Analyst Actions: Brookfield Asset Management

Well positioned given current market conditions. "From our perspective, Brookfield Asset Management is very well positioned to benefit from the current market conditions. In the last week, BAM's involvement in two separate real estate related restructuring deals became more public (Kerzner and Stuyvesant). Distressed investing and restructuring activities are truly the core of BAM's corporate culture and a meaningful way to potentially add significant future value to the shares. We believe a combination of direct investments along with third party funds will be used as capital sources for opportunities. Despite the potential for asset management growth, the quality of investments remains a critical issue as the bulk of future cash flows will still come from asset ownership."

Asset ownership versus asset management. "Given Brookfield's (in a very broad sense) typical 20% interest in any private fund, asset ownership will be more important for cash flow generation versus asset management for the foreseeable future. Under some simple assumptions, 70% of total cash flows from a typical asset management deal would accrue to Brookfield from asset ownership rather than a management fee stream. Therefore, we focus on asset selection and quality for capital allocation. Positively, we believe a number of indictors look very favourable for BAM's investment approach in the current market environment."

Longer-term value. "BAM's recent liquidity raising activities look similar to past periods ahead of larger transactional activity. We look forward to some near-term catalysts, including: ongoing third party capital fund raising; fund redeployment; and, eventually an expanded Brookfield Group of companies."

Valuation: "Our target price of US$35.00 is obtained with a net asset value approach that, includes: a blended NAV and cap rate approach for commercial properties; 10x cash flow for renewable power; and, an 8x multiple on net fee income. We reiterate our Outperform rating."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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