Element Fleet Management Corp T.EFN

RBC

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RBC Capital Markets analyst Geoffrey Kwan provided his top picks in domestic diversified financials,

“Element Fleet (EFN) is our No. 1 high-conviction best idea. We still view the shares as undervalued, despite better share price performance in Q2/24. Over the next five years, we think EFN can generate an almost +15% EPS CAGR [earnings per share compound annual growth rate], +25% dividend CAGR, and ~3% share buybacks per year, which would see ROE increase from 15% to almost 25%. With the shares trading at 15.5x P/E and 7.6% FCF yield (2025E), we view EFN as undervalued … No. 2 best idea: Brookfield Asset Management (BAM). We see significant valuation upside driven by double-digit FRE [fee-related earnings] growth in the near term (and mid-teens FRE growth over the medium term) and 3.4% dividend yield. We think the additional higher stake in Oaktree and recent Castlelake investments should be accretive to FRE/share … No. 3 best idea: Brookfield Corp. (BN). BN’s shares trade at a 17% discount to NAV (which already includes our 30% discount to BN’s Real Estate IFRS fair value), with the current share price implying a 78% discount to the IFRS fair value of BN’s Real Estate assets. We think BN benefits from multiple catalysts including successful fundraising at BAM, improving financial performance within its Real Estate segment, insurance segment demonstrating consistent organic growth, and increasing monetization activity, which should increase NAV growth and narrow the discount to NAV”