This report is an updated version of the report published on the 19 January 2024 at 3:55 PM AEDT.
Macquarie Technology Group Limited (ASX: MAQ)
MAQ is an Australian data centre, cloud, cyber security, and telecom service provider. The ASX-listed company caters to mid-to-large business and government customers.
Recommendation Rationale – SELL at AUD 70.86
- Financial Performance: The company delivered ninth consecutive year of profitable growth in FY23. Revenue jumped over 11% YoY and EBITDA grew more than 16% YoY on the back of the company’s differentiated market offerings, ongoing cloud migration, and its focus on customer experience.
- Outlook: EBITDA is expected to grow in FY24. MAQ expects demand growth for its cloud and cyber security services, focus on opportunities through the AI megatrend, and further investment in growth and customer growth capex in FY24.
- Emerging Risks: A failure to protect the client data due to cyber incidents may impact the company’s reputation as well as its financial performance.
- Overvalued Multiples: On a forward 12-month basis, key valuation multiples (EV/EBITDA, EV/Sales, Price/Earnings, Price/Cash Flow, and Price/book) are higher than the median of the Telecommunications Services’ industry.
MAQ Daily Chart
Valuation Methodology: Price/Earnings Approach (FY June'25E) (Illustrative)
Given the expected demand growth for MAQ's cloud and cyber security services, focus on opportunities through the AI megatrend, and further investment in growth and customer growth capex in FY24, etc, the company might trade at a slight premium to its peers. For valuation, few peers like Hansen Technologies Ltd (ASX: HSN), Altium Ltd (ASX: ALU), TechnologyOne Ltd (ASX: TNE), and others have been considered. Considering the current trading levels, risks associated, and downside indicated by the valuation, it is prudent to book profit at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current price of AUD 70.86, as of January 19, 2024, at 2:35 PM AEDT.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.
Note 1: Past performance is neither an indicator nor a guarantee of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is January 19, 2024. The reference data in this report has been partly sourced from REFINITIV.
Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.
Technical Indicators Defined: -
Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.