Portfolio Change - Reduce Macquarie Group (MQG)
Updated: Jul 29, 2021
Australian Equities Income Portfolio Change
MQG’s operational performance throughout the COVID pandemic has been resilient with the Group reporting a 10% uplift in NPAT in its latest earnings report in May 2021. We contend that MQG’s solid operational result has now been adequately reflected in its strong share price performance of +25% over the last 12 months.
We are reducing our overweight position in MQG from ~6% to ~3.5% given its high valuation metrics with the stock trading on a 12-month prospective price earnings ratio (PER) of ~18.5 times, which is now capturing the buoyancy in activity levels for capital markets and richly priced asset realisations. MQG also announced this week (trading update) a reduction in its dividend payout ratio to 50% to 70% of profit compared to the previous range of 60% to 80%.
Our investment thesis for MQG over the medium term is based on the recognition of its enviable mix of annuity style assets (particularly in Green Energy/Infrastructure) and its strong balance sheet which provides strategic flexibility.