In a recent report by the research house, Morningstar analysts exalted the ‘diversification and interlinking’ of Macquarie Group’s five businesses: Macquarie Asset Management; Macquarie Corporate Asset and Finance; Macquarie Banking and Financial Services; Macquarie Commodities and Global Markets; and Macquarie Capital.
“The extent of interconnectivity between the five groups and operating leverage provides attractive earnings upside we think the market underappreciates,” the report said.
It explained that Macquarie’s business model allowed it to “‘clip the ticket’” on transactions that could move around the various businesses.
“Macquarie Capital can develop or buy assets, provide advisory and consulting services, access debt capital markets, equity capital markets, mergers and acquisitions, and take fees on assets sold to other Macquarie business units.”
The firm’s growth trajectory, long-term senior management and investment approach, as well as its exposure to the infrastructure, energy and technology sectors were all looked upon favourably by the research house.
Furthermore, the company’s adeptness in niche markets and investment banking sectors, alongside its flexibility and adaptation to change, were “primary points of differentiation” that has allowed it to develop market share in global markets.
“We see the interconnectedness of Macquarie’s adjacent businesses as a real competitive advantage and key to continued strong growth in shareholder returns.”
The company was also well-placed to benefit from global economic growth from its “leading” position as an infrastructure asset manager, Morningstar analysts indicated.
“The beauty of Macquarie’s business model is not just leverage to global growth but the way the group is particularly exposed to the global policy move from monetary policy stimulus, including quantitative easing, to the massive expected ramp up in public-private infrastructure investment.”
The company’s strengths were its capabilities in “building, buying, funding, advising and managing critical infrastructure assets”.
With the need for infrastructure across the world – and particularly in Asia – set to rise in the coming decade, governments would be forced to rely on the private sector to help fund the “massive investment required”.
“The estimates of global infrastructure investment needs are immense and underpin our positive investment view on Macquarie.
“The financial impacts on Macquarie from increased spending on infrastructure assets are higher assets under management, increased equity under management, increased potential for performance fees, higher investment trading profits, increased investment banking transaction volumes, increased M&A potential, and lower asset impairments.
“The size and scale of Macquarie’s asset management operations, the strength of its brands, and the diversity of its AUM by asset class, distribution channel and geographic reach provide it with competitive advantages over competitors.”
