These are USD targets. GLTA
Takeaways From Our 2024 Western Conference Our Conclusion
CIBC hosted Brookfield Corporation’s Nicholas Goodman (President & CFO)
at our 27th annual 2024 Western Institutional Investor Conference. We
summarize herein the key takeaways of our discussion and the factors that,
in our view, underpin the substantial value optionality within BN shares. BN
remains one of the top picks within our coverage universe, as a favorable
growth outlook and a discounted valuation present an attractive investment
opportunity. We maintain our Outperformer rating while increasing our price
target to $46.00 (from $42.00), implying NAV parity.
Key Points
Fundraising Remains Supportive: Overall, we continue to expect a
positive environment for fundraising as the tailwind of investors increasing
their allocation towards alternative investments is likely to grow. Given the
sheer size of such allocations, there is a propensity to allocate funds towards
larger managers capable of absorbing large amounts of capital in addition to
having a proven track record and relationship—two distinct advantages
which favor BN. While investor demand remains robust across Brookfield’s
entire product offerings, there is notable interest within its infrastructure and
private credit verticals.
The Potential That Lies In Insurance: While still a relatively small part of
the overall BN business, the company has undergone a meaningful build-out
of its insurance solutions platform through the acquisitions of AEL and
American National. By 2028, management estimates the vertical will
contribute ~$4B in distributable earnings.
The Jewel That Lies In Plain Sight: We continue to believe that BN’s
carried interest profile is significantly undervalued by the market given the
timing mismatch and longer horizon required to crystalize carried interest. As
the company’s asset management platform and AUM continue to grow (and
by extension its carry-eligible capital), we believe such a fee stream will
become an increasingly meaningful contributor to BN’s overall earnings
profile and be reflected accordingly.
Valuation: At a current share price of ~US$38.80 BN trades at a ~16%
discount to our NAV. We believe that as BN executes on its many growth
initiatives the existing discount should narrow and provide investors with a
favorable risk/return profile.
What’s Next? BN aims to grow its AUM to over $2T, with total fee-bearing
capital to ~$1T by 2028. With the continued global themes of deglobalization,
decentralization, and digitalization all favoring Brookfield’s many verticals, we
believe the company is well situated to utilize its deep war chest of capital to
take advantage of the global opportunities. With interest rates cresting and
credit spreads tightening, we believe 2024 and beyond should prove to be
constructive years, with the potential for significant transaction activity.