News: MQG Macquarie quarterly profit boosted by strong commodities business , page-11

"I disagree Madamswer. A likely record result in FY23 is a great result. By having a diversified portfolio of businesses they can deliver even when others in the merchant banking world can't.
Some time back I suggested their commodities business would under pin a strong result for them this year and guess what - it did.
Yes in the future this may no always be the case but in the future their main stream business will be back doing annuity type deals, and thriving in the M&A world, especially in green energy.
MQG is taking a serious position in the renewables and Green energy space and whilst I am no greenie by any means, stopping this immovable force globally is impossible and MQG will make billions out of facilitating deals in the space.


@noonster,

Points all well-made.

I am one of those investors who sold out (on 25 October 2011... I still recall the date, because it was quite a notable event, given my having owned the shares for many years - certainly more than a decade, and probably close to 15 years, on a volume-weighted basis).

The reason for my selling was purely on valuation grounds, based on the view that the stock was trading on record valuation metrics (Price-to-Book )and that the parts of the company that warranted the higher valuation multiple, namely the annuity-businesses - which were, in essence interest rate derivative businesses - were over-earning and that as rates normalised, those earnings would fall.

That process has started to be seen in the latest update, but I don't believe it has run its full course, given the lag in business activity in response to liquidity drainage out of capital markets, which is still continuing.

For the company as a whole, this earnings downdraft has been ameliorated by the recent jump in the lower-quality market's-facing business (which, obviously I had no way to anticipate).

But that sugar hit can't be relied on to be repeated in coming financial periods, so I struggle to see the stock outperforming over the foreseeable future.

Don't get me wrong: I think it's a money-making machine. When the conditions are right.
And the conditions that have been very very "right" for the preceding decade - i.e., ever-declining cost of global capital - are no more.

I'm not saying the company is going to go backwards in great strides; not at all. I'm just saying sustainable organic growth is going to be hard to come by in the near- to mediaum term.

The one very meaningful exception is in the area to which you allude, namely the Green energy space (known to some cynics as the Great Green Grift):

At its core, the essence of Macquarie IP is to capitalise and arbitrage inefficiencies in capital markets at various points in the capital cycle.

And when you have massive capital velocity like we will have in this green energy gig, with governments basically legislating (and subsidising) accelerating capital flows into the "green revolution", then the scope and latitude for capital-to-capacity inefficiencies and juicy arbitrage opportunities - MQG's bread and butter - is huge.

So I am viewing MQG through that lens and if I do become a shareholder in the company again, it will be because of the prospects of MQG clipping of the Green ticket (without putting any of its own shareholder capital on the line to actually build or own green energy assets... because I find scant evidence of those assets generating a return in excess of their cost of capital, without government subsidies.)

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