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Financial research report / analyst note
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This document is a page from a Morgan Stanley research report titled 'North America Insight' analyzing the valuation of KKR & Co. It contains a 'Sum-of-the-Parts' (SOTP) analysis (Exhibit 42) projecting values for 2018 based on 3Q17 data, specifically examining the impact of a potential C-Corp conversion. A red box highlights the 'Market Implied Carry Value' at $6.57 under the current price scenario. The document bears the Bates stamp 'HOUSE_OVERSIGHT_025576', indicating it is part of a congressional investigation, likely related to financial records subpoenaed in the Epstein inquiry.
Organizations (5)
| Name | Type | Context |
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| Morgan Stanley | ||
| KKR & Co. | ||
| KKR | ||
| Thomson Reuters | ||
| House Oversight Committee |
Locations (1)
| Location | Context |
|---|---|
Relationships (1)
Morgan Stanley Research report analyzing KKR valuation.
Full Extracted Text
Complete text extracted from the document (2,197 characters)
Morgan Stanley | RESEARCH
NORTH AMERICA INSIGHT
NORTH AMERICA INSIGHT
KKR & Co. SOTP and Sensitivity Analysis
Exhibit 42:
SOTP for KKR
KKR & Co. (KKR)
SOTP for KKR
KKR & Co. (KKR)
[Table Column Headers]
Sum-of-the-Parts Components (KKR) | Current Price SOTP | Downside Case C-Corp Conversion | Change | Upside Case C-Corp Conversion | Change
Sum-of-the-Parts Components (KKR) | Current Price SOTP | Downside Case C-Corp Conversion | Change | Upside Case C-Corp Conversion | Change
[Row: Fee Related Earnings]
2018e Pre-Tax Core FRE / Sh | $0.56 | $0.56 | 0% | $0.56 | 0%
Tax Rate | 24% | 24% | 0% | 24% | 0%
2018e After-Tax Core FRE / Sh | $0.43 | $0.43 | 0% | $0.43 | 0%
FRE Multiple | 15.0x | 15.0x | 0.0x | 22.5x | 7.5x
Core FRE Value | $6.38 | $6.38 | 0% | $9.57 | 50%
+
[Row: Balance Sheet]
Balance Sheet Net Cash and Investments / Sh (as of 3Q17) | $9.71 | $9.71 | 0% | $9.71 | 0%
+
[Row: Accrued Carry]
Net Accrued Carry / Sh (as of 3Q17) | $1.74 | $1.32 | -24% | $1.32 | -24%
+
[Row: Market Implied Carry Value]
Avg Net Carried interest / Sh (2018e-2020e) | $0.93 | $0.71 | -24% | $0.71 | -24%
Multiple | 7.0x | 2.5x | -4.5x | 9.0x | 2.0x
Market Implied Carry Value | $6.57 [Red Boxed] | $1.80 | -73% | $6.42 | -2%
=
[Row: Valuation]
Total Value | $24.40 | $19.21 | -21% | $27.01 | 11%
2018e EPS | $2.74 | $2.16 | -21% | $2.16 | -21%
P/E | 8.9x | 8.9x | 0.0x | 12.5x | 3.6x
3Q17 Book Value / Sh | $13.80 | $13.80 | | $13.80 |
Price-to-Book | 1.77x | 1.39x | -0.4x | 1.96x | 0.2x
2018e ROE | 19.1% | 19.1% | 0.0% | 15.3% | 3.8%
2018e Pre-Tax Core FRE / Sh | $0.56 | $0.56 | 0% | $0.56 | 0%
Tax Rate | 24% | 24% | 0% | 24% | 0%
2018e After-Tax Core FRE / Sh | $0.43 | $0.43 | 0% | $0.43 | 0%
FRE Multiple | 15.0x | 15.0x | 0.0x | 22.5x | 7.5x
Core FRE Value | $6.38 | $6.38 | 0% | $9.57 | 50%
+
[Row: Balance Sheet]
Balance Sheet Net Cash and Investments / Sh (as of 3Q17) | $9.71 | $9.71 | 0% | $9.71 | 0%
+
[Row: Accrued Carry]
Net Accrued Carry / Sh (as of 3Q17) | $1.74 | $1.32 | -24% | $1.32 | -24%
+
[Row: Market Implied Carry Value]
Avg Net Carried interest / Sh (2018e-2020e) | $0.93 | $0.71 | -24% | $0.71 | -24%
Multiple | 7.0x | 2.5x | -4.5x | 9.0x | 2.0x
Market Implied Carry Value | $6.57 [Red Boxed] | $1.80 | -73% | $6.42 | -2%
=
[Row: Valuation]
Total Value | $24.40 | $19.21 | -21% | $27.01 | 11%
2018e EPS | $2.74 | $2.16 | -21% | $2.16 | -21%
P/E | 8.9x | 8.9x | 0.0x | 12.5x | 3.6x
3Q17 Book Value / Sh | $13.80 | $13.80 | | $13.80 |
Price-to-Book | 1.77x | 1.39x | -0.4x | 1.96x | 0.2x
2018e ROE | 19.1% | 19.1% | 0.0% | 15.3% | 3.8%
Source: Company Data, Morgan Stanley Research estimates
Exhibit 43:
KKR Estimated Potential Share Price in C-corp Conversion
Multiple on Future Performance Fees
[Table Matrix with Headers: Fee Related Earnings Multiple (vertical) vs Multiple on Future Performance Fees (horizontal)]
[Values range from 12.5x to 30.0x vertically and 2.5x to 9.0x horizontally]
[Sample values: 18, 19, 20... up to 30]
KKR Estimated Potential Share Price in C-corp Conversion
Multiple on Future Performance Fees
[Table Matrix with Headers: Fee Related Earnings Multiple (vertical) vs Multiple on Future Performance Fees (horizontal)]
[Values range from 12.5x to 30.0x vertically and 2.5x to 9.0x horizontally]
[Sample values: 18, 19, 20... up to 30]
Source: Thomson Reuters, Company Data, Morgan Stanley Research estimates
Exhibit 44:
KKR Estimated % Change in Current Share Price
Multiple on Future Performance Fees
[Table Matrix with Headers: Fee Related Earnings Multiple (vertical) vs Multiple on Future Performance Fees (horizontal)]
[Values represent percentages ranging from -26% to 24%]
KKR Estimated % Change in Current Share Price
Multiple on Future Performance Fees
[Table Matrix with Headers: Fee Related Earnings Multiple (vertical) vs Multiple on Future Performance Fees (horizontal)]
[Values represent percentages ranging from -26% to 24%]
Source: Thomson Reuters, Company Data, Morgan Stanley Research estimates
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HOUSE_OVERSIGHT_025576
HOUSE_OVERSIGHT_025576
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