Brookfield Asset Management Inc (TSX: BAM.A) owns and manages commercial property, power, and infrastructure assets. Its investment focus includes Real Estate, Infrastructure, Renewable Power and Private EquityBrookfield has the greatest amount of assets in Real Estate and generates the most revenue through Private Equity.

Key highlights

• Robust earning matrix: The company continues to identify appealing investment opportunities throughout the business, utilizing its global presence, operational knowledge, and access to scale finance, the firm has made excellent success across its complementary strategy. As a result, the firm announced a healthy earnings matrix in which sales climbed by 20.7 percent to USD 75,731 million in FY 2021, compared to USD 62,752 million in pcp. A comparable increase was seen in its gross profit and net income.

Source: Company Filing, Analysis by Kalkine Group

• Registering sequential growth in operating margins: Despite the chaotic period, the Company maintained its pace and witnessed spirited performance across its EBITDA margin, operating margin and net margin in FY 2021 against FY 2020. We believe the momentum to continue in the foreseeable future, as the Company had an extensive development pipeline to support future growth.

Source: REFINITIV, Analysis by Kalkine Group 

• Strong growth trajectory: Looking ahead, the management anticipates the growth in the company's business. Each of its business segments aims to double in size over the next five years, which is a significant plus. This growth would result in CAGR of more than 20% in fee-related earnings. As it continues to monetize investments, the business anticipates that a large portion of today's accrued unrealized carried interest will be recognized as income.

• Private Credit is the new fixed income: Through the expansion of the Brookfield private credit franchise and its cooperation with Oaktree, the company has extended its credit platform throughout the years. Today, the company has a total AUM of USD 30 billion across its seven strategies (including Oaktree), and it is well positioned to generate considerable growth over the next five years and beyond. It is focused on developing new products that will appeal to clients and assist to capitalize on market possibilities, in addition to scaling up existing approaches.

• Clocking strong cash from operations: In 2021, the company's cash flow from operating activities was USD 7,558 million, up from USD 5,180 million in the previous similar period. The increase in operating cash flows is largely attributable to an increase in asset management profits, robust same-store growth from primary investments, and asset monetization gains.
  

• Raised dividend distribution by 8%: The Board of Directors declared an 8% increase in the quarterly dividend to USD 0.14 per share (approximately USD 0.56 per year), payable on March 31, 2022, to shareholders of record on February 28, 2022. Despite the adverse climate, the company boosted its dividend payment; whereas other businesses are reducing or halting dividend distributions, this demonstrates the group's financial health and signals that the organization is a friend of income investors.

Risks associated with investment

The group's financial performance is vulnerable to a variety of external and internal factors that can harm the company's performance. Some of these risks include investment returns that are lower than expected, the impact or unanticipated impact of general economic, political, and market factors in the countries where the company operates, the behavior of financial markets, including fluctuations in interest and foreign exchange rates, and global equity adequacy.

Financial overview of FY 2021

Source: Company Filing

• Strong revenues: The company’s revenue for Fiscal 2021 increased by 20.7% to USD 75,731 million, compared with USD 62,752 million in Fiscal 2020. Revenues increased primarily due to organic growth initiatives across the businesses and from acquisitions completed in the last twelve months across most segments.
• Steady direct cost: The direct cost as a % of revenue stood constant at 76% in FY 2021 compared to 75.5% in pcp. However, due to higher revenues the company clocked higher gross profit of USD 18,168 million compared to USD 15,366 million in pcp.
• Robust net income: In the reported period of FY 2021, the company clocked robust net income of USD 12,388 million against USD 707 million in pcp. This huge elevation was primarily due to higher equity accounted income and fair value changes.
  

Top-10 Shareholders 

The top 10 shareholders have been highlighted in the table, which forms around 37.89% of the total shareholding. Brookfield Asset Management, Inc. and Partners Value Investments, L.P. hold the company's maximum interests at 7.94% each respectively. The company's institutional ownership stood at 71.49% and ownership of the strategic entities stood at 11.51%. Higher institutional holding boosts the confidence in the mind of retail investors.

Valuation Methodology (Illustrative): Price to Book-Value

Analysis by Kalkine Group

Stock recommendation 

The company just recorded its strongest performance to date, generating USD 12.4 billion in net income and USD 6.3 billion in distributable earnings. This high performance was fueled by USD 71 billion in capital inflows, strong performance from primary investments, and large carried interest and gains from asset sales totaling USD 42 billion. Furthermore, the company's scale and quality of operations, together with its cash-generating profile and inherent inflation protection, will provide a significant tailwind as it continues through 2022.

Looking ahead, we anticipate that the company's business will continue to grow. Each of its business segments aims to double in size over the next five years, which is a significant plus. If it meets this goal, it should result in compound annual increase in fee-related earnings of more than 20%, which is a significant plus. Therefore, based on the above rationale and valuation, we recommend a "Buy" rating at the closing price of CAD 69.24 as on March 16, 2022. Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

One-Year Technical Price Chart (as on March 16, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary

Disclaimer

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