BUY HOLD SELL – Macquarie Group (ASX: MQG)

Macquarie Group (ASX: MQG) reported first-half net profit of $2.305bn, ahead of consensus of $2.16bn.

The group announced an interim dividend of $3.00/share, with 40% franking. Profits were up 13% on last year but down 13% on the second half of FY22. Assets under management increased 3% to $795.6bn over the first half of the year. International income accounted for 72% of the total income, with 38% from the Americas, 24% from EMEA, and 10% from Asia. Profits from market-facing activities were down 18% to $2.292bn over the half, with profits from annuity-style activities down 15%, to $2.281bn over the half.

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The presentation is a 72-page affair and another more in-depth report for analysts, but all looks good. They provided a short and medium-term outlook update. They cited factors that may influence the short-term outlook, which included:

• Market conditions – global economic conditions, inflation and interest rates, significant volatility events, and impact of geopolitical events.
• Completion of period-end reviews and the rate of completion of transactions.
• The geographic composition of income and the impact of foreign exchange.
• Tax or regulatory changes.

The medium-term outlook contained comments about continuing to develop their geographic diversity and adapting the portfolio mix to changing market conditions. You can see how important America is in the whole scheme of things, though. Source: Macquarie Group Presentation  

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  19,266 staff members, of which 53% are international. 72% of income comes from international. When Henry worked there back in the 90s, there was 1200 staff. Amazing.  

Fundamentals

Ask anyone in the Marcus Today team, and they’ll tell you that MQG is one of their favourite stocks. In terms of Australian banks, it’s one of the best there is, with some very, very, good minds behind everything. The share price hit a 52-week high of $217.32 at the start of the year, following a strong rally post-COVID-19 lows. Since then, the share price has been in a downtrend, but the bank’s reporting season is underway, and good numbers from MQG this morning should help to turn the tide.   It’s trading on an average PE of 16.7x, which is expected to drop in each of the next four years and has a gross yield of 4.6%, which is expected to increase in the coming years. Revenue, EPS, and dividends are expected to grow, and with a payout ratio of only 60%, there is room to keep investors happy, although 40% franking is a little disappointing.  

Conclusion

To read the conclusion and to get access to more market commentary, sign up for a free trial now and become a better investor.     More about the author – Layton Membrey Layton Membrey has been working with the Marcus Today newsletter since 2021. He is currently undertaking a Master of Commerce specialising in Finance at Deakin University, which he will complete in 2023. Layton has quickly accumulated knowledge from Marcus and Henry, enabling him to develop his own investment style.