MQG - Macquarie Group

The major problem is that a lot of people just don't understand infrastructure as an asset class.

People, on this site, and the media commentators you refer to, seem to be worried by the following (reasons why its not a problem in brackets):

High levels of debt (cash flows are incredibly predictable for most infrastructure)

Asset level debt (project finance is the norm in infrastructure and theres no recourse to the fund as a whole. There are scale advantages in corporate level financing (e.g. Babcock's recent refinancing of its project finance debt) but with minority investors its not an option)

Increasing debt service commitments over time (step-up swaps help debt service commitments mirror cash flow profiles - you really think lenders are lending to projects without being convinced that theres sufficient cash flow cover on debt payments?)

Liquidity dry-up in debt markets (infrastructure probably the safest asset class to lend to, infrastructure deals are still getting done - e.g. Hobart Airport)



If you read Matthew Davison's & Merrill's latest infrastructure sector research (December 07), you'll find they are singing a different tune on infrastructure funds - quite fond of MAP and MIG. And they love SKI. If you have access to a Bloomberg terminal you can grab them for free.

Granted people do not quite know what's going on as well as how debts are financed in detail, and referring to your statement: Increasing debt service commitments over time (step-up swaps help debt service commitments mirror cash flow profiles - you really think lenders are lending to projects without being convinced that theres sufficient cash flow cover on debt payments?) as contrast to this, In 2007 the Skyway will pay interest of just $129,000 on $961 million of debt. But the interest payment for 2018 is to be $480 million - that's not a typo. - 2018 is just another 10 years from now, not 20 or 50 years. In 10 years, the investor or the project or whatever they call it by then, will have to come out with 480 millions as interest payment. Am I reading this and deducing this right?

What about 2019? And the subsequent years?

My view is still this - IF I am an investor in this company, I would dearly want to work out a little details myself instead of relying on the analysts.

Cheers.

I just want to add, Argo Investments, one of Australian oldest (since 1946) and one of the most successful long term buy and hold listed investment company has been having MQG as its largest holding for the past few years, and still is.
Sure, they could be wrong, but then again given a choice, who would you place your trust/money, financial analysts, brokers, amateur investor or someone with more than half century of enviable investment track record ?

josjes said:

I just want to add, Argo Investments, one of Australian oldest (since 1946) and one of the most successful long term buy and hold listed investment company has been having MQG as its largest holding for the past few years, and still is.
Sure, they could be wrong, but then again given a choice, who would you place your trust/money, financial analysts, brokers, amateur investor or someone with more than half century of enviable investment track record ?

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Very interesting.

That piece of funnymentalist information is the first that has made me think twice about my generally negative view of MQG, their business model and their down trend technically. ARG know their nuts. Mrs Gumnut is a long term accumulator of ARG as are many female investors.

gg

Garpal Gumnut said:

Very interesting.

That piece of funnymentalist information is the first that has made me think twice about my generally negative view of MQG, their business model and their down trend technically. ARG know their nuts. Mrs Gumnut is a long term accumulator of ARG as are many female investors.

gg

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You hit it on the nail Mr. Gumnut. Mrs Gumnut and me as the rare species of female investors know what we are doing. :

josjes said:

You hit it on the nail Mr. Gumnut. Mrs Gumnut and me as the rare species of female investors know what we are doing. :

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Madam,

I would never ever question a lady's judgement, particularly on stocks. Female stock pickers tend not to rush in and not to sell out on sudden price moves.

gg

Garpal Gumnut said:

Madam,

I would never ever question a lady's judgement, particularly on stocks. Female stock pickers tend not to rush in and not to sell out on sudden price moves.

gg

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Arent females more emotional? Wouldnt that make them more likely to move with sentiment (feelings)?

Buffettology said:

Arent females more emotional? Wouldnt that make them more likely to move with sentiment (feelings)?

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The opposite (anecdotally at least). I'm paraphrasing Louise Bedford (and perhaps a little David E Bowden too), but female traders/investers generally need a reason to take an action, whereas men will often react without taking the time to stop & fully contemplate our actions.

Garpal Gumnut said:

Very interesting.

That piece of funnymentalist information is the first that has made me think twice about my generally negative view of MQG, their business model and their down trend technically. ARG know their nuts. Mrs Gumnut is a long term accumulator of ARG as are many female investors.

gg

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Learn to trust your judgment everyone has their reason to be in a stock.
if you dont think it isnt good why go for it just because you think someone may know alot more than you?

In my book anything that has high level of debt is a no-no doesnt matter what it is and how good it looks... Most funds and company go bankrupt because of debt not because they are not profitable ...

josjes said:

You hit it on the nail Mr. Gumnut. Mrs Gumnut and me as the rare species of female investors know what we are doing. :

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I've started a new thread in the General chat on the pros and cons of being male or female as regards investing trading.

The MQG regulars may get their keks or pantaloons in a knot if this keeps up.

gg

Hmm, interesting view.

I think most people who are contributing in this forum are amateurs barring some. Does it mean the majority are wasting their time discussing stocks here?

Let me make one last amateur TA attempt - if MQG were to retest its recent low of 58.20 and fails there, you are looking at a potential target of 42.50. And if that fails too, the next target is 31.50.

In due time, the market will show us, amateur or not.

Ok, I will shut up now. Good luck.

Every lass and lad will have a different opinion on this one. I'm an owner on the weakness and yes there may be further down to go, so I dont want to be accused of ramping. So I'll be as fair as possible.

I'm not particularly a believer that credit is that tight - it's only tight for riskier businesses, and utilities aren't. As I said before, utilities are the only services you are likely to pay in a recession. As for spending, when citizens tighten their money, it's government that will spend on infrastructure to boost GDP (again my views).

I'm not saying this could not go down to $30, I'm not saying it won't. I was a small holder initially, then took new positions at each of the support lines it met, and $58 being one of the largest support lines. $80, $70, and then $58.

As with the level of debt. My personal perception is that people who revalue their homes to retrieve equity for investment have a debt security based on brick and mortar, something I feel is much of a bubble. Personally to me, utilities and infrastructure is a more stable rating, and so that's how I spread my risks. As you can see, it is entirely personal, I've seen property crashes before, and my take is many Australian's haven't and believe it nevber goes down.

Now for the holder biased useless ramping part - Buy this one or you'll regret it when it reaches $150 And the rest, This may reach $25 OMG try and fear it down so you can take a cheap position. ok ok you can disregard my post, See sig

haunting said:

In 2007 the Skyway will pay interest of just $129,000 on $961 million of debt. But the interest payment for 2018 is to be $480 million - that's not a typo.

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I'm not familiar with the financing structure on the Skyway deal - if you have a link to debt service repayment commitments for the project I can comment in more detail. However, it would seem to me that it would be unlikely that the 2018 repayment was reflective of the repayments over the life of the concession, simply based on that level of repayment ongoing would surely breach the ICR covenants. Quite possible that the author has handpicked that repayment to make a shocking point.

I do know if the financing structures for some of the other deals, and can say generally that the operational performance of the assets is modeled in detail and the financing repayments, while aggressive, are supported by the cash flows. And the lenders are quite diligent in ensuring this.

prana said:

As with the level of debt. My personal perception is that people who revalue their homes to retrieve equity for investment have a debt security based on brick and mortar, something I feel is much of a bubble. Personally to me, utilities and infrastructure is a more stable rating, and so that's how I spread my risks. As you can see, it is entirely personal, I've seen property crashes before, and my take is many Australian's haven't and believe it nevber goes down.

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I'm not sure some of the management fees the parent entity take from funds is any different to drawing equity from residential property - last scan of the MAP financials seemed to indicate MCG are taking management fees from revenue and the increase in the valuation of "assets undermanagement". If these assets reduce in value, management fees would be cut.

Hi Stoxc,

I was thinking of removing myself from this thread before it turns unpleasant judging from some of the responses I am reading, but I will give it another go.

Let me say it out front - I don't own this stock, and I don't intend to own this stock. Neither am I shorting it. I am just expressing my opinion for those who may find an alternate view useful. That's all.

With regard to this: I do know if the financing structures for some of the other deals, and can say generally that the operational performance of the assets is modeled in detail and the financing repayments, while aggressive, are supported by the cash flows. And the lenders are quite diligent in ensuring this.

I think the danger with MQG and its myriad of funds lies in the recent developments. I am not sure whether the credit crunch has surfaced when you last went through some of their project financing. If it has not, may be you should revisit them.

I can only point out the demise with CNP and RHG - using the same argument, surely when they were presenting their projects to the lenders, the lenders would have run a fine comb over all the numbers. And yet, see how spectacularly they failed!

With credit crunch, funding is becoming harder and costlier. Asset price is dropping and making repricing or revaluation of asset higher a much harder thing to do, which will definitely impact the income and distribution of these funds.

The market reaction to the various Maq funds has not been that great in the last 4 months. Most of their stock price are in a declining trend and may accelerate depending on how well Bernanke is able to contain the credit crunch fallout and stopping the onset of recession.

The price target I have quoted may sound ridiculous or outrageous to the existing share holders, but back when MQG was selling at 77.00 and when I was sending out alert of it risking a drop to 60, I got the same kind of reaction I am getting here.

A simple chart observation will show you that MQG is under selling pressure. In August last year, it has made a low at 65.80. On Jan 21, it made a new low of 58.20. The 50 days average volume in the recent period is at around 2.275 million shares daily, at a stock price of 65, you are looking at a daily turnover of 147 millions - it comes across to me as some kind of big fund selling.

Why are they selling?

The observation above is not pure opinion but market data and fact plus my interpretation.

Looking forward, I am not saying for sure 42.50 will happen, but, as I have said earlier, I urge those of you who own this share to take precaution, do some digging and find out more about the company you are investing in, in view of what's happening to companies that are over leveraged and heavily burdened with debt.

Cheers.

haunting said:

I urge those of you who own this share to take precaution, do some digging and find out more about the company you are investing in, in view of what's happening to companies that are over leveraged and heavily burdened with debt.

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Hey Haunting, well received and a good warning for everyone, incl me. Hopefully once own risk assessment will help avoid heated selling if the poo contacts the propeller.

There will will be always cash around for quality investments... if not head for the hills my friend.
Oh since 20/09/07 (all negative of course)
CBA -16.68 ANZ -9.44 WES -12.66 NAB -14.65 and the dastardly financials
MQG-26.98 BNB-28.29
The market as we all know is a beast driven by fear and greed.I will ride this one till fear is replaced by greed

http://www.brr.com.au/event/40675 Listen to the whole speel on boardroom radio if you haven't already.

Just revisited the charts, XAO appears to be consolidating around the 5800 triangle. At the same time, MQG's bearish resistance are pointing to the $58 mark. I'm not a great chartist, but last time I saw a pattern like this, it broke below support - if it does move below, a long way to go, however pattern seems to be pointing to around March. VOlumes also support weakness

At the same time, reporting season is soon, hohpefully the financial sector will recover from the negative sentiments, but looking at BNB, now with a large bearish column, it appears gloomy



lol .... get ready

haunting said:

Granted people do not quite know what's going on as well as how debts are financed in detail, and referring to your statement: Increasing debt service commitments over time (step-up swaps help debt service commitments mirror cash flow profiles - you really think lenders are lending to projects without being convinced that theres sufficient cash flow cover on debt payments?) as contrast to this, In 2007 the Skyway will pay interest of just $129,000 on $961 million of debt. But the interest payment for 2018 is to be $480 million - that's not a typo. - 2018 is just another 10 years from now, not 20 or 50 years. In 10 years, the investor or the project or whatever they call it by then, will have to come out with 480 millions as interest payment. Am I reading this and deducing this right?

What about 2019? And the subsequent years?

My view is still this - IF I am an investor in this company, I would dearly want to work out a little details myself instead of relying on the analysts.

Cheers.

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Spot on, also maybe i am a bit more cynical, but since when do analysts make judgements without giving consideration to other departments in the merchant bank they work for. (future consulting/financing/listing fees etc)

Buffettology said:

Arent females more emotional? Wouldnt that make them more likely to move with sentiment (feelings)?

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Nope been alot of academic research on this topic, and they found that women outperform men, because they dont trade as much.