Apollo Global Management (APO) PT Raised to $24 at UBS
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UBS analyst Brennan Hawken reiterated a Buy rating and raised his price target on Apollo Global Management (NYSE: APO) to $24.00 (from $20.00) noting fundraising for Fund IX set to start while Fund VIII continues to perform well.
Hawken commented, "APO reported 3Q16 economic net income (ENI) per unit of $0.58, above our estimate of $0.45 and consensus of $0.46 per unit. Relative to our estimate, broad based strength across the Management business (8c tailwind) and the Incentive business (8c tailwind) were only partially offset by a slight higher tax rate (2c headwind). The better results in the Management business were largely a function of elevated transaction fees while in the Incentive business higher marks were the main driver. Realization activity was in line but a higher payout ratio and higher management fees resulted in a distribution of $0.35 per unit compared to our $0.28 per unit estimate."
The analyst notes deployment remains strong as Fund IX fundraising set to start. "Deployment was once again strong in 3Q ($4.3 bn in 3Q, $16.5 bn LTM), and Fund VIII is now 65% invested with a pipeline of potential additional investments (including Rackspace and Apollo Education). As a result, fundraising for Fund IX is set to commence, with APO targeting a similar size to Fund VIII ($17.5 bn) and a final close at the end of 2017. Importantly, the company is maintaining its value-oriented discipline, with the average deal in the fund being done at roughly 6x EBITDA and the fund in carry for a second straight quarter despite still being in the investment phase. Juxtaposed against an average industry multiple approaching 11x, we believe the firm's willingness to do more complex deals has aided in finding attractive areas to put capital to work and should bode well for returns and realizations as these funds season."
Shares of Apollo Global Management closed at $18.18 yesterday.
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