Canada just hosted investors controlling more than $100 trillion in assets and essentially handed them a very expensive shopping list.
The first Canada Investment Summit ended with nearly $500 billion in investment and financing commitments covering infrastructure, artificial intelligence (AI), energy, critical minerals, defence, and Canadian businesses. Prime Minister Mark Carney’s pitch was considerably shorter.
“Canada is building big. Build with us.”
For Canadian investors, the trick is separating the enormous headline from the companies that could actually earn money from it.
Source: Getty Images
What $500 billion means
Nearly $325 billion came from bank financing commitments. Institutional investors committed almost $100 billion in new capital, while investment managers pledged more than $14 billion.
Some projects will take years. Others may never get built. Yet the summit revealed something more important. Global capital doesn’t appear to be Canada’s biggest problem.
BlackRock Chief Executive Officer Larry Fink said his firm has historically struggled to find enough investment opportunities within Canada. Blackstone President Jon Gray described the country as “a bit of a sleeping giant economically.” Canada now wants to wake that giant up with faster approvals, cheaper investment taxes, and hundreds of billions of dollars worth of infrastructure proposals.
That makes Power Corporation of Canada (TSX: POW) particularly interesting.
POW
Power Corporation is a holding company with major investments in financial services, wealth management, insurance, and alternative assets. Its holdings include Great-West Lifeco and IGM Financial, but the summit connection comes through Power Sustainable.
Power Corporation held a roughly 73% economic interest in Power Sustainable’s management business at the end of June, while Great-West Lifeco owned another 20%.
Just before the summit, Power Sustainable announced plans to invest and mobilize more than $10 billion into Canadian infrastructure and related companies over five years. The money is expected to target power and electricity grids, digital infrastructure, environmental solutions, industrial businesses, and food supply chains.
Why buy
Power Corporation gives investors something different from buying one mine, pipeline, or AI project. Its underlying businesses can benefit from Canadians investing more, institutional capital growing, and alternative-asset platforms raising money for infrastructure.
Power Sustainable’s growth strategy is particularly interesting because asset managers can earn recurring management fees and potentially performance-based income as third-party capital expands.
Meanwhile, the broader company is already performing well. Second-quarter adjusted net earnings climbed to $974 million, or $1.55 per share, from $883 million, or $1.38 per share, a year earlier. Power Corporation also finished the quarter with an adjusted net asset value of $112.94 per share. Yet POW recently traded around $95. That leaves investors buying the shares at roughly a 16% discount to that reported underlying value.
Considerations
Power Corporation also pays a quarterly dividend of $0.67 per share, or $2.67 annually. At today’s price, that’s a yield around 2.8%. The dividend isn’t enormous, particularly compared with some Canadian banks or pipelines. Yet management increased it 9% this year, while the stock trades at roughly 14 times forward earnings.
The biggest risk is familiar to holding-company investors. The discount to underlying assets can persist for years. Insurance, wealth management, and investment businesses are also sensitive to markets, while Power Sustainable’s $10-billion plan represents capital to be invested and mobilized rather than guaranteed future profits.
Bottom line
All that said, I like the setup. Canada’s summit wasn’t simply about finding one winning mine, data centre, or transmission line. It was about finding enough capital to build dozens of them. Power Corporation already owns a manager preparing to help write the cheques.
