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Brookfield Corp Grew Slower Than Expected in Q1
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- Solo FIRE
Brookfield Corp BN reported 10% distributable earnings growth for 2024 Q1 compared to a year ago, much slower than the company's own projection of 20%+ expected growth. Considering the challenging economic environment, I think this is acceptable and the company is on track to deliver more growth considering the recent positive developments I will discuss later. The estimated value of the company is about CA$66 per share by running a 5 year DCF projection. Here are the assumptions ($ in USD):
- Latest TTM distributable earnings before realization (DE) of $4.49 billion
- Future price/DE of 15 (5YR avg is 17.92)
- Growth rate of 15% annually (5YR avg is 21%)
- Share dilution of 1.57% annually (BN bought back $700 million of shares so I believe this to go down)
- Discount rate of 10%
There are several positive developments in this quarter:
Brookfield Renewable signed a $10 billion deal with Microsoft. This is massive as this deal is worth more than the BEP's entire market cap. As BEP grows, BAM will benefit as it charges fees based on the BEP's market cap, and BN also benefits as it owns about 75% of BAM.
Brookfield property group's (100% owned by BN) core real estate portfolio grew 5% of its same-store net operating income, this indicates a long-awaited recovery in the commercial real estate market which will benefit BN greatly.
Earnings of the Wealth solution (the annuity business, also 100% owned by BN) grew massively by 88% YoY. With the recent close of AEL acquisition, the management is expecting another 40%+ growth this year. This is my favorite part of BN as it is a very predictable business, and with BN's investment expertise, they should be able to continuously grow earnings meaningfully from the float.
Overall, I think the company is on the right track and is still undervalued despite a weaker than expected Q1. I think it will perform well in the next 5 years and will continue to hold.
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DISCLAIMER: Solofire is not a registered financial advisor. This post contains author's personal opinion only and it should NOT be considered financial advice.