Bullboard - Stock Discussion Forum Brookfield Ord Shs Class A T.BN

Alternate Symbol(s): BN

Brookfield Corporation is an owner and operator of real assets. It is focused on compounding capital over the long term to earn attractive total returns for its shareholders. Its operating segments include the asset management business and insurance solutions business. Its operating businesses include Renewable Power and Transition business, which includes the ownership, operation, and... see more

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TSX:BN - Post Discussion

Brookfield Ord Shs Class A > TD

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Post by retiredcf on Dec 28, 2022 10:13am

TD

December 21, 2022

Our Action List Pick

Brookfield Corporation
BN-N, BN-T: US$33.11; ACTION LIST BUY 12-Month Target: US$63.00

Brookfield Corporation (BN) recently completed the distribution and public listing of a 25% stake in its asset management franchise, Brookfield Asset Management (BAM), in which it has retained a 75% ownership stake.

BN is focused on deploying capital on a value basis and compounding that capital over the long term across three core pillars: asset management, insurance solutions, and operating businesses.

The company's current run-rate of distributable earnings (DE) pro forma the spin- off is ~US$3.7 billion (~US$2.30/share), which is expected to compound at a 20% CAGR through 2027, based on steady growth in the distributions from the perpetual affiliates and an increasing stream of realized carried interest. The dividend consumes minimal free-cash-flow (~US$450 million) and the other potential uses are highly discretionary, such that we expect a considerable proportion of free-cash-flow to be returned to shareholders, primarily through share buybacks, although BN also has some interesting reinvestment opportunities.

The American National deal resulted in a step-function increase in BN's insurance AUM, and we anticipate that the company may continue to use M&A to accelerate its growth in insurance. Brookfield also often sees other interesting transaction opportunities that are too big for its private funds, which it was reluctant to execute on previously, for fear of confusing investors, but would feel comfortable executing on now that the manager is separate from the corporation. BN sees potential upside to US$12.6 billion of DE in 2027 (~28% CAGR), driven by inorganic growth in insurance and other opportunistic investments.

We believe that BN offers substantial upside potential. After subtracting the market value of the company's ownership stakes in BAM, BEP, BIP, and BBU, the current share-price assigns nominal value to: 1) carried interest; 2) the real estate portfolio, which includes a number of marquee assets; 3) the insurance business; and/or 4) the potential for accretive capital allocation.

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