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KALKINE DAILY 03/06/2015 + MACQUARIE GROUP

Jun 03, 2015

In today’s daily we have covered stock research on MACQUARIE GROUP (EXPENSIVE).









 

The S&P 500 was down by 2.13 points or 0.10% to 2109.60 on Tuesday. U.S. stocks edged down on Tuesday while the dollar fell and bond yields rose as investors sought clarity on Greece's debt crisis and awaited the U.S. jobs report. The U.S. dollar was on track for its biggest one-day percentage decline against a basket of major currencies in nearly two years while the euro rose on expectations that Greece would reach a deal with its creditors.

Yields on safe-haven German 10-year bonds rose 14.7 basis points to 0.677 percent, while those on lower-rated Spanish, Italian and Portuguese debt touched their highest of the year after the data showing inflation resumed in the euro zone last month. U.S. long-dated Treasury debt yields rose to two-week highs, drawing support from rising European yields after news inflation in the euro zone was picking up and overall optimism about Friday's U.S. jobs report. In corporate news, Dollar General advanced $2.27, or 3%, to $74.98, after the discount retailer reported a better-than-expected increase in first-quarter profit, benefiting from higher traffic and customer spending. Apple fell 57 cents, or 0.4%, to 129.96. The company is preparing to launch a direct rival to Spotify AB and other popular services that lets users stream songs instead of buy them.
 


Dollar General Daily Chart (Source - Thomson Reuters)
 

S&P ASX 200 was down by 99.40 points or 1.73% on Tuesday and closed at 5636.00 points. TheCommonwealth Bank closed at $83, down 1.8 per cent; the ANZ Banking Group closed at $33.20, down 1.3 per cent; Westpac Banking Group dropped 2.4 per cent to $32.34, whileNational Australia Bank shed 2 per cent to $33.35. Rio Tinto closed at $56.49, down 1.6 per cent. BHP Billiton closed down 3 per cent at $28.33.  Virtus Health felt the most pain of the day, shedding close to one-fifth of its value to $6.11 after downgrading its earnings forecast for 2015.

Regis Resources was up 5.6 per cent to close at $1.23, as well as Southern Cross Media was up 4.5 per cent to $1.05 after promising quarterly radio results. The Australian dollar was fetching as much as US77.75¢ on Wednesday. On Tuesday, the currency jumped as much as 1.4 per cent to 77.09¢ by 5pm after the RBA left interest rates on hold at 2 per cent in June, in line with expectations. The spot price of ore with 62 per cent iron content delivered to Qingdao, China, was trading at $US63.02 a tonne overnight, up 1.9 per cent.



Regis Resources Daily Chart (Source - Thomson Reuters)


Top Performers ASX 200 :-



 


 

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Stock Of The Day - Macquarie Group (EXPENSIVE)

Macquarie Group Ltd (ASX: MQG)  announced a net profit of $ 1.6 billion for FY 2015 a growth of 27% over the previous year. The net profit for 2H 2015 was $ 926 million which was up 37% over the comparable half-year. The combined net profit of the annuity style businesses grew by 33% over the previous year while the business relating to the capital markets was up by 19%. The operating income for the year of $ 9.3 billion grew by 14% over the previous year and international income accounted for 70% of the total income. Operating expenses of $ 6.8 billion rose by 12% and assets under management stood at $ 486.3 billion at the end of the year up 14% over the previous year. APRA Basel III group capital was $ 16.1 billion as at 31 March 2015 which was $ 2.7 billion surplus to the minimum regulatory capital requirements from 1 January 2015. EPS at $ 5.02 per share was up 31% over the previous year and return on equity was 14% (15.4% in the second half of the year) compared to 11.1% in the previous year. The final ordinary dividend (40% franked) was $ 2 per share making a total ordinary dividend of $ 3.30 per share compared to $2.60 per share in the previous year.

 
Financial Highlights (Source - Company Reports)

Overview for the full year
 
The combined net interest and trading income was up 17% to $ 3.8 billion as a result of growth in the loan portfolio (CAF and BFS) and better trading results in CFM and MSG. Fee and commission income rose by 24% to $ 4.8 billion because of the higher base and performance fees from MAM, improved levels of advisory fee income In Macquarie Capital and enhanced levels of activity CFM and debt capital markets. Other operating income and charges decreased by 18% to $ 0.7 billion were offset by higher impairment charges and collective provisions as well as the non-recurrence of certain items appearing in the previous year. The increase in operating expenses was 12% primarily driven by a 11% increase in employee expenses as a result of the better operating performance of the group as well as increased technology costs and the impact of the depreciation of the Australian dollar on overseas expenses. The total head count was 14,085 at the end of the year compared to 13,913 at the end of the previous year.


Growth in assets under management (Source - Company Reports)

Balance sheet and capital management 
 
The balance sheet continues to be conservative and strong and the group continues to diversify its funding sources with a mix of deposit growth and access to other funding markets. Retail deposits grew by 12% to $ 37.3 billion while total deposits increased from $ 36.9 billion to $ 39.7 billion. During the fiscal 2015, funding of $ 21.5 billion was raised from a number of different sources and different types of products.The group continues to be well capitalised with a surplus of $ 2.7 billion surplus to regulatory requirements and the Tier 1 capital ratio of 9.7% as at the end of March 2015 was slightly up on the previous year.


Diversification by region (Source - Company Reports)
 

Operating performance
 
Macquarie Asset Management showed a net profit contribution of $ 1.45 billion 36% over the previous year as a result of strong contribution from fee income from performance and growth in annuity based business. Assets under management grew by 14% to $ 484.4 billion. Macquarie infrastructure and Real Assets raised $ 8.3 billion in fresh equity commitments during the year while Macquarie Investment Management continued its strong investment results. Macquarie Specialised Investment Solutions continues to grow its business and third party investment commitments are now more than $ 3.3 billion.
 
Corporate and asset finance showed a net profit contribution of more than $ 1.11 billion a growth of 35% over the previous year and the asset and loan portfolio at $28.7 billion grew by 13%. The corporate and real estate loans portfolio rose by 24% to $ 11.2 billion while the asset finance portfolio at $ 17.5 billion was up by 6%. Through the year there was continued expansion in motor vehicles and equipment finance as well as the energy asset portfolio.


Loan Portfolio Growth (Source - Company Reports)
 
Commodities and Financial Markets produced a net profit contribution of $ 835 million up 15% over the previous year reflecting an overall improvement in market conditions. Energy was a significant contributor while Metals, Mining and Agriculture also made a better contribution. There was continued growth in origination and securitisation.


Macquarie Capital produced a net profit contribution of $ 430 million up 54% over the previous year. Advice was provided on 470 transactions worth $ 141 billion and the group was ranked number 1 in respect of completed mergers and acquisitions deals in Australia for the calendar year 2014. Among the notable deals during the year was the $ 11 billion equity and debt raising by Freeport LNG.


Macquarie Group Daily Chart (Source - Thomson Reuters)
 
Banking and financial services delivered a net profit contribution of $ 285 million, up 10% over the previous year. The mortgage portfolio grew by 44% to $ 24.5 billion and constitutes just under 2% of the Australian mortgage market. Platform assets under administration grew 19% to $ 48 billion and the business continued to invest in technology to improve its business operations.
 
Macquarie Securities Group delivered a net profit contribution of $ 64 million compared to $ 107 million in the previous year. Brokerage income was relatively flat but activity increases in the equity markets were due to enhanced IPO activity. The group was ranked number 1 for IPOs in Australia and number 2 for Australian equity and equity related deals for the calendar year 2014. It continued to build on its expertise as one of the largest warrant issuers in the Asia-Pacific region.

The shares of the group have been on an upward trajectory having gained an eye-popping 187% since June 2012 and this is not surprising considering that, as the leading Australian investment bank, it is going to do well as long as the global confidence is rising. Moreover, there are a number of positive factors that we observe in favour of the stock. Any further weakening of the Australian dollar will have a positive impact on profits since the group has diversified overseas and almost 70% of its income is generated in there. Moreover, it has diversified into less cyclical businesses and around 69% of its income comes from annuity style businesses such as funds management. Finally, investors are likely to see an increase in dividend and the dividend yield for the next year is expected to be around 4.3%.
 
However, we believe that the stock is expensive at the current price and would review the stock at a later date.
 

 


Level 13  167 Macquarie Street
Sydney NSW 2000 Australia
E-Mail - [email protected]
Phone - 02 8667 3147


        
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