Brookfield Asset Management Voting Ord Shs Class A T.BAM

RBC

[retiredcf]

Their upside scenario target is now US$47.00. GLTA

February 8, 2023

Brookfield Asset Management Ltd. 
License to Thrill: Strong start for the “new” BAM

Our view: BAM had a good start with its first quarter as a publicly traded company, highlighted by better-than-forecast Fee Related Earnings (FRE) and continued evidence of strong fundraising activity. Furthermore, we have a positive view on the new disclosures regarding many of BAM’s various investment funds (e.g., IRRs) (see Exhibit 7). BAM is one of our Top 3 best ideas for 2023 in our coverage universe, reflecting positive fundamentals, potential catalyst(s), and some defensive attributes, but attractive upside in a market recovery scenario. We raise our price target to US$40 (from US$35) and maintain our Outperform rating.

Key points:

Q4/22 FRE/share of US$0.35 was ahead of our US$0.33 forecast due to higher-than-forecast transaction and advisory fees and a lower-than- forecast OpEx ratio. Our forecasts are for BAM ULC (100% of the Asset Management operations), of which BAM’s proportionate ownership is 25%.

Q4/22 consolidated Fee Bearing Capital (FBC) (incl. Oaktree at 100%) was US$418B, +3% Q/Q from US$407B in Q3/22 and +15% Y/Y from US$364B in Q4/21. The Q/Q change primarily reflected an increase in Real Estate FBC.

Q4/22 Distributable Earnings/share was US$0.35, above our US$0.30 forecast, driven by higher-than-forecast FRE.

Fundraising environment remains positive. BAM was positive on the fundraising environment, noting things such as additional closes for its flagship funds in Infrastructure (US$22B vs. US$21B in its first close) and Private Equity (US$9B vs. US$8.4B in its first close). In addition, BAM said that it started fundraising for its next flagship Real Estate fund (BSREP 5) and that its first Global Transition fund was >50% invested; we think BAM could be fundraising for its next Global Transition fund this year, and it mentioned that it would likely launch other global transition type funds over the next couple of years. Furthermore, there were other positive disclosures on fundraising progress for a number of BAM’s other strategies.

Raising 12-month target to US$40/share (from US$35) and maintaining Outperform rating. The increased target primarily reflects a higher target FRE multiple (23x, was 20x), reflecting an improvement in sector valuations this year.