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 Equity. Brookfield 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 seek enticing investment opportunities throughout the business, leveraging its worldwide footprint, operational experience, and access to scale funding. As a consequence, the company reported a healthy earnings matrix in which revenues increased by 20.7% to USD 75,731 million in FY 2021, up from USD 62,752 million in pcp. Its gross profit and net income both increased in a comparable manner.

• Registering sequential growth in operating margins: Despite the turbulent time, the Company maintained its pace and saw lively performance across its EBITDA margin, operating margin, and net margin in fiscal year 2021 compared to fiscal year 2020. We anticipate that the momentum will continue in the near future, as the Company has a robust development pipeline to support future growth.

• 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.

• Clocking strong cash from operations: The cash flow from operations of the firm was USD 7,558 million in 2021, up from USD 5,180 million in the previous comparable year. The rise in operational cash flows is primarily due to higher asset management profitability, strong 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.
  

• 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.

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

• 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 39.66% of the total shareholding. Brookfield Asset Management, Inc. and Partners Value Investments, L.P. hold the company's maximum interests at 8.32% each respectively. The company's institutional ownership stood at 74.96% and ownership of the strategic entities stood at 11.38%. Higher institutional holding boosts the confidence in the mind of retail investors.

Valuation Methodology (Illustrative): Price to Book-Value

Stock recommendation 

The business just achieved its best-ever results, achieving USD 12.4 billion in net income and USD 6.3 billion in distributable earnings. This robust performance was fueled by USD 71 billion in capital inflows, outstanding primary investment performance, and huge carried interest and asset sale gains of USD 42 billion. Furthermore, the company's scale and quality of operations, as well as its cash-generating profile and intrinsic inflation protection, will provide a strong tailwind 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 64.51 as on April 27, 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 April 27, 2022). Source: REFINITIV, Analysis by Kalkine Group 

Technical Analysis Summary

Disclaimer

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