Post by
retiredcf on May 11, 2023 10:26am
RBC
May 11, 2023
Brookfield Corporation
Q1/23 OFFO/share was below our forecast
NYSE: BN | USD 31.15 | Outperform | Price Target USD 50.00
Sentiment: Neutral
Our initial take: Q1/23 OFFO/share of US$0.45 was below our US$0.66 forecast due to lower-than-forecast FFO contributions from invested capital in its private investments (asset management OFFO was in line with our forecast). However, we think investors should not focus on the quarter to quarter variance in BN's FFO given the long term nature of its investment horizon and strong historical track record.
Other key takeaways:
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BN provided significant new disclosures on its real estate investments (e.g., detailed operating metrics of its portfolio of office and retail properties) and its insurance solutions business (e.g., outlining its AUM, net flows and earnings drivers).
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BN repurchased 10.5MM shares for US$294MM during Q1/23 and intends to continue repurchasing shares given the current discount valuation.
In terms of key metrics:
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Consolidated OFFO/share was below our estimate: Q1/23 Operating FFO (OFFO) of US$762MM (US$0.45/share) was below our US$1,109MM (US$0.66/share) forecast. The variance to our forecast primarily reflected lower OFFO contribution from invested capital (primarily Real Estate and Private Equity & Services).
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Fee related earnings (FRE) were right in line with our estimate: Q1/23 FRE of US$408MM (US$0.26/share) was right in line with our US$408MM (US$0.25/share) forecast.
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Invested capital (Hard NAV) OFFO/share was below our estimate: Q1/23 Invested Capital OFFO of US$354MM (US$0.20/share) was below our US$701MM (US$0.41/share) forecast.
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Reported FFO/share was below our estimate: Q1/23 Reported FFO of US$1.18B (US$0.71/share) was below our US$1.55B (US$0.93/share) forecast. The variance to our forecast primarily reflected lower-than-forecast OFFO, as disposition gains and realized carried interest were in line with our forecast.
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Distributable earnings/share was below our estimate: Q1/23 Distributable Earnings (DE) of US$1,157MM (US$0.72/share) was below our US$1,251MM (US$0.77/share) forecast.
Conference call today at 10:00am ET; webcast only (link can be found on Brookfield’s website).
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