Shares in capital markets advisory and asset management business Moelis Australia Ltd (ASX: MOE) have now doubled over the course of a bumper 2017 after the business upgraded its full year EBITDA guidance by 15% to "at least $38 million" on underlying revenue that is now expected to exceed $100 million.
The strong result is being attributed to growth in capital market or corporate deal structuring advisory work, while its Redcape pubs investing business continues to benefit from the strength of Sydney's commercial property markets and ongoing popularity of its drinking dens.
It bought the Redcape Hotel Group for $677 million earlier in the year and continues to raise capital from sophisticated investors and clients to grow its pub empire ahead of a planned listing for Redcape within the next 18 months. In total Moelis now has more than $2.5 billion in assets under management
Capital markets advisory work still represents a big part of its business across debt markets, mergers & acquisitions, capital raisings, consulting, or restructuring advisory work. As such it competes with the likes of UBS, Macquarie Group Ltd (ASX: MQG) and Deutsche Bank's investment banking teams in seeking work across a relatively small Australian market.
Outlook
It appears that Moelies has come to the view (in a similar way to Macquarie Group) that the best way to grow its business is by pivoting into the defensive earnings streams available from the asset management space, rather than the volatility associated with demand for capital markets work that is leveraged to the macro-environment and business confidence.
Today, Moelis shares hit a high of $6.39 and if 2018 proves another strong year for capital markets with a pick up in inflation and growth it could enjoy another strong year.
However for investors focused on the long term I still think shares in Macquarie Group offer a better combination of growth, yield, and value selling for $98.10 today.
