MQG – Citi rates the stock as Neutral

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Macquarie surprised friend and foe yesterday by announcing a fresh $1bn capital raising plus a share purchase plan which Citi estimates has the magnitude of $150m. Estimates have been sliced to incorporate the immediate dilution.

All in all, Citi sees this move as further evidence of the fact that near-term earnings at the Golden Donut continue to face the challenge of replacing cyclical market earnings with more robust annuity-style earnings, which should temper expectations in the short term.

The analysts also point out Macquarie is entering a period of elevated capital deployment, which indicates a turning point in the Return on Equity (ROE) trajectory has been reached. The most obvious conclusion to draw seems to be that future composition of earnings will change. Neutral. Target $123.50.

Sector: Diversified Financials.

Target price is $123.50.Current Price is $122.91. Difference: $0.59 – (brackets indicate current price is over target). If MQG meets the Citi target it will return approximately 0% (excluding dividends, fees and charges – negative figures indicate an expected loss).

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