Summary: Macquarie’s purchase of the Esanda dealer finance portfolio was warmly received by analysts, who expect the portfolio to add to earnings in the first full year. Meanwhile, Bank of Queensland’s full-year result was seen as strong, while Aurizon’s cost cuts are being well received by the market. Transurban’s toll revenue has risen in the September quarter, which the market sees as a strong start to the year.
Key take-out: Analysts took the opportunity of Macquarie’s Esanda deal to increase their target price for the bank.
Key beneficiaries: General investors. Category: Shares.
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Macquarie Group Limited (MQG)
On Thursday (October 8) Macquarie Group announced the acquisition of the Esanda dealer finance portfolio from ANZ Banking Group (ANZ). The portfolio of retail and wholesale dealer financing valued at $7.8 billion will become part of Macquarie's automotive and equipment financing division.
The acquisition will take Macquarie Leasing to approximately $17bn. The acquisition will be funded through existing capital, a $400 million institutional placement (completed on October 9) and a share purchase plan. The completed placement resulted in 5 million new ordinary shares issued at $80.
The move has been warmly received by analysts with the portfolio expected to add an extra 10 cents to earnings per share in the first full year. Analysts were pleasantly surprised by an upgrade in first half guidance mainly off the back of accrued performance fees.
Analysts took the opportunity to increase their target price for MQG with the average sitting at $90.09. At the time of writing Macquarie Group’s share price was $80.77.
- Investors are generally advised to buy Macquarie at current levels.
Bank of Queensland (BOQ)
Bank of Queensland announced FY15 results on Thursday (October 8). The result was viewed as strong all round and even beat some analysts’ expectations. Statutory profit after tax was up 22 per cent to $318m. Positively, lending momentum is returning to the regional bank and costs have been well contained. It appears the hard work since the recapitalisation is starting to pay off.
Analysts have also highlighted BOQ Specialist as a successful acquisition as it contributed $43m to the result, exceeding guidance by $5m. The business, which serves health, medical and accounting professionals, also delivered loan growth of $1.6bn and is considered to be lower risk than the majority of commercial lending segments.
Analysts all remain positive on BOQ with a number calling the regional bank a buy but with the majority labelling it as a hold. The average 12-month price target is $13.62. At the time of writing the share price was $12.75.
- Investors are generally advised to hold Bank of Queensland at current levels.
Aurizon Holdings Limited (AZJ)
The management team at Aurizon Holdings put on their best suit and tie and got out the muffins and Twinings tea selection for an Investor Day last week (October 7). The stock formerly known as QR National used the day to announce a further $310m-380m in cost outs and productivity benefits over the course of the next three years through a process of improving technology and labour efficiency.
In a time where top-line growth is hard to come by cost outs are being well received by the market in the short term. Analysts have commented on this regarding AZJ, stating organic growth will remain a challenge.
Analysts are torn between a hold and a buy with four of the seven surveyed calling AZJ a buy and three calling it a hold. The average 12-month price target is $5.52. At the time of writing the share price was $5.195.
- Investors are generally advised to buy Aurizon at current levels.
Transurban Group (TCL)
On Monday (October 12) Transurban held its AGM and took the opportunity to release traffic and revenue numbers for the September quarter. Analysts agreed it was a strong start to the year for TCL with overall toll revenue up by 17 per cent ($427m) on the prior corresponding period.
Surprising analysts was the growth in the Sydney toll numbers with revenue increasing by 16 per cent and average daily traffic increasing by 10.3 per cent. Analysts commented they can see more pleasing surprises coming from the Sydney roads. Unfortunately for Melbourne and Brisbane revenues, road closures weighed on the numbers.
Analysts have TCL as a buy currently and the few who have it as a hold point towards the stock being fully priced at the moment. The 12-month average price target is $10.09 and at the time of writing the share price is $10.06.
- Investors are generally advised to buy Transurban at current levels.