Brookfield Asset Management Voting Ord Shs Class A T.BN.PF.H

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Their upside scenario target is US$76.00. GLTA

September 13, 2022
Brookfield Asset Management Inc. 
The Secret of My Success: Investor Day Highlights

Our View: The Investor Day importantly answered several key questions regarding the upcoming asset manager spinoff, but we think the over- arching theme was BAM is well-positioned to capitalize on numerous key investment themes in the current market environment given its scale; strong product offering and fundraising capabilities; and positive investment track record. Despite an uncertain macro outlook, we think BAM offers investors an attractive blend of significant NAV-growth driven valuation upside and relatively strong defensive attributes. The shares trade at a 6.7% discount to NAV. We view BAM as a core holding and reiterate our Outperform rating and US$66 target.

Key points:
Key takeaways (see pp. 3–13 for key exhibits from BAM’s presentation): • BAM’s updated 5-year targets (2022-2027): (1) Plan Value (before factoring in the asset manager spinoff): +17% CAGR from US$82-$94/ share to US$175-$198/share; (2) Distributable Earnings (DE): +20% CAGR from US$3.7B to US$9.3B; (3) Fee Bearing Capital: +20% CAGR from US$400B to US$1T; and (4) Fee Related Earnings: +17% CAGR from US$2.0B to US$4.4B. We note the CAGRs are similar to those from last year’s Investor Day.

• Asset Manager spin-off additional details: (1) the current BAM will be re-named Brookfield Corp. (planned tickers NYSE/TSX: BN) and the asset manager will be named Brookfield Asset Management (planned tickers NYSE/TSX: BAM); (2) carried interest from existing funds will be 100% attributable to BN with BAM only eligible to earn carried interest on “new”/future funds (BSREP 4, Global Transition Fund, BIF 5 and BCP 6 are “new” funds). Carried interest on new/future funds will be split 1/3 to BN and 2/3 to BAM; (3) re-iterated target 90% dividend payout ratio for the asset manager, with the dividend being variable. BAM is targeting 15-20% growth in distributions; (4) spinoff will be tax-free at least in the U.S. and Canada with 1 share of the asset manager issued for every 4 shares owned in BN, resulting in BN spinning off 25% of the asset manager; (5) the asset manager will have US$2.8B in cash/financial assets and zero debt and BAM expects it to generate US$2B in FCF/year; and (6) BAM believes the current Plan Value of the asset manager is US$32- $45/share, which assumes 25-35x FRE, 10x on annual net target carried interest plus accumulated unrealized carried interest. BAM estimates the asset manager Plan Value could reach US$71-$94/share in 5 years (+19% annualized total return);