Multiple Upgrades Following an in-line third-quarter, CIBC World Markets analyst Dean Wilkinson reiterated his view that Brookfield Asset Management Inc. possesses a “clear (and, indeed, demonstrable) runway for above-average NAV growth for years to come (a growth outlook that is at odds with the current 10-per-cent discount to NAV).”
Before the bell on Thursday, Brookfield reported funds from operations for the quarter, including realized gains, of 85 cents, matching Mr. Wilkinson’s projection. It also announced its record inflows of US$34-billion since last quarter, noting “fundraising momentum across the business continues to be very strong.”
“The quarter can best be summarized by management’s comment that it has a lot on the go, but its growth prospects have never been better; of note are the record inflows achieved since last quarter, which highlights the unrelenting demand for BAM’s product offering in the current investment environment,” said Mr. Wilkinson. “We continue to view the current interest rate backdrop as favourable for alternative investments, and agree with management’s view on this topic; despite modest increases in rates observed since pandemic lows, we are likely to remain in a ‘lowish for longer’ environment for the foreseeable future.”
Noting all of its peripheral affiliates also saw year-over-year growth, Mr. Wilkinson raised his target for Brookfield’s U.S.-listed shares to US$70 from US$67 with an “outperformer” rating. The current average is US$65.63.
Other analysts making target adjustments include:
* BMO’s Sohrab Movahedi to US$67 from $61 with an “outperform” rating.
“BAM shares should benefit from a favourable set-up heading into 2022 with flagship fundraising providing a step-function increase to fee-related earnings and consistent realization of carried interest providing continued valuation upside. In addition, the scaling of BAM’s reinsurance platform is set to further diversify fee streams (with favorable economics). With the asset management business trading at a discount to our target and U.S. peers, the stock continues to offer an attractive risk-reward, in our view,” said Mr. Movahedi.
* TD Securities’ Cherilyn Radbourne to US$75 from US$72 with an “action list buy” rating.
“We believe that an investment in BAM provides exposure to a high-quality portfolio of real assets, with the added leverage of a world-class asset-management franchise,” she said.
* Canaccord Genuity’s Mark Rothschild to US$69 from US$66 with a “buy” rating
* JP Morgan’s Kenneth Worthington to US$72 from US$71 with an “overweight” rating.