. Weighting is 5.0% of portfolio value.<\/p>\n

Valuation<\/h2>\n

We project flat annual revenue growth in the next 12 months, recovering to 8% in the long-term, with a provision of $1.5 billion to cover further impairment charges and under-performance of market-facing businesses. Estimated fair value is $125.42 with a payback period of 11 years.<\/p>\n

The payback period recognizes MQG’s strong market position but also the uncertainty of financial markets.<\/p>\n

Technical Analysis<\/h2>\n

MQG is in a primary down-trend and we expect another test of primary support at 70 before the bear market is over. Trend Index and Momentum below zero both warn of bearish market sentiment. Respect of primary support would provide a solid base for a new primary up-trend. Breach is unlikely but would flag another decline and a strong bear market.<\/p>\n

\"Twiggs<\/p>\n

Company Profile<\/h2>\n

Macquarie Group is Australia’s only sizable investment bank. Internationally diversified, the group employs 15,849 people in 31 countries, with its head office in Sydney, Australia.<\/p>\n

Macquarie was innovative in setting up large infrastructure funds which provided a captive client for the group but most of these were dissolved after the 2008 global financial crisis and have been replaced as an income source by other annuity businesses. FY20 net profit contribution by activity:<\/p>\n

\"MQG<\/p>\n

Asset Management<\/strong> (MAM) manages infrastructure and real assets and securities investments for both retail and institutional clients in Australia and the US, with a total of $A607 billion under management in FY20.<\/p>\n

Corporate and Asset Finance<\/strong> (CAF), with an asset and loan portfolio of $A21.3 billion (FY19) was broken up and integrated into MAM, CGM and Macquarie Capital in FY20.<\/p>\n

Banking and Financial Services<\/strong> (BFS) has a retail deposit book of $63.9 billion, an Australian loan and lease portfolio of $A75.3 billion and a wealth management platform with funds of $A79.1 billion (FY20).<\/p>\n

Commodities and Global Markets<\/strong> (CGM) offers broking, trading, hedging and finance on global securities markets including equities, fixed income, foreign exchange and commodities.<\/p>\n

Macquarie Capital<\/strong> (MC) provides corporate finance advisory and capital raising services to corporate and government clients.<\/p>\n

International Income<\/h3>\n

\"MQG<\/p>\n

International income1<\/sup> is net operating income excluding earnings on capital. Australia2<\/sup> includes New Zealand.<\/em><\/p>\n

Competitors<\/h3>\n

Macquarie competes with local commercial banks, fund managers and securities houses, and \u2014 with 67% international income in FY20 \u2014 a multitude of international investment banks.<\/p>\n

Performance<\/h2>\n

Annuity-based businesses performed well in FY20 but cyclical, market-facing divisions experienced a significant fall in net profit contribution.<\/p>\n

Asset Growth<\/h3>\n