ONEX: Lower Convex estimates drives lower target price

Research evidence excerpt

ONEX: Lower Convex estimates drives lower target price

Onex Corporation

Target/Upside/Downside Scenarios Investment summary

We rate Onex Sector Perform given limited visibility on upsideOnex Corporation

catalysts in the near term. Onex trades at ~35% discount to

150 125 Weeks 26DEC23 - 18MAY26 NAV and we apply a 25% discount. Overall, we believe our

140 25% discount appropriately reflects the company’s investment

130 TARGETTARGET 130.00130.00

120 performance, fundraising challenges and NAV growth outlook.

110 CURRENTCURRENT 108.75108.75

90 Key potential catalysts include the following:

70 i) Sustained or improving IRRs in Onex Private Equity strategies 60

50 driving higher NAV growth.

8m

6m 4m ii) Launch of next Private Equity vintages (i.e. Onex Partners VI)

2m

2024 2025 2026 which should help consolidated FRE turn positive.

D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M

ONEX CN Rel. S&P/TSX COMP IDX

MA 40 weeks iii) Convex successfully pulls its four structural levers toSource: Bloomberg and RBC Capital Markets estimates for Target

preserve profitability in a softening insurance pricing cycle.

Valuation

Our 12-month price target is CAD $130/share, derived using Risks to rating and price target

a SOTP approach, reflecting Onex's post-Convex structure. Key potential risks include the following:

We value Onex's stake in Convex based on 1.5x P/TBV. The

remaining NAV is grown at 5% to Onex stated NAV adjusted i) Declining investment portfolio performance within Onex’s

for cash. We assume Onex remains active on its NCIB. We significant companies.

separately value the asset management business at ~$8/share

(FRE at $3.7/share and carried interest at $4.6/share). ii) Key personnel departures at the senior level (e.g. Bobby

LeBlanc) and the investment team.