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Is Moelis Australia Ltd the next Macquarie Group Ltd?

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Investment bank Moelis Australia Ltd (ASX: MOE) has seen its share price hit a 52-week high of $3.95 today, a 68% jump so far since listing in April 2017 at an IPO price of $2.35 per share.

According to the company’s prospectus, Moelis has grown from a small boutique financial advisory business to a financial services group active in two core segments: Corporate Advisory & Equities and Asset Management. It also has a strategic alliance with the US-listed investment bank, Moelis & Company, and Moelis & Co has retained a 40% holding in Moelis Australia.

Macquarie Group Ltd (ASX: MQG) is obviously much larger and has more business operations, but Moelis could grow into Australia’s second-largest investment bank behind Macquarie.

While still in its infancy, Moelis generated $62 million of revenue in the 2016 financial year (FY16) and pro forma earnings before interest and tax (EBIT) of $18.8 million.

In the calendar year 2016 (CY16), Moelis generated $13.9 million in net profit and is forecasting $16.8 million in CY17.

At the IPO issue price, shares were trading at an adjusted P/E of 14.6x, with an annualised dividend yield of between 2.2% and 3.6%. That may not appear attractive, especially considering the 68% increase in the share price since the IPO, but Moelis should be considered a long-term investment i.e. at least three to five years. Of the ~$60 million raised in the IPO, roughly $44 million will be used by Moelis to grow the company, according to the prospectus.

Foolish takeaway

While the current price might be high, Moelis might be one financial stock to watch closely – particularly when it reports its half-year in August 2017.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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