After a year's lapse since the announcement of a possible deal with Rosneft over the sale of its oil merchandising unit, Morgan Stanley (NYSE:MS) announced that the efforts of the sale to the Russian company have been aborted following the rift between Russia and US on the Ukraine issue. The arrangement between both the companies met its dead end as regulators failed to clear the deal. The announcement of the sale was made last year in December, as the bank faced pressures from regulatory authorities over its involvement in commodity trading and the risks related to it. In the announcement of the sale made last year, Morgan Stanley had indicated that no material impact on financial results was expected from the deal.
As Morgan Stanley has indicated that it will be on the lookout for other arrangements for the sale of its oil merchandising unit, Rosneft (OTCPK:RNFTF) doesn't seem to be taking the rejection all too well, especially since the current year has been a rather tough one for the company. Rosneft was viewing a possible expansion in its global reach from the outcome of this deal, which was said to be valued at nearly $300-$400 million. Rosneft was earlier thwarted by its partner Exxon Mobil (NYSE:XOM), which withdrew from its projects as Western sanctions limited the flow of capital to Russia over concerns of the Ukrainian crisis.
Despite a setback, Morgan Stanley doesn't find itself in the slightest bit of trouble, since it seems to be carrying on with its efforts to expand and improve in its performance. The investment bank is thought to actively participate in the property market in South Asia (in India in particular) as it cuts back on investment in low yielding securities. With 28% of its real estate assets under management being located in Asia, an increase in investment in the region is on the agenda for the upcoming year. While it plans to gain in the future from the pursuit of this strategy, it also has shown an interest in exiting from some of its entity level investments in India as well. Though no official statements have been received pertaining to this investment strategy by the corporate, a source very close to the deal stated that it was indeed a very realistic possibility that is being taken into serious consideration at the moment.
Morgan Stanley also demonstrated its success when it was able to steal the deal on a $4.7 billion placement of Chinese company Ping An, as it left rivals, Credit Suisse and Goldman Sachs way behind in the deal. With the deal in the bag, Morgan Stanley's position received quite a boost on the Asian league tables as it ranked first in the equity capital markets in Asia, leaving Goldman Sachs, JPMorgan and Credit Suisse behind in the race. Though this doesn't entirely mean that Morgan Stanley is at the top of the table in the worldwide industry, it is a definite indication that the company is close to getting there as it catches up with its rivals and picks up the pace in striking deals that could add further value to its financials.
If that wasn't all, the company had also posted some robust financials for its third quarter. The company was able to report earnings of $0.77 per share, as it beat analyst estimates of $0.54. Revenues also grew by a staggering 54%, as they were reported at $8.7 billion. The company was able to top analyst estimates of $8.17 billion in revenues as well.
Considering the effort that the investment bank is putting into streamlining its operations and employing lucrative strategies to add to its long term growth prospects, there seems to be very little that could stop the investment giant from reporting better results in the quarters to follow. With the equity markets at their highest levels following the financial crisis in 2008-2009, things seem to be going very well for Morgan Stanley.
Having gained nearly 22% in their value year to date, the company's stocks seem to be on a bullish run as they continue to trend upwards. Trading at 15.50x their earnings, the shares have seen a yearly low of $28.31 and a yearly high of $39.17. Despite trading very close to their highest levels for the year, analysts have remained conservative in their price targets for the share, expecting share prices to amount to $37.54 over the course of the next 12 months. Offering a 1.10% dividend yield, an investment in Morgan Stanley seems like a decent decision at this point in time, especially if its latest round of successes is taken into consideration. The low interest rate climate of the US has served the company well, especially since its model focuses more on investment banking and wealth management. That being said, an end to the quantitative easing program could be a tiny bump in the road in the months ahead, but the bank seems to be more than prepared to take on the challenge as it looks into other investment avenues to compensate. As of now, an investment in Morgan Stanley seems like a very good investment decision and its highly recommended that investors add these stocks to their portfolio, at least until next quarter's results are announced.
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