Diversified Financials
Change is the only constant
We anticipate that the diversified financial stocks will struggle to produce a
positive result between them in the February reporting season. With
macroeconomic news deteriorating further, 2009 is likely to be another tough
year for high-beta stocks.
Table 1 : Key recommendations & forecasts
Rating Price Target
price
Upside/
downside
Result Result
date
ABN EPS
forecast
(Acps)
Growth
on pcp
PE
(x)
CPU Buy A$7.59 A$8.88 17.0% 1H09 11-Feb-09 25.2 -8% 10.0
CGF Hold A$1.39 A$1.80 30.0% 1H09 16-Feb-09 17.1 -4% 3.9
ASX Hold A$29.84 A$31.00 3.9% 1H09 17-Feb-09 108.8 -1% 14.0
PPT Sell A$31.90 A$31.30 -1.9% 1H09 18-Feb-09 106.3 -45% 14.0
PTM Sell A$3.32 A$2.49 -25.0% 1H09 20-Feb-09 10.1 -40% 19.0
HGG Hold A$1.33 A$1.40 5.3% FY08 26-Feb-09 8.7 (p) -43% 8.1
BTT Hold A$1.95 A$2.11 8.2% 1H09 29-Apr-09* 7.2 -44% 13.6
MQG Hold A$28.17 A$31.84 13.0% FY09 1-May-09 343 -48% 8.2
1. Normalised EPS - pre non-recurring items and post preference dividends. * TBC
Source: Company data, ABN AMRO forecasts
Results season – going into reverse
Having ridden the wave during the boom years, we anticipate that the diversified financial
stocks will now struggle to produce a positive result between them in February. We forecast
ASX will deliver the strongest result, with 1H09 EPS down only 1% on pcp, followed closely
by CGF, with normalised EPS down 4% and CPU down 8%. By contrast, we forecast the
fund managers will all deliver negative growth of 40-45% on pcp due to the 51% fall in the
ASX200 between November 2007 and November 2008.
Earnings surprises – CPU and ASX potentially positive, PPT and CGF may be weaker
We see little potential for upside surprises in this set of results. Revenue lines are all likely to
have suffered and cost-reduction strategies should be the source of outperformance. In this
vein, CPU and ASX have previously delivered strong cost control. On the downside, PPT
could cut its dividend payout ratio from 90% of cash profit, disappointing the largely retail
investors, and the size of CGF’s mark-to-market losses could surprise negatively.
Outlook for 2009 – another tough year ahead
We believe a global economic recovery is unlikely before the end of 2009 at the earliest. As
such, a sustained market recovery seems doubtful before the beginning of 2H09. In light of
this, we argue that it is too early to be playing the cyclical high-beta stocks. There are some
positives – secondary capital raisings are likely to remain strong and most diversified
financial stocks have little gearing – but these stocks are likely to remain under pressure.
Key stock picks – Buy CPU, Sell PPT and PTM
CPU remains our only Buy in the sector. The stock is trading at historically low PEs and
appears to be faring better than most, thanks to high levels of equity raisings and good cost
control countering weakening M&A-led revenue. On the flip side, PPT and PTM remain
victims of the global bear market. PPT is also suffering from weakness in its corporate trust
and private client divisions, and we believe recent cost-cutting will deliver meaningful benefits
only in FY10. PTM continues to trade on a lofty 19x FY09F EPS, which appears to be more
of a temporary pricing aberration than a true vote of confidence from investors.

Contents
Change is the only constant 3
2009 looks set to be another testing year for diversified financial stocks, with
macroeconomic data and the GFC sucking in more victims. However, should a
market recovery materialise in 2H09, we believe these stocks could rebound
strongly.
3
Outlook for 2009 4
Deteriorating global macroeconomic news and the rapid downturn in domestic
companies’ fortunes late in 2008 indicate Australia might merely have postponed
the inevitable. ABN AMRO now forecasts negative GDP growth of 0.25-0.5% in
Australia in 2009.
4
Economic analysis 4
Implications for diversified financials 13
Key conclusions 21
Company profiles 22
Australian Securities Exchange (Hold, TP A$31.00) 22
BT Investment Management (Hold, TP A$2.11) 24
Challenger Financial Services (Hold, TP A$1.80) 26
Computershare (Buy, TP A$8.88) 28
Henderson Group (Hold, TP A$1.40) 30
Macquarie Group (Hold, TP A$31.84) 32
Perpetual (Sell, TP A$31.30) 34
Platinum Asset Management (Sell, TPA$2.49) 36
Valuation analysis 38
With the collapse in share prices over the past year, there is no shortage of
apparent value in the sector. However, some PEs look seductive due to what we
believe are ambitious consensus forecasts. We remain cautious anticipating further
downgrades from here.
38
Valuation metrics 38
Historical PE charts 39
Valuation methodology and risks to target prices 40
Appendix – global comparables 41
Global wealth management comparables 41
Global exchange comparables 42
Global investment banking comparables 42