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

Alternate Symbol(s): BN | T.BN.PR.C

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 Sep 11, 2023 9:01am

TD

On their Action Buy List with a US$61.00 target. GLTA

Brookfield Corp.

(BN-N, BN-T) US$34.17 | C$46.61

Investor Day Preview; Insurance Contribution Growing Rapidly

Event

BN will host an Investor Day in New York on Tuesday, September 12 (webcast link).

Impact: NEUTRAL

Asset Manager: BAM is on track to raise a record +/-$150bln of capital in 2023, including +/-$100bln of fundraising plus the ~$50bln of insurance AUM associated with the pending AEL acquisition, which should drive another step-function increase in fee-bearing capital/fee-related earnings (FBC/FRE).
Insurance: The pending AEL acquisition will effectively double BN's insurance AUM to ~$100bln and should establish the business as a top-three annuity writer in the U.S. As a top-three U.S. annuity underwriter, BN should have the potential to reach $225bln of insurance AUM by 2027, from ~$100bln in 2023, largely through organic growth. We believe that growth in insurance, particularly organic growth, which BN has more control over, creates a virtuous circle, because it: 1) drives attractive spread-related earnings at BN and 2) provides a stream of FBC for BAM, enabling BAM to scale its existing credit strategies faster and accelerate expansion into adjacent strategies, thereby enhancing BAM's advantage of scale in executing transactions and increasing its relevance to clients in a consolidating market.

Real Estate: We do not see any near-term catalyst that would significantly alleviate the CRE pessimism that is weighing on BN's share price, but the market seems to be implying that the real-estate portfolio could be worth less than zero, which is inconsistent with the underlying capital structure.

TD Investment Conclusion

We see significant upside in BN, and although it may take a turn in sentiment on CRE and/or interest rates to unlock that value, perhaps a multi-year period of strong earnings growth, boosted by insurance, it can achieve the same end, if only more gradually. After subtracting the market value of BN's stakes in BAM/BEP/BIP/BBU, the market is ascribing negative value to real estate (~$20.00/share), insurance (~ $2.50/share and growing) and carried interest (~$3.70/share). We anticipate that BN will continue to repurchase $500mm-$750mm of shares/year, with the potential for a larger buyback at some point if the stock continues to trade at a significant discount to intrinsic value. Importantly, Brookfield's senior executives are heavily invested in BN, and therefore highly aligned with shareholders.