CIBC: Target at 40$ (From 38$)Power Corporation Of Canada (Outperformer, $40 Price Target)
Power Corporation is expected to report Q1 earnings on Friday, May 14. We consider shares of POW to be a NAV growth story as opposed to an “earnings-driven” stock. As a result, we are less concerned with the prospect of an earnings beat or miss, and are more focused on corporate development updates, the performance of Power’s non-core portfolio holdings and changes to the corporate balance sheet and liquidity position.
Power Corp reported encouraging progress towards its objective of obtaining scale in the investment management business in Q1 (with an emphasis on LP capital). Third-party capital represents a disproportionate amount of new commitments, consistent with the company’s goal of reducing reliance on proprietary investing capital.
We will be looking for: 1) continued progress towards corporate expense reduction targets; 2) execution on share repurchases; 3) modest sequential growth in the fair market value of proprietary investing capital, and; 4) any other developments that could accelerate the strategy including the divestiture of standalone businesses.
We continue to view shares of Power as a value opportunity, trading at a ~27% discount to its current NAV. As the company executes on its strategy over time, including the creation of a leaner holding company structure and divesting standalone businesses, we would expect this discount to narrow.