NORTH AMERICA INSIGHT ~~
Morgan Stanley | RESEARCH
KKR & Co. SOTP and Sensitivity Analysis
Exhibit 42: SOTP for KKR KKR & Co. (KKR) Downside Case C-Corp Conversion
Current Price SOTP
Upside Case C- Corp Conversion
Sum-of-the-Parts Components
(KKR)
2018e Pre-Tax Core FRE / Sh $0.56 $0.56 0% $0.56 0% Tax Rate 24% 24% 0% 24% 0% Fee Rel Earn ated 20180 After-Tax Core FRE / Sh $0.43 $0.43 0% $0.43 0% arnings FRE Multiple 15.0x 15.0x 0.0x 225K. 7.5x Core FRE Value $6.38 $6.38 0% $9.57 50% le Balance Balance Sheet Net Cash and ° 5 Sheet Investments / Sh (as of 3Q17) LE oval Ws ua oe + Accrued Net Accrued Carry / Sh (as of $1.74 $1.32 24% $1.32 24% Carry 3Q17) as Avg Net Carried interest / Sh 940 -949 Market (2018e-2020e) $0.93 $0.71 24% $0.71 24% Implied Carry ; Value Multiple 7.0x 2.5Xx -4.5x 9.0x 2.0x Market Implied Carry Value I _ _ $6.57) $1.80 -73% $6.42 -2% Total Value $24.40 $19.21 -21% $27.01 11% 2018e EPS $2.74 $2.16 -21% $2.16 -21% Valuation 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: Exhibit 44: KKR Estimated Potential Share Price in C-corp Conversion KKR Estimated % Change in Current Share Price Multiple on Future Performance Fees Multiple on Future Performance Fees 2.5x 3.5x 4.5x 5.5x 6.5x 7.5x 2.5x 3.5x 4.5x 5.5x 6.5x 7.5x
Fee Related Earnings Multiple
Source: Thomson Reuters, Company Data, Morgan Stanley Research estimates
9.0x
Fee Related Earnings Multiple
Source: Thomson Reuters, Company Data, Morgan Stanley Research estimates
HOUSE_OVERSIGHT_025576
9.0x