RE:analystsFrom TD:
Event
Q1/21 Preview Impact: SLIGHTLY POSITIVE
We are updating our outlook for Power Corp (Power Co) following recent updates to our Great-West and IGM forecasts and the Wealthsimple transaction. Our target price increases to $42 (from $38) and we maintain our BUY recommendation which implies a constructive ~19% return (including a 4.9% dividend yield).
Our EPS estimates reflect recent updates to our forecasts for Great-West and IGM. Our 2021/2022 EPS estimates have increased by 2%/3%. We are not forecasting a dividend hike, given that we do not have dividend increases in our estimates for either Great-West or IGM.
Wealthsimple recently raised equity at a $5bln valuation (up from $1.5bln; see our previous note here). PowerCo's pro-forma stake in Wealthsimple is now valued at $796mm (up from $163mm) which equates to a $0.94/share increase to PowerCo's NAV. This includes $187mm in pre-tax cash proceeds that PowerCo expects to receive from the secondary offering.
PowerCo is trading at a 28.1% discount to NAV. The historical discount is ~21-22%. The NAV reflects PowerCo's public assets (Great-West, IGM, GBL, and Lion Electric), and private assets as of Q4/20 (Sagard, Sustainable Capital, China AMC and others). We are incorporating the new Wealthsimple valuation.
On forward P/E, PowerCo is trading at 9.9x.This is 0.6x higher than the L5Y average of 9.3x, and in-line with L10Y average of 10.0x. The banks are trading at a 0.5x premium to L5Y averages, and the lifecos are trading at a 0.3x discount. Lastly, PowerCo is trading at a 4.6% forward dividend yield spread (vs. the twoyear bond yield). This is in-line with a L5Y average of 4.6%.
PowerCo will report its Q1/21 results on May 13, 2021. 1-833-979-2697 (passcode 9947642#) or here. TD Investment Conclusion Recent efforts to simplify the organization and increase disclosure are well-received and should support valuation, in our view. Value surfacing transactions such as Lion Electric and Wealthsimple are also viewed favourably. Current valuation is attractive, in our view