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Msg  9649 of 9674  at  8/7/2022 5:14:48 PM  by


$9 target

Technology & Communications
Strong Buy 1 Target Price
$9.50▲ Suitability

Market Cap (mln)
$3,857 2022E AFFO/Share
$0.05 2023E AFFO/Share

August 4, 2022
Reiterate Strong Buy, Raise Target to $9.50; The DI Keep Rolling

We reiterate our Strong Buy rating on DBRG and raise target price to $9.50, from $9.00, following 2Q22 results, including updated mid- and long-term guidance (see below) as the company further shifts focus toward the asset-light Digital Investment Management business (DI raises third-party capital to invest and collects Fee Revenues and FRE), as opposed to the Digital Operating business (DO invests own balance sheet capital and collects Rental Revenues and EBITDA). We view the asset-light model as attractive given the long-term nature of stable, recurring fee revenues and Fee Related Earnings (FRE), combined with substantial organic growth through DBRGs ability to raise capital, plus potential performance fees that we feel the Street is not currently valuing in the stock. DBRG also has the opportunity for significant inorganic growth given $900M of dry powder it will have pro forma to invest, that it could use for acquisitions in either DI or DO.
And on top of fundamental strength, DBRG reaffirmed its intention to bring back the dividend, and the Board authorized a $200M share repurchase program in early July, which can apply to common stock or the $884M outstanding preferred stock. Not to mention, we think the 4-to-1 stock split will widen the potential investor base based on conversations with the buyside.
Reeling in the Realizations: We are very encouraged by two recent monetizations, including the $1.2B partial recapitalization of DataBank at an ~31x EV/EBITDA multiple and 1.9x Multiple on Invested Capital (MOIC) after just ~2.5 years (see our note HERE) with further recap tranches to come, as well as the sale of European outdoor advertising company Wildstone, the first monetization from the DBP I fund.
Upgrading the Roadmap: To better align with the focus on the DI business, DBRG updated its 2023 and 2025 guidance, most notably including plans to more than double Fee Earning Equity Under Management (FEEUM) from ~$23B pro forma for AMP, to $52-58B by YE25, leading to $270-310M of 2025 FRE.
Estimates: We raise our consolidated DI FRE estimates to $106/187/245M, from $118/174/205M, as we forecast faster FEEUM growth, but lower our 2022/23/24 proportional DO Adj. EBITDA estimates to $63/62/67M, from $70/97/209M, as we no longer currently included any additional DO acquisitions (vs. previously $1.5B in 4Q23).
Valuation: We reach our $9.50 YE23 price target using a sum of the parts analysis (see below).

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Msg # Subject Author Recs Date Posted
9650 Re: $9 target stocksurfer 0 8/10/2022 6:10:41 PM

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