Australia's globally focused investment bank Macquarie Group Ltd (ASX: MQG) has seen its shares lift around 9% over the past year. This after it posted a net profit of $1.265 billion for FY14 and recently forecast that it expects net profit to be slightly up in FY15, with analysts' estimates in the region of $1.35 billion.
There are plenty of reasons to suggest Macquarie is one of the better long-term bets for those looking for yield and growth potential. Here are six of them.
- Overseas exposure. With more than two-thirds of income derived from abroad in FY14 Macquarie is better insulated than most businesses from any prolonged weakness in the domestic Australian economy.
- Macquarie Funds Group has been bulking up organically and through acquisitions with more than $407 billion of assets under management as at 30 June 2014. Around two-thirds of that is in fixed income and infrastructure assets. Macquarie's reputation as the leading infrastructure investor globally is helping to drive its annuity style income streams higher, with the funds management business leading the way.
- The Banking and Financial Services Group now has over 1 million Australian retail clients offering personal and business banking, insurance, broking, mortgage and credit cards services among others. Like the Funds Group it is expecting a stronger FY15 than FY14. The bank is also building deeper relationships with the Australian consumer via credit card issuing partnerships with Woolworths Limited (ASX: WOW) and Qantas Airways Limited (ASX: QAN).
- Macquarie Capital is also expecting a stronger FY15 as global merger and acquisitions levels increase and the bank continues to leverage off new IPOs and other capital market activity.
- The best-in-class reputation for deal-making services and fundamental research across different asset classes including equities is what gives the bank competitive advantages. While in the United States it has serious competitors in Australia it's often able to win more business by operating in relatively less competitive areas.
- The bank's evolution is beginning to pay dividends as the annuity-style businesses are now positioned to deliver better returns following years of investment and acquisitions. This evolution is illustrated by the fact that the annuity-style businesses contributed around three-quarters of all income in FY14, compared to around one-third in FY08.
Selling for $57.73 the group looks reasonable value trading on 14.4x analysts' estimates for FY15's earnings per share, with a dividend yield in the region of 4.5%.
