Macquarie Group (MQG) Update
I like the news flow around Macquarie a lot more than the price direction.
A couple weeks back the bank sold $2.5B in 3yr notes at 2.6%. A great rate thanks to the government guarantee. Compare that to the 15% Harley Davidson (HOG) has to pay. This is an excellent time to be getting your hands on cheap cash, well done Mac.
Now Mac is putting money to work in what is arguably one of the clearest long term opportunities in North America, gas. See more below.
I like the news, but clearly I’m missing something as the rest of the market is voting against the news.
The google chart for MQG is better. You can see clearly how the last high on Jan 7 turned into a downtrend on the back of the Jan 8 briefing.
Macquarie Group to Acquire Constellation Energys Downstream Natural Gas Trading Operations
LOS ANGELES–(BUSINESS WIRE)–Macquarie Group (“Macquarie”) (ASX: MQG.AX) today announced that it has entered into an agreement to acquire Constellation Energy’s (“Constellation Energy”) (NYSE: CEG) Houston-based downstream natural gas trading operations (“Business”). When combined with Macquarie’s existing North American gas trading business, Macquarie Cook Energy, the business will become a leading participant in the North American wholesale natural gas market.
In a related transaction, Macquarie Cook Energy and Constellation Energy announced that they have signed a letter of intent under which Macquarie Cook Energy will supply natural gas to Constellation’s Louisville, KY-based retail gas division, Constellation NewEnergy Gas.
Based in Houston and with operations in Calgary and Baltimore, Constellation Energy’s downstream natural gas trading unit provides physical natural gas to meet the fuel supply needs of customers, including local distribution companies, power generators, retail aggregators, industrials and large end-users in the United States and Canada. Constellation Energy’s downstream natural gas trading unit is one of the largest marketers of natural gas in North America. The Business averages over 10 billion cubic feet (“bcf”) per day and has approximately 130 employees.
Looking for Trouble
THIS week’s $646 million sale of Macquarie Countrywide’s holding in a portfolio of US shopping centres could be a sign of things to come as Macquarie Group — the investment bank parent of the struggling property fund — prepares to navigate at least 18 months of economic pain.
As Macquarie Group prepares to update investors next week, analysts, including brokerage Credit Suisse, nominate Macquarie’s $23 billion property empire — held mostly through its listed funds — as the most likely area to be jettisoned over the next few years.
via http://business.watoday.com.au
Key Dates
Macquarie’s operational briefing is webcast at 9.30am tomorrow 5th Feb.
http://www.macquarie.com.au/au/about_macquarie/investor_information/ops_briefings.htm
[Macquarie's briefing presentation is now available.]
Year end results on May 1 and ex dividend is May 15.
http://www.macquarie.com.au/au/about_macquarie/shareholder_calendar.htm
Market is nervous about MQG’s real estate exposure and just how bad last quarter was. At the end of the last briefing they used ominous language.
Tomorrow will be very interesting.
[Tomorrow it is]
MACQUARIE GROUP OPERATIONAL BRIEFING
Key points
- Currently anticipate FY09 profit being approximately $0.9b after allowing for an
- additional $900m in writedowns and impairment charges for the second half (after $1.1b
- of writedowns and impairment charges in the first half)
- Operating income (before impairments) is expected to be down 15%
- Outlook remains subject to significant swing factors including market conditions, asset
- realisations, completion rate of transactions and asset prices
- Market conditions remain extremely challenging, but opportunities are emerging
- Balance sheet funding and liquidity further strengthened since 30 September 2008,
- completing approximately $21b (gross) of new funding initiatives
- Cash and liquid assets of $32.1b1 significantly exceed short term wholesale issued paper
- of $12.7b
- Active across businesses and geographies
- Group using strong balance sheet for business growth and to support clients’ capital needs
see media release or briefing presentations for more.
Thanks for reading, here is a ten year history of MQG.
Related posts:
MQG has been falling since the 8th Jan update in which they clearly flagged these results.
The results were no worse and perhaps a little better than anticipated.
Simple maths:
At what point in the future will MQG earn as much as they did in 2008 and pay as high a dividend?
When they do, a purchase today will return a 15% dividend which is likely keep growing. While you’re waiting you’ll need to settle for around a 12% div which will be cut if MQG stick to 50-60% payout and hold the risks of associated MQG assets.
Macquarie’s dividend history
If management are correct and to be believed then MQG looks in terrific shape. However, there is seldom a last man left standing.
The front of the boomer wave is nearing retirement. Stocks are likely to be the best asset over the next ten years and cash the worst. High paying dividend stocks will be awarded good multiples.
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