wheres she going tomorrow ?, page-29

re: nab target 3100 / goblin Macquarie: NAB - Dividend Sustainability
6/09/04

NAB has announced its intention to issue $2.5billion in mortgage securitisation, freeing up capital and potentially mitigating any dividend sustainability questions. NAB’s share price has rallied higher this morning touching highs of $27.22 (up 12c), demonstrating good support at $27.00. Macquarie Research Equities (MRE) believe that this announcement, combined with further press speculation that NAB is close to selling its Irish banks will likely provide a boost to investor sentiment.


MRE point out that NAB’s intention to issue $2.5 billion in mortgage securitisation will liquefy its balance sheet to free up capital. As MRE had expected, NAB has announced its intention to securitise portions of its housing loan portfolio. The issue should free up around $100m in capital. Whilst slight, the manoeuvre should relieve some of the pressure caused by APRA's demand for higher capital adequacy, and could help to ensure dividend sustainability.

MRE maintain their long term out perform recommendation, and view the mortgage securitisation as a positive for the stock, given the capital released to maintain its dividend stream.

Traders looking for maximum exposure to short-term movements in the NAB share price should consider the following equity and TURBO warrants for a high-risk, high-return strategy.

Investors and traders looking for short to medium-term leveraged exposure to the NAB share price should consider Macquarie Instalments for a higher risk, higher return alternative to direct share investment.

Long term, more conservative investors looking for a simple, "set and forget" investment should consider the Self Funding Instalments NABSMS and NABSMT. SFI's are moderately geared, have no annual resets and a maturity date in up to five years.