After Brookfield Asset Management Inc. logged “strong” fourth-quarter results, RBC Dominion Securities analyst Geoffrey Kwan said he expects 2021 to be “an active year for monetizations, which should be positive for the share price.”
“BAM reported solid results across the board with the dividend increased to US$0.52/share annualized (was US$0.48),” he said.
“We see 2 key positives from Q4/20 results: (1) BAM plans to be active monetizing assets in 2021, which normally surface value and therefore likely positive for BAM’s share price; and (2) BAM reiterated its fundraising target of US$100-billion for its flagship funds (vs. US$57-billion raised in the last round), which if achieved, suggests a positive tailwind for Fee Related Earnings (FRE) growth in upcoming years. BAM is our 2nd best idea for 2021 and we view as a core holding. BAM trades at a 16-per-cent discount to NAV, which looks too wide (we think BAM should trade at or a slight premium to NAV). We see significant valuation upside from a narrowing of the discount to NAV and double-digit NAV growth potential over the next year
Keeping an “outperform” recommendation, Mr. Kwan raised his target to US$55 from US$52. The average is US$60.56.
Others making changes included:
* Citi analyst William Katz to US$49.50 from US$45 with a “buy” rating.
“We believe both 4Q results and post Q call reinforce BAM is benefiting from strong flywheel around NNA, scalability and building realizations,” said Mr. Katz. “The stock bounced 4 per cent on Feb. 11, outperforming peers. We see solid follow through as investors work through FRE and realization dynamics. One area of caution reflects management’s view around potentially ebbing dry powder deployment, notably in Public Markets, but unlikely to a point to derail the budding super cycle. Management bumped up the dividend modestly, but the yield is not much of a draw given fixed payout structure.”
* JP Morgan’s Kenneth Worthington to US$57 from US$55 with an “overweight” rating.
* CIBC’s Dean Wilkinson to US$54 from US$49 with a “buy” rating.