{"id":180969,"date":"2023-09-06T07:59:16","date_gmt":"2023-09-06T07:59:16","guid":{"rendered":"https:\/\/precoinnews.com\/?p=180969"},"modified":"2023-09-06T07:59:16","modified_gmt":"2023-09-06T07:59:16","slug":"macquarie-flags-weaker-first-half-as-deal-making-slows","status":"publish","type":"post","link":"https:\/\/precoinnews.com\/markets\/macquarie-flags-weaker-first-half-as-deal-making-slows\/","title":{"rendered":"Macquarie flags weaker first half as deal-making slows"},"content":{"rendered":"

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Investment giant Macquarie Group has warned of a weaker first half as a tougher deal environment slows earnings in its flagship asset management business, sparking a slump in its price.<\/p>\n

On Wednesday, Macquarie issued an ASX update saying its net other operating income would be \u201csubstantially down\u201d in the first half, mainly due to lower investment-related income from green energy investments.<\/p>\n

<\/p>\n

Macquarie chief executive Shemara Wikramanayake noted in July that deal activity had slowed.<\/span>Credit: <\/span>Elke Meitzel<\/cite><\/p>\n

The company said asset sales were mostly expected to occur in the second half, impacting the short-term outlook of its asset management arm, which is a major source of profit for Macquarie.<\/p>\n

At the group\u2019s annual meeting in July, chief executive Shemara Wikramanayake said deal activity \u2013 the buying and selling of assets \u2013 had slowed because of a number of factors, but Macquarie\u2019s most recent update was below market expectations.<\/p>\n

Shares in Macquarie closed 3.8 per cent lower to $170.21 a share on Wednesday, although investors and analysts said it was largely a reflection of the trading environment.<\/p>\n

TMS Capital portfolio manager Ben Clark said the news from Macquarie was not significant, especially amid a patchy pickup in merger and acquisition activity this year.<\/p>\n

\u201cIt\u2019s not a big deal, and it\u2019s not unexpected,\u201d he said. \u201cWe all know corporate deals and M&A activity has been very slow this year, and dead last year.\u201d<\/p>\n

Macquarie was a \u201cpatient investor\u201d, Clark said, and was unlikely to be in a rush to sell given the quality of its assets and selling conditions globally.<\/p>\n

\u201cMacquarie owns some great assets, especially in recycling, and they\u2019re not in a position where they need to hurry,\u201d he said.<\/p>\n

\u201cYou want some competitive tension when selling assets, and we know financing conditions globally are tight, and debt funding has become more expensive and harder to source. Macquarie has a lot going on in Europe, especially in its green infrastructure division, and conditions there are even tighter than they are in the US.\u201d<\/p>\n

While Macquarie shares fell on Wednesday, Clark said the company\u2019s update was \u201cmore a timing thing\u201d and that given the broader Australian sharemarket\u2019s performance over the day, the share price movement was to be expected.<\/p>\n

\u201cWhat Macquarie basically said was that some of the assets they were going to sell this half of the year will be sold in the next half,\u201d he said. \u201cWhen markets are down 1 per cent, Macquarie\u2019s share price comes down a couple per cent because they\u2019re leveraged.\u201d<\/p>\n

Citi analyst Brendan Sproules said Macquarie\u2019s announcement showed the company would face a softer first half than expected but that unlike July\u2019s annual general meeting, the group\u2019s current full-year performance metrics had been left unchanged.<\/p>\n

However, he noted Wednesday\u2019s release \u201cindicated that Macquarie Asset Management\u2019s realisations will predominantly appear in the second half rather than the first half\u201d.<\/p>\n

Sproules said he expected consensus cash earnings for the first half to be revised down to about $1.6 billion from $1.9 billion as the result of a \u201ctougher environment for deal flow\u201d, which had already led to full-year downgrades for the Macquarie Asset Management and Macquarie Capital businesses this year.<\/p>\n

Morningstar analyst Nathan Zaia said Macquarie\u2019s update could result in some analysts lowering their first half profit results for the company, but that it largely looked to be about timing of asset sales rather than a material change. \u201cIt\u2019s nothing alarming from our point of view,\u201d he said.<\/p>\n

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