Moving into the diversified financials space, Macquarie Group has defied its detractors in the face of supposed short-selling pressure and a money-for-jam capital raising with the group's share price jumping 8.8 per cent this week.
The bulk of brokers believe Macquarie will still face stiff headwinds in 2010, but on a 2/7/0 buy/hold/sell ratio they are mostly pleased with the recent (and expanded) capital raising, the level of participation among retail investors and the removal of uncertainty it provides.
Citi suggested this week that provided Macquarie can achieve a 16 per cent return on the new capital, the dilution effect of selling the new shares will be neutral.
Wilson HTM (not a member of the FNArena universe) takes a contrary view. The Wilson analysts issued a report this week suggesting that Macquarie's current share price is implying a return on equity of 15 per cent, which would imply a profit of $1.2 billion in the next 12 months or so, which is "wishful thinking". Never mind the 30 per cent ROE numbers Macquarie used to produce - those days are "long gone".
Macquarie will take "at least four years" to even reach an ROE of 15 per cent, the Wilson HTM analysts suggest.
In the meantime, Macquarie shares closed the week 14.25 per cent above the average target in the FNArena universe, yet so far no broker has deigned to downgrade to sell.
Wilson, on the other hand, is happy to rate Macquarie a sell.
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