EFTA02656282

From: Richard Kahn <[email protected]> Sent: Monday, May 21, 2018 12:43 PM To: jeffrey E. Subject: Fwd: Apollo Global Management LLC: Three Reasons to Own Apollo Richard Kahn HBRK Associates Inc. 575 =exington Avenue 4th Floor New York, NY 10022 tel 212-971-1306 fax 212-320-0381 cell Begin forwarded message: From: =/b>"Morgan Stanley" <[email protected]> Subject: =/b>Apollo Global =anagement LLC: Three Reasons to Own Apollo Date: =/b>May 21, 2018 at 1:53:15 AM =DT To: = Reply-To: =/b><[email protected]> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> Wealth =anagement <http://www.morganstanley.com/img/cs/spacer.gif> Apollo Global Management LLC: Three Reasons =o Own Apollo <http://www.morganstanley.com/> EFTA_R1_01901938 EFTA02656282 Michael J. Cyprys, =FA, CPA — Morgan Stanley May 21, =018 5:48 AM GMT We think the market =ndervalues APO's growth in sticky management fee earnings and =erformance fee upcycle. Current valuation reflects just $1 of value for =uture performance fees vs. $13 value in our SOTP valuation. Overweight =ith $41 PT for 40% potential upside. Attractive entry =oint with APO shares down 12.5% YTD, underperforming Alt peers by 1300 =ps on volatile marks in their public PE portfolio and investors taking =ains following 2017's extremely strong 73% stock performance. Yet we =ee an inflection point for growth that's not priced in to the stock. =hree key reasons to buy APO: 1) Accelerating growth in management fee =arnings from new initiatives, credit business scaling faster, and fees =urning on-line will drive upside to estimates and expand the stickier =arnings stream that should be rewarded by the market and command a =igher multiple. We expect 20% CAGR in fee-paying AUM to drive 15% CAGR =n management fee-related earnings (FRE) over the next 3-years. 2) =erformance fee upcycle starts now; we expect cash performance fees in =E to double in 2018 vs 2017, and sustain an elevated pace over the next =everal years as Fund VIII enters the portfolio harvesting stage, energy =unds shift into their monetization phase and credit funds ramp =erformance fee generation. 3) Compelling valuation with the stock =ricing in nearly zero value for performance fees. We see the stock =ricing in just $1.03/share in value for performance fees, far below the =13.14/share in our sum-of-the-parts valuation. Expect 27% of current =hare price returned in dividends over the next 3 years. Sticky core =gmt fee earnings yield 4.4% suggest meaningful downside protection from =ong-term locked-up nature of client assets under mgmt. Upcoming =atalysts; 50% sequential growth in fee-related earnings (FRE) in 2Q18 =ith 900 bps FRE margin expansion and double digit FRE growth over next =ew years. Increased industry M&A activity accelerates portfolio =arvesting via strategic sales; This alert is sent from: Andrew Atlas, [email protected] You received this because you requested =hat you receive content and reports from: APOLLO =LORAL MANAGEMENT, LLC Please =ontact your FA if you want to unsubscribe from the alerts. <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> Disclosures: Please see =he full report for risks, disclosures and other important =nformation. Important disclosures regarding the =elationship between the companies that are referenced in Morgan Stanley =esearch and Morgan Stanley Wealth Management research are available on =he Morgan Stanley Wealth Management disclosure website at https://www.morganstanley.com/online/researchdisclosures. 2 EFTA_R1_01901939 EFTA02656283 Morgan Stanley Wealth Management Not Acting as Municipal =dvisor Morgan Stanley Wealth Management is not acting as a municipal =dvisor to any municipal entity or obligated person within the meaning =f Section 158 of the Securities Exchange Act (the "Municipal Advisor =ule") and the opinions or views contained herein are not intended to =e, and do not constitute, advice within the meaning of the Municipal =dvisor Rule. Copyright The =opyright in materials provided by Morgan Stanley is owned by Morgan =tanley & Co. LLC. Morgan Stanley Wealth Management is the trade =ame of Morgan Stanley Smith Barney LLC, a registered broker-dealer in =he United States. © 2018 Morgan Stanley Smith Barney LLC. Member =lPC. <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> 3 EFTA_R1_01901940 EFTA02656284