Analyst Reactions A pair of equity analysts on the Street initiated coverage of Brookfield Asset Management Inc. on Tuesday a day after its unique market debut.
In May, Brookfield Asset Management Inc. revealed a plan to spin off its asset-management business to shareholders. The spinoff takes the ticker
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and is called Brookfield Asset Management, while the original company changed its name to Brookfield Corp. and trade under the ticker symbol Goldman Sachs analyst Alexander Blostein initiated coverage of Brookfield Asset Management with a “buy” rating, believing it provides investors with an “outsized exposure to some of the fastest growing parts of the market.”
Expecting the company to drive “robust” 20-per-cent-plus annual earnings growth through 2024, he set a US$40 price target, representing 25-per-cent upside.
BMO Nesbitt Burns analyst Sohrab Movahedi think BAM offers investors “access to a ‘pure-play’ alternative asset management franchise with a proven track record for double-digit fee-bearing capital growth, stable fee rates and margins coupled with the financial and operating synergies of Brookfield Corporation’s capital.”
“However, we are mindful of multiple upside to BAM’s premium valuation absent a further acceleration to fee-bearing capital growth,” he added.
Admitting he would take a more constructive view if its valuation pulled back, Mr. Movahedi gave it a “market perform” rating and US$32 target.
Elsewhere, analysts reducing their targets for Brookfield Corp. include:
* Credit Suisse’s Andrew Kuske to US$42 from US$50 with an “outperform” rating. The average target on the Street is US$59.03.
“With the spin successfully completed, the focus on BN is multi-faceted and partly revolves around surfacing value across the portfolio and executing the strategic plan,” he said. “Given the nature of the structure, we believe BN has many levers to pull amidst an overall environment that is relatively conducive to many of the Group’s strengths.
“BN’s core franchise continues to be positively positioned on a longer-term basis from a legacy of value-oriented investing and a holdco structure often trading at a discount. The greater segregation of business lines offers a unique exposure across the group that is enhanced by some privately owned assets at the top of the house.”
* Scotia Capital’s Mario Saric to US$55.75 from US$64 with a “sector outperform” rating.
“Our initial observation is that BN looks very cheap relative to BAM, perhaps understandable as near-term relative positioning decisions are firmed up,” said Mr. Saric. “That said, we believe BPG (a source of near-term investor consternation)is valued at less than $0 in BN share price based on BAM’s implied 20 times FRE trading price and 9 times carry (i.e. ‘hold-co’ discount = approximately 65 per cent). We chose BN/BAM as a top pick in Scotiabank’s 2023 Focus Report. ... We think it will take time for the dust to settle, but we expect BAM to trade well, with BN narrowing the gap.”
* BMO’s Sohrab Movahedi to US$49 from US$51 with an “outperform” rating.
“BN stock provides investors access to Brookfield’s ecosystem, a proven 15-per-cent-plus return track record and substantial cash generation,” he said. “:We argue price is fundamentally disconnected from value with BN’s stock trading at a 30-per-cent-plus discount to our target. Potential catalysts to unlock value include: i) the consistent realization of carried interest; ii) reduced capital intensity; iii) the return of capital via shareholder distributions.”
* Canaccord Genuity’s Mark Rothschild to US$50 from US$60 with a “buy” rating.
* RBC’s Geoffrey Kwan to US$53 from US$63 with an “outperform” rating.