Macquarie Group Limited
Decent Performance in 1HFY19:Macquarie Group Limited (ASX: MQG) is a diversified financial group. It has a different line of services including asset management and finance, banking, advisory & risk, and capital solutions across debt equity and commodities. The company aims to deliver long-term profitability and shareholder returns while managing risk and maintaining certain standards of corporate governance. On the financial front, the profit attributable to equity holders for the group stood at A$1,310 million for the period ended 30 September 2018, up by 5% from the prior corresponding period. The company’s annuity-style business achieved a net profit of $1,495 million for the half year ended 30 September 2018, 29% down from the prior corresponding period. The capital market-facing business, however, delivered a net profit contribution of A$1,106 million up by 95% on the previous corresponding period. The net profit for the asset management stood at A$762 million down by 36% period on period. The asset finance is down by 29% from the previous corresponding period with net profit standing at A$437 million. Banking & financial services posted a marginal increase in their profit numbers with 3% increase pep. However, the profits for commodities and capital business are up by 85% and 114% pep respectively. The net operating income increased by 8% for the half year ended which stood at $A5,830 million as compared to A$5,397 million in the prior corresponding Period.
The key business drivers had a mixed performance over the half-yearly period. The net interest and trading income grew by 18% as compared to the prior period. The fee and commission income are up by 4%. The net operating lease income went down by 2%. The other operating income went up by 29% on the prior corresponding period owing to lower impairment charges, rising investment income and an increase in other income relating to asset sales. On the operating expenses front, the company has seen a rise of 12% from the prior corresponding period. The effective tax rate for the half year ended 30 September 2018 stood at 22.2% as compared to 26.4% in the prior corresponding period and 24.9% in the prior period. Further, the company maintained a conservative and robust balance sheet with total assets growing by 7% and total liabilities by 9% on half yearly basis. The annualized ROE of the company however increased consistently over the past years and came in at 16.3% in 1HFY19. The consolidated net cash flow from operation for the company stood at $2,524 million as of September 30, 2018 as compared to $3,741 million in the second half of FY18. The company has an AUM of A$551.0 billion, increased by 11% in 1HFY19 against the prior year. There has been a stable increase in DPS over the past five years and the payout ratio increased by 12% in FY18 on a Y-O-Y basis. The company expects that FY 2019 results will be most likely in line with FY 2018 results.
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Segment-wise profit contribution in 1HFY19 (Source: Company Reports)
Meanwhile, the stock has generated YTD return of 14.27% and has been trading in a tight consolidation range from quite some time now.Although there are numerous positive factors that would ensure better value to shareholders in the long run, but we presume that all positive factors have priced in at current juncture.We, therefore, maintain our “Expensive” recommendation on the stock at the current market price of $113.180, suggesting that the investor should wait for a few more trading sessions to get the better levels for entry.
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