Brookfield Corp.
(BN-N, BN-T) US$39.75 | C$53.48
Q4/23 DE Beat; Planning to Accelerate Share Repurchases
Event BN reported Q4/23. The conference call is at 10:00 a.m.
Impact: POSITIVE
Q4/23 DE Beat: DE of $0.83/share were a solid beat vs. the Street/TDSI at $0.73/
$0.69. Core DE of $0.76 were a 17% beat vs. our $0.65 estimate, and total DE
beat based on higher realized carried interest.
Carried Interest: Despite an environment of much-reduced transaction velocity,
BN realized $100mm of realized carried interest in Q4/23 and $570mm in 2023,
which is ~$0.36/share of cash-flow that is arguably not attracting value in the
share-price. Notwithstanding those realizations, the accumulated but unrealized
carried interest balance (net) increased to $6.2bln in Q4/23 (~$4.00/share) vs.
$5.6bln in Q4/22.
Share Buybacks: BN's view of intrinsic value is $82.29/share, roughly double
the current share-price. BN repurchased ~$600mm of shares during 2023 and
expects to acquire at least $1bln over the next few months if prices stay
reasonable. The company will also consider switching to a tender offer process
if shares are not readily available or if it decides to increase the size of its
repurchases.
Improving Market Backdrop: With interest rates poised to decline, we expect
BN to benefit from: 1) improved deal-making activity, which should support
higher realized carried interest and higher distributions from its real estate LP
investments; and 2) an earnings tailwind for the on-balance-sheet real-estate
portfolio. Conversely, the cumulative impact of Fed tightening is just being felt by
many businesses that are not as well-positioned as BN, and which have significant
debt maturing in 2024/2025. Therefore, BN should enjoy good opportunities to
invest for value.
Uniquely Positioned in Data: BN's infrastructure business owns one of the
world's largest hyperscale data center platforms, with a substantial contracted
growth pipeline. Data centers are also very energy-intensive and have a
destabilizing impact on the grid. Consequently, data centers increasingly need to
have an accompanying power solution in order to get permitted. That need is at
the heart of Brookfield's competitive advantage, because it is one of the only, if
not the only, player that can provide both scale data center capacity and scale
clean energy solutions on a global basis.