mqg

Macquarie Group Limited (MQG $58.91)
Recommendation: Accumulate
Risk Rating: Medium
Full year Result: Evolving Business Model Retains Growth Potential Despite
Global Credit Crunch
�� Quantitatively and qualitatively the $1,803m 2008 result disappointed given weaker
than expected revenues, larger investment writeoffs, a lower staff bonus pool and
low effective tax rate. The 2009 outlook was cautious “The current state of financial
markets means that it will be challenging to repeat last year’s record performance,
but this may be achievable.”
�� The 2008 result sees our forecast 2009 earnings downgraded by 10% to 619.2¢
representing EPS growth of negative 6.7%. These forecasts are conservative as
we do not include any “super-transaction” gains going forward until they are
announced.
�� Following the 2008 result we expect several issues will drive MQG’s share price:
The qualitatively and quantitatively disappointing 2008 result and earnings outlook;
MQG Valuation (slightly expensive investment bank or cheap Integrated Investment
Bank / Infrastructure Funds Manager?), MQG’s new CEO, Nicolas Moore, MQG’s
infrastructure business model (the risks vs. the opportunity), Non Operating Holding
Company restructure and bolstered capital adequacy position see MQG positioned
for growth investment opportunities and the traditional conservative outlook
statement versus subsequent strong growth reality.
�� Our forecasts based on a valuation of 60% investment bank / 40% integrated
infrastructure funds manager give a December 2008 share price target of $115.45.