Brookfield Ord Shs Class A T.BN

TD Raise Target

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Obviously these are USD targets and numbers. GLTA

Q2/24 PREVIEW; SUBSTANTIAL UPSIDE POTENTIAL REMAINING

THE TD COWEN INSIGHT

We have revised our Q2/24 DE/share estimate to $0.78 vs. $0.86, to reflect a somewhat slower-than-expected start to the year, which has limited impact on our long-term forecasts/investment thesis. We still see substantial share-price upside to any reasonable view of intrinsic value. Our $62.00 target offers an implied return of >40%, and we see room to increase our target by ~$10.00-$14.00+.

Event

BN will report its Q2/24 results on Thursday, August 8 (pre-market).

Impact: NEUTRAL

Q2/24 Results: We have revised our forecasts to reflect: 1) lower market caps for BEP/BIP/BBU and subdued transaction/advisory fees at BAM (link); 2) corporate debt issuance at BN in mid-June; 3) a true-up of certain lumpier forecast items, e.g., residential development/energy marketing, etc.; and 4) lower realized carried interest, which we now expect will be more back-end-loaded. Our new DE estimate of $0.78/share is in line with consensus.

Considerable Remaining Upside Potential: Despite YTD share-price performance, we still see substantial upside to any reasonable estimate of intrinsic value. Our $62.00 target price offers an implied return of >40%, and we believe that our target NAV has ~$10.00- $14.00+ of upside, based on: 1) the FRE multiple used to value BAM; 2) the use of a PE multiple to value insurance; 3) the inclusion of some value for carried interest; and 4) the discount applied to the IFRS value of the real estate business. We value BAM based on a 22.5x multiple of FRE for the 12 months ending June 30, 2026, whereas BAM and BX are currently trading at 23.0x and 28.5x 2024E/2025E consensus FRE, respectively, and every 1x multiple-point increases our BAM target by ~$2.25/share (~$1.75/BN share). We currently value insurance based on book value of ~$4.50/share (including AEL), but the use of an 8x-10x multiple to value spread-related earnings would translate into ~ $7.00-$9.00/share based on the prospective run-rate of ~$1.4bln, pro forma AEL. Our target price does not embed any value for carried interest, whereas the accumulated but unrealized carried interest balance is ~$4.00/share. And finally, we value the real estate business by applying a 30% discount to the IFRS value of ~$31bln (including the real estate LP stakes), which is the equivalent of giving 100% value to the LP interests and the residential land operations (land is generally held at cost), zero value to the T&D portfolio, and ~$7.50/share of value to the core real estate portfolio (~82% of IFRS value). Just including the core real estate portfolio at 100% of IFRS value would add ~$1.75/share.