Macquarie Goodman Group

Macquarie Goodman Group (MGQ) has a target price of $7.50 per share from stockmarket analyst Citigroup Investment Research. MGQ's debt funded A$840m acquisition of UK logistics land bank (~1,000acres), and developer Rosemound, will enable faster FUM growth from a soon to be launched UK logistics fund (UKLF). A strategic acquisition which is both earnings and value enhancing. The analyst's FY09E EPS increases by 1%, though they estimate from FY10 on increase ~3%. The analyst had not previously factored in the creation of UKLF. Whilst a full price appears to have been paid for the Rosemound landbank and business, the analyst views the transaction as value enhancing for the MGQ platform. Though the earnings drag is limited, given the capitalization of interest. A large proportion of the land will be put in UKLF, which the analyst estimates to be established in 2H08. Payment for 'Goodwill' contingent on performance: A$113m is payable over a 3 year period contingent on development targets. The analyst considers the amount reasonable given the fees/profits that can be recognised. UK logistics development expertise was a missing piece of the UK/Europe business. Further FUM strategies: The operational update from Macquarie Goodman Group revealed the Australian wholesale fund will raise additional equity to enable A$1bn of acquisitions/development. The analyst expects further comments on the Asian (inc Japan) strategy over the next half.