Ord Minnett have increased their end of 08 target to...

Ord Minnett have increased their end of 08 target to $94.95.

Macquarie Group Limited (MQG – A$55.94), Accumulate
EPS Revisions - FY08E -3.7%, FY09E +11.4%
�� MQG reports its FY08 result on May 20. We are cutting FY08E diluted EPS by 3.7% on an A$300m REIT investment
provision charge but raising FY09E by 11.4% given the higher interest rates, reduced bonus pool participation, a lower tax
rate and reduced share count. MQG has underperformed in the wake of the global credit crunch and the announcement
CEO Allan Moss will retire. We note (i) MQG have around A$3bn of surplus capital, 3 times the normal level of liquidity, a
strong debt funding profile and the capacity to lower capital intensity by raising A$750m of hybrid debt capital, (ii) The
excessive level of staff bonus pool-diluting capital must raise the spectre of capital management, (iii) MQG should consider
leading a syndicate of its managed unlisted funds to privatise the struggling MIG, and (iv) we believe MQG’s long term
business model remains intact notwithstanding the current disruption to debt markets posed by the global credit crunch.
�� Our “unstressed” forecasts give a sum of the parts valuation of 60% investment bank/40% integrated infrastructure funds
manager December 2008 share price target of A$94.95. We continue to believe MQG offers compelling relative value.