DCF Studio

    BAM.TO · TOR · Financial Services

    Brookfield Asset Management Ltd.

    Also onConsensus Drift

    Implied value per share

    CAD 38.83

    Market price

    CAD 64.47

    Implied upside

    -39.8%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 1.3982

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.
    AdjustedOnly 3 year(s) of history available to anchor assumptions on.
    AdjustedReports in USD, trades in CAD. Modelled in USD, converted at the end.
    AdjustedReported capital expenditure averages just 0.00% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.00% of revenue so the forecast is not handed free growth. The accounts do not separate depreciation from amortisation, so the combined charge is used - if a large part of it is amortisation of an acquisition, the reported capex is probably right and this substitution is not. Override it if the reported figure is right.
    AdjustedCapital expenditure runs at 1.0% of revenue against depreciation of 0.5%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.
    NoteRisk-free rate is an assumption: CAD assumption - no free live source available for this market.

    Current EV/EBITDA of 34.2x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    CAD 38.83-39.8%
    Exit multiple
    CAD 66.94+3.8%
    Market price
    CAD 64.47

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 5.1bnUSD 5.7bnUSD 6.4bnUSD 7.1bnUSD 7.9bn+11.4%
    EBITUSD 3.4bnUSD 3.8bnUSD 4.2bnUSD 4.7bnUSD 5.2bn+11.4%
    NOPATUSD 2.8bnUSD 3.1bnUSD 3.5bnUSD 3.9bnUSD 4.3bn+11.4%
    Add depreciation & amortisationUSD 27.3mUSD 30.4mUSD 33.9mUSD 37.7mUSD 42.0m+11.4%
    Less capital expenditureUSD -51.3mUSD -57.2mUSD -63.7mUSD -70.9mUSD -79.0m+11.4%
    Less increase in working capitalUSD -524.7mUSD -584.5mUSD -651.0mUSD -725.2mUSD -807.7m+11.4%
    Free cashflow to firmUSD 2.2bnUSD 2.5bnUSD 2.8bnUSD 3.1bnUSD 3.4bn+11.4%
    Discount factor0.95530.87180.79560.72610.6627-
    Present valueUSD 2.1bnUSD 2.2bnUSD 2.2bnUSD 2.2bnUSD 2.3bn+1.7%
    Present Value Of The ForecastUSD 11.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate3.30%CAD assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta1.174Reported 1.260, pulled toward 1.0 (Blume)
    Cost of equity9.76%Risk-free + beta x equity risk premium
    Cost of debt5.30%Implied cost of debt of 11.3% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationUSD 103.0bn96.6% of capital
    Total debtUSD 3.6bn3.4% of capital, book value as a proxy
    Tax rate17.2%Effective, capped at statutory
    WACC9.58%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 27.77

    77% of EV

    Forecast FCFF, final year
    USD 3.4bn
    Capex at depreciation, working capital in reinvestment
    USD 4.3bn
    Less reinvestment at g/ROIC (11.7% of NOPAT)
    USD -501.5m
    Capitalised
    USD 3.8bn
    ROIC (reported)
    21.4%
    Terminal value, undiscounted
    USD 54.9bn
    Terminal value, discounted
    USD 36.4bn
    Enterprise value
    USD 47.4bn
    Less net debt
    USD 2.0bn
    Equity value
    USD 45.4bn

    Exit at 20.0x EBITDA

    Value per shareUSD 47.88

    86% of EV

    Terminal value, undiscounted
    USD 104.5bn
    Terminal value, discounted
    USD 69.3bn
    Enterprise value
    USD 80.3bn
    Less net debt
    USD 2.0bn
    Equity value
    USD 78.3bn

    Spread between methods: 53%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.58%35.2037.1839.5542.4245.99
    8.58%29.8631.1732.6934.4736.60
    9.58%25.8526.7527.7728.9430.30
    10.58%22.7323.3724.0824.8825.79
    11.58%20.2420.7021.2121.7822.41

    Outlined: this model. Green text: above today's price of 46.11. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year11.4%25.1%+13.7pp
    Discount rate9.6%6.9%-2.7pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.