Upgrading Macquaire to a BUY | EROAD | Credit Suisse

21 March 2023

Stock in Focus: Macquaire (MQG.ASX)

The bank rout has seen bank stocks sell-down heavily across the globe. As we highlighted earlier we liked Macquarie but were put off but its valuation recently. We upgrade Macquarie to a BUY and see value below $170, and on a technical level have seen support at $165, where it tends to rebound.

Macquarie and like the other four major Aussie banks are well capitalised, additionally Macquarie has a lower exposure to the mortgage market and is sitting on adequate funding from its capital raise in 2021. It also enjoys a higher exposure to infrastructure, which makes it a lower risk proposition to other banks.

While parts of its business will likely to struggle over the near-term we feel now is an opportune time to pick up “some” Macquarie; its markets exposure business is able to capitalise on times of high market volatility like it has done so in the past. We upgrade Macquarie to a BUY.


New Zealand Market Movers 

The New Zealand market (NZX50, -0.4%) closed down has global markets remain jittery on concerns regarding the stability of the banking sector. We note EROAD reaffirmed their FY23F guidance for revenues of ~$159M-$164M and an EBIT loss of -$6-3M. The company has hired Goldman Sachs to conduct a strategic review of the company’s North American business. We don’t have a view on EROAD but watching closely — looks “down and dirty” on the charts and a strong SaaS business to boot. One has to wonder: where do the funds which held Pushpay deploy their cash now?


Australia Market Movers 

The Australian Market (ASX200, -1.4%) fell to a four month low; banks and commodity-facing stocks were hardest hit. Oil fell to a 14-month low, seeing the energy sector extend its losses – we would prefer to wait until after the Fed’s interest rate decision before making any moves towards energy stocks (Woodside Energy looks interesting, but sitting on our hands for now…)


US Market Movers

Early risers (NZ time) would’ve noted that S&P 500 extended losses to negative 1.6% today before settling on +0.89%, as JPMorgan CEO Jamie Dimon looks for a solution for the embattled First Republic Bank. S&P cut their outlook for UBS to “negative” upon news of the forced Credit Suisse acquisition. We actually think UBS got a pretty good deal; it’s incorrect to value a bank on the value of its outstanding equities. Rather, a bank should be valued by its assets and liabilities: as of writing, Credit Suisse has about 531 billion Swiss frances of assets and about 486 billion Swiss francs of liabilities. Those liabilities are valuable! A bank basically makes money based on the value of its customer’s deposits (liabilities); UBS just acquired 486 billion of liabilities – a lot of which sit in Credit Suisse’s very lucrative wealth management business. This is not a bad outcome for UBS; it is less of a good outcome for Credit Suisse shareholders, of course. . Amazon continues to lay off employees – another 9,000 this round, as it continues to seek efficiencies. It’s a small piece of the pie for the e-commerce giant but encouraging – shows fiscal discipline – we remain buy rated. The market feels a little too optimistic at the moment, to our liking – bailouts are still a sign of failure – not a sign of confidence.

What Markets will be Watching this Week  

Wednesday

CPI (Inflation) data from the UK

Westpac NZ Consumer Confidence

Kathmandu Earnings

Thursday

US Fed Interest Rate decision

Friday

Bank of England (BoE) Interest rate Decision

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