Macquarie analysts upgrade HMC Capital on Payton acquisition
Make us a preferred source
Make us a preferred source on Google
The news: Macquarie analysts have upgraded their rating on HMC Capital from 'neutral' to 'outperform', after the alternative asset manager announced the acquisition of private credit investor Payton Capital last week.
The numbers: The analysts estimated that the Sydney-based investor's transaction, for an upfront consideration of $127.5 million, is around 7% accretive to operating earnings per share (OEPS) in FY25.
They revised their OEPS forecasts for the stock to -0.3% in FY24, 6.6% in FY25, and 8.8% in FY26, owing to the Payton acquisition and associated equity raise, as well as HMC's reduction of its stake in the HomeCo Daily Needs REIT from 14% to 12.1%.
The analysts said the takeover increased HMC's assets under management to $12.5 billion, improving its "line of sight" on achieving its medium-term target of $20 billion within two years.
They also hiked their target price for HMC from $6.76 to $7.97. HMC shares closed 5.2% higher at $7.25 on Monday.
The context: The analysts noted that the acquisition of Payton established HMC's entry to the non-bank segment, with the deal secured at "favourable" pricing given the growth opportunity in private credit. There is "material upside" if HMC can execute on growth ambitions in the credit segment, they said.
On Monday, HMC Capital completed a $100 million institutional placement to help fund the acquisition.
The source: Macquarie research
