Apollo Global Management (APO), mcap=$34bn, price $55.63 vs $58.00

$APO pitch:
– In the acquisition of Athene, APO received $1 for 50c.
– However, the market did not appreciate the benefits of transactions and continues to undervalue APO due to Athene’s asset-heavy insurance business, concern’s over its credit portfolio and lower value SRE income.
– Acquisition by Apollo signaled the soundness of Athene’s book.
– Future Athene growth is to be driven by third-party AUM.
– Athene is able to generate excess returns not by taking more credit risk but by a willingness to take on illiquidity/structural/complexity risks.

$APO valuation:
– Trades at 10x management’s 2022 EPS forecast of $5.5.
– Expected to generate >$9.0 of EPS in 2026.
– 20% IRR assuming 20x and 10x multiples on 2026 FRE and SRE earning forecasts.

Exp. gain: 20% five-year IRR.

Full $APO write-up (free guest account required):

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