Brookfield Asset Management Inc.
(BAM-N, BAM.A-T) US$40.45 | C$54.51
Q3/22 Earnings Preview
Event
BAM will report its Q3/22 results on Thursday, November 10 (pre-market).
Impact: NEUTRAL
Q3/22 Preview: We are forecasting DE of $0.71/share, modestly below the consensus estimate of $0.73. We are looking for ~18% y/y growth in fee-related earnings, with the impact of flagship fundraising success more than offsetting lower fees from the perpetual affiliates. We have reduced our estimate of realized carried interest to be comparable vs. Q2/22, as pending deal closings are weighted towards Q4/22.
Outlook: The fundraising environment has become a bit tougher, but there are few indications that institutional appetite for alternatives is cooling, and we believe that BAM is well-positioned as a global leader in real estate, with a dominant position in infrastructure and renewable power, a first-mover advantage in transition investing, and a much smaller weighting to private equity vs. the peers. BAM should have held first closes of $20bln and $8bln on its latest flagship infrastructure and private equity funds, respectively, in Q3/22, with the infrastructure fund likely poised to be significantly larger than its $20bln predecessor when it reaches its final close. The latest flagship real-estate fund should hold a final close by year-end, and, with a more favourable backdrop for deployment in credit, BAM should be back in the market soon with a successor to the $16bln opportunistic debt strategy. Public market volatility and macro uncertainty will likely slow monetization activity, and the build of the unrealized carried interest balance, which is also affected by FX, but should also create value investment opportunities for BAM's record $111bln of liquidity, though there is typically a lag before those opportunities emerge.
TD Investment Conclusion
We see very attractive upside vs. the current share-price and continue to view BAM as a core holding. Our target price assigns no value to carry, applies a 25x multiple to FRE, and values real estate at an ~30% discount to IFRS, and still offers a substantial implied return. The distribution of a 25% stake in the asset manager is on track for completion before year-end, and we still see this as likely to be a positive catalyst, even against a choppy market backdrop.