Expansion Into Hong Kong And Tailored Investments Will Drive Future Success

Key Takeaways

• Tailored solutions and robust exit pipeline are expected to drive revenue growth and enhance future earnings.
  
• Geographical expansion and infrastructure development boost potential revenue from global client base and diverse investment offerings.
  
• Reliance on bespoke solutions and few large exits exposes Partners Group to revenue volatility, scalability challenges, and currency fluctuation risks.

Catalysts

A private equity firm specializing in direct, secondary, and primary investments across private equity, private real estate, private infrastructure, and private debt.

• The firm's focus on developing bespoke solutions, which now comprise a significant portion of their asset mix, is expected to drive future revenue growth by attracting clients seeking tailored investments.
  
• The anticipated increase in performance fees due to a robust exit pipeline and the realization of postponed fees is likely to enhance future earnings outlook.
  
• Expansion into new geographical markets, including opening an office in Hong Kong, signals efforts to grow their global client base, potentially boosting revenue from increased assets under management.
  
• The continued investment in private wealth solutions and expected market growth in U.S. defined contribution plans suggest potential avenues for revenue and asset growth in the future.
  
• Development in infrastructure and private markets platforms, including new infrastructure funds and initiatives in private wealth, indicates potential for margin improvement through diversified and high-performing investment offerings.

Partners Group Holding Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Partners Group Holding's revenue will grow by 19.7% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 51.4% today to 50.3% in 3 years time.
• Analysts expect earnings to reach CHF 1.6 billion (and earnings per share of CHF 61.63) by about February 2028, up from CHF 960.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 25.5x on those 2028 earnings, down from 37.7x today. This future PE is greater than the current PE for the GB Capital Markets industry at 16.8x.
• Analysts expect the number of shares outstanding to grow by 0.49% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 4.66%, as per the Simply Wall St company report.

Partners Group Holding Future Earnings Per Share Growth

Risks

• Partners Group Holding faced a 39% decrease in performance fees, largely due to a slow transaction environment and decreased realization activity, which may continue to impact overall revenues if market conditions do not improve.
  
• The company's heavy reliance on bespoke solutions, representing over 70% of its asset mix, might limit scalability and diversification, potentially affecting future earnings if client demand shifts or if these solutions underperform.
  
• Exposure to currency fluctuations, particularly the strengthening of the Swiss franc, negatively impacted revenue growth from assets managed in U.S. dollars and euros, which could continue to pressure margins and earnings if currency trends persist.
  
• Dependence on a few large exits for performance fee realization, such as ongoing exits in the $20 billion pipeline, could lead to revenue volatility if there are delays or failures in closing these deals.
  
• High competition in private wealth markets may saturate the market and limit growth opportunities; moreover, potential reputational risks from new entrants mismanaging funds could indirectly affect Partners Group’s appeal, potentially constraining AUM growth and future revenues.

Valuation

• The analysts have a consensus price target of CHF1374.067 for Partners Group Holding based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CHF1600.0, and the most bearish reporting a price target of just CHF1200.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CHF3.2 billion, earnings will come to CHF1.6 billion, and it would be trading on a PE ratio of 25.5x, assuming you use a discount rate of 4.7%.
  
• Given the current share price of CHF1386.0, the analyst price target of CHF1374.07 is 0.9% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.