Our Action List Pick
Brookfield Asset Management Ltd.
BAM-N, BAM-T: US$28.48; ACTION LIST BUY 12-Month Target: US$47.00
Brookfield Asset Management (BAM) is a leading pure-play alternative asset manager that was recently spun-out by Brookfield Corp., which continues to own a 75% stake.
BAM has a debt-free balance sheet and intends to pay out ~90% of its distributable earnings to shareholders. The initial dividend of $1.28/share (annualized) corresponds to an ~4.5% yield.
BAM is well-positioned in higher-demand segments within alternatives, including: real assets (which offer significant inflation protection), transition investing, and private credit. The company is dominant in infrastructure and renewables, a global leader in real estate, and a first-mover in transition investing.
BAM has more than tripled its fee-bearing capital over the past five years and expects to increase it to ~US$1 trillion by 2027 (~20% CAGR), which we believe is achievable based on the opportunity to: 1) deepen existing client relationships; 2) originate new relationships; 3) expand distribution channels; and 4) develop complementary investment strategies.
The potential for BAM to attract a larger investor base and a higher valuation multiple in a simple, stand-alone structure also provides optionality for inorganic growth because the company could choose to use its stock as an M&A currency. We would expect BAM to be very selective on M&A due to the importance of cultural fit, but we could envision the company using M&A to quickly scale up in Asia and/or technology, much as it did in credit with Oaktree.