Brookfield Asset Management Inc.
(BAM-N, BAM.A-T) US$48.44 | C$62.42
Q1/22 Earnings Preview; Attractive Share-price Entry Point
Event
BAM will report its Q1/22 results on Thursday, May 12 (pre-market).
Impact: NEUTRAL
Q1/22 Preview: We are forecasting DE of $0.68/share, modestly below the consensus estimate of $0.71. We expect ~17% y/y growth in fee-related earnings, reflecting higher market capitalizations for the perpetual affiliates and flagship fundraising success. We are modelling similar realized carried interest vs. H2/21 and no disposition gains on the sale of principal investments, although there may be a gain on the partial sale of One Manhattan West, as a portion of it may have been held at the BAM level.
Outlook: The current macro backdrop is dynamic/uncertain, but we believe that BAM is well-positioned, with a focus on real assets, which provide inflation protection, particularly infrastructure, where the company has a considerable lead vs. its peers, in our view, with $68bln of fee-bearing capital as of Q4/21. BAM is also carving out a first-mover advantage in impact investing, having reportedly made four investments from the inaugural $15bln Brookfield Global Transition Fund. BAM's share-price is down ~20% year-to-date vs. ~20-30% declines for the peers, and we estimate that the asset management stub is trading at only 18.2x 2022E and 15.3x 2023E fee-related earnings, a calculation that attributes no value to carried interest, which generated $0.45/share of DE in 2021 and has an accrued but unrealized balance of ~$3.00/share. Institutional fund- flows into alternative assets show no signs of slowing, and the industry has only just begun to tap the massive retail wealth market, an ~$80tln opportunity. The fundraising environment has become more crowded/competitive for private equity of-late, but we believe that BAM's strong PE track-record, recent involvement in some high-profile PE transactions, and the scale/breadth of its asset management franchise provide helpful differentiation. Volatility in the public markets and macro uncertainty could slow monetization activity and the build of the unrealized carried interest balance, but could also create investment opportunities for BAM's record $92bln of liquidity.
TD Investment Conclusion
We believe that an investment in BAM provides exposure to a world-class asset management franchise and a high-quality portfolio of real assets.