Macquarie Bank (MBL) Share Trading Update

Submitted by Craig Strzelecki on 5 March, 2007 - 18:02

Macquarie Bank (MBL) have a reiterated Buy rating and a raised target price of $102.29 per share (up 5 percent) from stock analyst Macquarie Research Equities (MRE). MBL has upgraded earnings for the second time within a month, with estimated FY07 NPAT to rise "at least 50%" on the pcp. CIR have upgraded their core EPS forecasts by 4%, 4% and 2% over FY07-FY09 estimates. The guidance uplift appears broad based with favourable market conditions and transaction levels improving across most business units. Importantly, CIR cannot identify any significant asset sales that may have transpired in the past four weeks, suggesting the uplift is more operational.The analyst have carried though the FY07e earnings upgrade to FY08e given the greater certainty surrounding the likely profit on sale of much of the group's interest in Boart Longyear (around $315m). Earnings momentum across most of the group's business units remains strong (AUM, broking, trading, M&A, loans), suggesting further upside earnings risk. However, the valuation is still undemanding, with CIR's high-end FY08e forecast suggesting a PER of 14.3x – a 13% discount to the All Industrials PER of 16.4x. Note CIR's FY08e forecast is predicated on just 5% EPS growth – which could well prove conservative.

Meanwhile, another stock analyst, UBS have given the investment bank a Buy 2 broker call and a price target of $96. The analyst has commented that Macquarie Bank (MBL) provided its second upgrade in a month. It now expects profit for 2H07 (ending 31 March) to exceed 1H07 profit of $638m (ex MGQ). This compares to its prior trading statement in early February that NPAT would be slightly below 1H07. This new guidance implies FY07 profit will be up by at least 50% on FY06. Today's 3% upgrade to 2007 follows a 5% upgrade on 6th Feb. This was driven by a very strong February across the business. In particular the Investment Bank undertook a number of substantial deals while trading conditions were very good. If market conditions stabilise through March we see further upside risk to our earnings forecasts. Macquarie Bank has seen a rapid acceleration in its asset recycling. As at 30 Sept MBL had $1,833m in seed assets on BS. Since then it has sold $1.3b in assets and acquired $987m of new assets. This (1) addresses concerns over rising capital intensity (2) Seeds growth in off BS FUM (3) generates revenue from profit on sale. Positives that analyst UBS have identified about Macquarie: (1) International growth & diversification, (2) Bal Sheet inventory underpins earnings targets, (3) ahead of peers on Specialist Funds experience. Risks for Macquarie Bank identified by the analyst: (1) Moving up risk/return curve with bigger bets (2) Markets/macro factors. Our PT is based on a SOTP.

Macquarie Bank Limited is listed on the Australian Stock Exchange (ASX) under stock code MBL. You can view their investor website here. MBL was listed on the ASX on 29 July, 1996. David Clarke is the chairman of Macquarie Bank and the managing director is Allan E Moss. The company is involved in investment Banking, Banking and Financial Services. Macquarie is a diversified international provider of financial and investment banking services, headquartered in Sydney, Australia. Macquarie Bank evolved from Hill Samuel Australia Limited, which was established in 1969 as a subsidiary of the UK merchant bank, Hill Samuel & Co. In 1985, a banking licence was acquired and operations began under the name Macquarie Bank. In 1996, Macquarie Bank’s fully paid ordinary shares were quoted on the Australian Stock Exchange. In Australia, Macquarie is a full-service investment bank providing financial market trading and advisory products and services. In the Asia-Pacific region, the Bank provides a broad range of investment banking services and in the Americas, Europe, Africa and the Middle East, it focuses on particular business areas in which its expertise delivers value to clients. Macquarie has reported successive years of record profits and growth since 1992, and now employs over 10,000 people in 24 countries. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade MBL. Check your charts and good luck with your share trading!

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