On Jan 7, Zacks Investment Research upgraded Brookfield Asset Management Inc. (BAM) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
The rank upgrade of this Toronto, Canada-based global alternative asset manager was driven by the recent announcement of the definitive agreement of acquiring 30.6% common shares of Brookfield Residential Properties Inc. (BRP).
Last month, Brookfield Asset Management announced that it has inked a deal to acquire around 35.9 million shares of Calgary, Canada-based Brookfield Residential through a court-approved plan of arrangement per Ontario law. The deal will cost around $871 million and is expected to close by early 2015.
Per the deal, shareholders of Brookfield Residential will receive cash amount of $24.25 per common share, reflecting a 5.4% increase from the previous offer of $23.00 per share revealed in the October proposal.
Brookfield Asset Management primarily focuses on four real asset businesses – property, renewable energy, infrastructure and private equity. The company’s residential development operations mainly comprise of direct investment in two companies – Brookfield Residential and Brookfield Incorporações S.A. – and directly held operations in Australia.
Brookfield Asset Management holds around 70% stake in Brookfield Residential that runs the business in North America. Brookfield Residential operates in 11 core markets spread in Canada, and the U.S., and controls more than 110,000 lots in these markets. The company is focused on entitling and developing land for building homes. The company also opts for the sale of lots to other builders.
Notably, for the quarter ended Sep 30, 2014, Brookfield Asset Management reported a 10% year-over-year increase in funds from operations (FFO) from Brookfield Residential. The rise came on the back of improved revenues and gross margins in the U.S. operations, offsetting the impact of a lower contribution from Canada. Total gross margins for land and housing were 30% for the quarter.
Over the past 30 days, the Zacks Consensus Estimate remained stable at $2.31 and $2.92 per share for 2014 and 2015, respectively.
Other Stocks to Consider
Other stocks in the investment management space include Affiliated Managers Group Inc. (AMG) and Janus Capital Group, Inc. (JNS). Both the stocks hold the same Zacks Rank as Brookfield Asset Management.
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