Surging U.S. Power Demand And European Private Markets Will Transform This Alternative Asset Manager

Catalysts

About Bridgepoint Group

Bridgepoint Group is a diversified, growth-focused alternative asset manager specialising in European mid-market private equity, credit and U.S. energy infrastructure.

What are the underlying business or industry changes driving this perspective?

• Accelerating electricity demand in the U.S., driven by onshoring, transport electrification and data center build-out, is expanding the opportunity set for ECP to deploy larger flagship and evergreen funds into power generation and energy transition assets, supporting sustained fee-paying AUM growth and higher management fee revenue.
• Structural investor reallocation toward European private markets and the increasingly attractive European middle market is reinforcing Bridgepoint’s leading position in sub EUR 1.5 billion deals. This is enabling larger fund sizes at disciplined entry multiples and underpinning long term growth in management fees and carried interest earnings.
• Global expansion of the investor services and distribution platform, with coverage teams now in 11 locations and meetings with LPs up sixfold versus 2022, is broadening the LP base and cross selling strategies. This should lift fundraising conversion rates, diversify fee income and support margin expansion through operating leverage.
• Product innovation and diversification, including new evergreen and wealth channel vehicles in both private equity and infrastructure, are opening long duration capital pools from private banks and high net worth clients. This is improving AUM durability, smoothing fee income and supporting more resilient EBITDA margins through cycles.
• Scaled credit platform growth, including direct lending, CLOs and the expansion into asset backed lending, is positioning Bridgepoint to benefit from the long term shift toward private credit financing in Europe. This should support higher fee paying AUM, more stable recurring revenue and enhanced earnings visibility.

Assumptions

This narrative explores a more optimistic perspective on Bridgepoint Group compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Bridgepoint Group's revenue will grow by 12.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 10.4% today to 51.1% in 3 years time.
• The bullish analysts expect earnings to reach £407.0 million (and earnings per share of £0.38) by about December 2028, up from £57.8 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as £202.8 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 12.7x on those 2028 earnings, down from 40.2x today. This future PE is greater than the current PE for the GB Capital Markets industry at 12.6x.
• The bullish analysts expect the number of shares outstanding to grow by 0.17% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.07%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• A prolonged period of FX headwinds, such as continued weakness in currencies used by ECP relative to the euro, could mute reported AUM growth and fee-paying AUM in Europe, slowing the 11% management fee growth trend and constraining future revenue and fee related earnings.
• If fundraising conditions remain challenging globally and institutional investors continue to reduce U.S. overweights or rotate away from alternatives, Bridgepoint may fall short of its EUR 24 billion 2026 fundraising ambition, which would limit growth in fee paying AUM, compress management fee growth and cap fee related earnings and carried interest potential.
• A reversal or slowdown in the U.S. power demand megatrend, for example from weaker onshoring, delayed data center build outs or policy shifts after the current budget framework, could reduce the attractiveness and deployment pace of ECP’s energy transition strategies, putting pressure on infrastructure fee income, carried interest and ultimately group EBITDA margins.
• As older funds come off fee paying status after their 10 year lives and successor funds take longer to raise or deploy in a tougher macro environment, there is a risk of gaps in the fee base, which would reduce contracted, locked in management fees, compress the currently high EBITDA margin and increase earnings volatility.
• The scheduled unlocking of over 330 million shares by 2026 and the majority of share capital by 2029, combined with potential secondary offerings to improve liquidity, could create sustained selling pressure. If this coincides with any earnings disappointment or lower carried interest realization, it may drive a structurally lower valuation multiple relative to earnings and net margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Bridgepoint Group is £4.8, which represents up to two standard deviations above the consensus price target of £3.91. This valuation is based on what can be assumed as the expectations of Bridgepoint Group's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £4.8, and the most bearish reporting a price target of just £3.17.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be £796.0 million, earnings will come to £407.0 million, and it would be trading on a PE ratio of 12.7x, assuming you use a discount rate of 9.1%.
  
• Given the current share price of £2.81, the analyst price target of £4.8 is 41.4% higher.
  
• 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.