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. 

Key Updates:

• Strong momentum from the private equity segment: The company reported its income of USD 13,424 million, which is higher than USD 9,712 million in pcp. The company’s private equity segment constitutes a broad range of industries, and is mostly focused on business services, infrastructure services and industrials. The growth was driven by the positive impact from the recent acquisitions along with improved demand dynamics.
• Growing traction from the renewable segment: The group also operates through the renewable segment and reported income of USD 1,246 million in Q1FY22, as compared to USD 1,089 million in pcp. The growth was driven by higher contributions from organic growth initiatives, recent acquisitions and higher realized pricing across most markets. We expect the above momentum to continue in the coming quarters, supported by growth demand dynamics across the Globe.
• Strong liquidity profile: As on Q1FY22, the company reported its available funds of USD 15 billion including liquidity from corporate and perpetual affiliates, and USD 85 billion of total liquidity, including third-party commitments available under private funds. These are sufficient to fund its upcoming capital investments and working capital requirements.

Risks associated with the Investment:

The company’s performances might be hindered due to the extension of the ongoing pandemic, as it would impact the demand for the company’s products and services. Growing interest costs would likely dampen the company’s profitability, which remains a major concern.

Q1FY22 Financial Highlights:

Q1FY22 Income Statement Highlights (Source: Company Reports)

• A announces its first quarter result, wherein the company reported its revenues of USD 21,882 million, as compared to USD 16,410 million in pcp. The growth was driven by higher revenue from all the operating segments.
• The quarter was marked by higher direct costs, increase in interest expense, while income from Fair value changes stood lower than pcp.
• The company reported its net income of USD 2,960 million v/s USD 3,776 million in pcp. This is primarily due to higher input costs as mentioned above coupled with higher income taxes.

Valuation Methodology (Illustrative): Price to Book based

Analysis by Kalkine Group

Stock Recommendation:

Despite the ongoing sluggish macros, the company ended the quarter on a positive note. The company reported income growth from most of its operating segments which depicts the company’s resilience and is a key positive. We expect the above momentum to continue in the coming days, supported by revival in the demand dynamics. We have valued the stock using price to book based relative valuation approach and arrived at a target price offering double-digit upside potential (in % terms). We have considered peers like BlackRock Inc, CI Financial Corp etc. for this purpose. Considering the aforesaid facts, we recommend a ‘Buy’ rating on the stock of BAM.A at the last closing price of CAD 56.88 on June 20, 2022. 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 June 20, 2022). Source: REFINITIV, Analysis by Kalkine Group

The reference data has been partly sourced from REFINITV

Technical Analysis Summary

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