mqg is a steal at this price, page-40

Lionel....the macquarie you were working in and associated with is a very different macquarie now....Unlike during the GFC....it does not have toxic satelites full of debt to bring it down......its got surplus cash....and unlike other investment banks...it has a big annuity generating leasing business which will keep cash flowing in even during the lean times......

Below is an extract of Citi bank research on MQG released yesterday...

Macquarie Group Limited (MQG.AX)

Going cheap?K.below cost!
?? Stock price now 0.89x last reported NTA ?X due to both a deteriorating banking
environment and an unimpressive trading update. Here we revert to a book value
metric ?V testing our 12-month fwd NTA estimate we find ~11% potential downside gives
us a ??stressed?? NTA of $24.48. Adding a standalone value for the Funds business
gives us a ??stressed?? Group valuation of $30.41, which is well above today??s close
($23.25). With MQG going cheap, we maintain our $30.65 TP and lift the stock to BUY.
?? Balance sheet composition looks sound ?X With 42% of assets in lending and 30%
in cash and liquids we view the biggest swing factor to NTA as being the equity
investments, which constitute ~7% of assets.
?? Our ??stressed?? FY12 NTA estimate is $24.48 ?X This includes a MTM adjustment for
the equity investments that assumes further downside from what we have seen YTD.
This implies an NTA of $8,555m. However we regard the Funds operation as having a
standalone value greater than its NTA. Given this, we add a multiple-of-revenue
valuation for the Funds business (~$2bn net of capital) to estimate a ??stressed??
valuation of the Group of $10.6bn or $30.41 per share.
?? Company NTA calc appears conservative ?X Contrary to practice among peer banks
both domestically and offshore, MQG deducts net deferred tax from its NTA. If we add
this back to align with global peers, the reported FY11 NTA of $26.16 would have been
$28.91, and our ??stressed?? FY12E NTA would be $27.22.
?? MQG is trading at 0.85x our stressed (tax adj) FY12 NTA ?X This is a ~12% discount
to the peer group average of 0.97x.
?? Given earnings concerns, time to revert to NTA? ?X We have raised questions
about MQG??s investment banking strength vs global peers. Yet looking at PE multiples,
post the recent trading update downgrades, MQG still trades at a modest premium to
its peer set. However given a volatile market globally, investors now have cause to
doubt sector earnings estimates. In this environment relative NTA may provide a more
reliable basis for benchmarking investment banks. If so, MQG is now going cheap!
Equities
MQG.AU (Y/E Mar)