Macquarie Group (MQG)
HOLD

Commodity Driven

 5 May 2023
Sector: Financials

FY23 RESULT

Need To Know

  • Strong earnings beat driven by the commodities business
  • Asset Management (MAM) and Capital markets significantly weak on market conditions
  • Bumper FY23 creates a larger earnings growth headwind of FY24. Hard to see share price outperformance over the next 12 months 

Macquarie Group released its full year 2023 result which highlighted significant earnings beat due to outperformance in the commodities business (58% contribution to earnings – the largest ever). 

Result Highlights:

Profit before Tax of A$6,992 vs market at A$6,650 (5% beat) 

Net Profit of A$5,182 vs market at A$5,056 (2.5% beat)

ROE of 16.9% vs 16% market (5.6% beat)

EPS of A$13.54 vs A$12.78 market (5.9% beat) 

DPS of A$7.50 (40% franked) vs A$6.77 market (11% beat) 

Assets under management increased to A$870.8bn (+10% yoy).

Investment View

Whilst a good result, the earnings beat was almost entirely driven by the markets facing commodities business (up 55% on FY22) which doesn’t give much readthrough into the non-volatile growth prospects for FY24. EPS revisions for FY23 and FY24 are up 14% and 5% respectively YTD. 

Macquarie capital (-47% yoy) and MAM (-23% yoy) both delivered notably feeble performance due to weaker market conditions, something that is expected to somewhat improve over the next 12 months. 

The outlook commentary followed Macquarie’s usual pattern of giving little quantification on expectations. The market had earnings estimates for FY24 at ~10% below FY23e (implies ~6% lower than today’s release), so we see the potential for some positive revisions as the market may be tempted to roll forward some of FY23 earnings momentum. 

If the ex-commodity segments of the business continue to underperform, we find it increasingly difficult to see how the earnings quality improves for FY24. The group trades on a PER of 15.5x (slightly above its long-term average) and at a +1SD premium relative to market. So, on a multiple basis we see the business as valued. Especially with the recovery in the less volatile earnings base not being expected to come through on estimates until FY25E. Deploying ~$13bn of surplus capital could be the swing-factor. 
Re-iterate our Hold rating. 

Figure 1: PER

Figure 2: PER RELATIVE TO ASX200

View the latest Research Report

Stock Overview

Share Price

Company Overview

MQG is an Australian financial company with 4 segments: Asset Management, Banking and Financial Services, Commodities and Global Markets, and Capital.

Disclaimers and Disclosures

Issuer

The information and opinions contained within Sandstone Insights Research were prepared by MST Financial Services Pty Ltd (ABN 54 617 475 180, AFSL 500557) ("MST").

Reliance

Whilst MST make every effort to use reliable, comprehensive information in the construction of its reports, MST make no representation, warranty or undertaking of the accuracy, timeliness or completeness of information in this report. Save for any statutory liability that cannot be excluded, MST and MST employees, representative and agents shall not be liable (whether in negligence or otherwise) for any error or inaccuracy in, or omission from, this advice or any resulting loss suffered by the recipient or any other person.

General Advice

Any advice contained within Sandstone Insights Research is general advice only and has been prepared without taking into account any person’s objectives, financial situation or needs. Any person, before acting on any advice contained within Sandstone Insights Research, should first consider consulting with a financial adviser to assess whether that advice is appropriate for their objectives, financial situation and needs. 

General Disclosures

This report should be read in conjunction with MST Disclaimers and Disclosures and is published in accordance with MST Conflict Management Policy which are available on the MST website: https://www.sandstoneinsights.com.au. 

Currency of Research

The recommendations made in a Sandstone Insights Research report are current as of the publication date. If you are reading a report materially after publication, it is likely that circumstances will have changed and at least some aspects of the analysis may no longer hold.

Access and Use

Any access to or use of Sandstone Insights Research is subject to the Terms of Use. By accessing or using Sandstone Insights Research you hereby agree to be bound by our Terms and Conditions and hereby liable for any monies due in payment of accessing this service. In addition you consent to us collecting and using your personal data (including cookies) in accordance with MST Privacy Policy, including for the purpose of a) setting your preferences and b) collecting readership data so MST may deliver an improved and personalised service to you. If you do not agree to MST Terms of Use and/or if you do not wish to consent to MST use of your personal data, please do not access this service.

Equities Research Methodology

Please click here for information about MST equities research methodology.