BAM - Brookfield Asset Management

[cubsfan]

Thanks - always a pleasure John.

[gokou3]

In Q1, they have already hit their projected value from the 5-year guidance from 2013 investor day.

 

I don't have their 2013 Investor Day powerpoint, but I have the 2014 one.  Their asset management business is on track to meet the most aggressive forecast made back in 2014.  However, it also forecasted an invested capital of $52B in the *least* optimistic case and yet as of 2018Q1 (supplemental page 15) it only has ~$34B.

 

On the other hand, I understand BAM puts up capital for its own private funds (supplemental page 25). I wonder if the reason for the performance "lag" of the invested capital is due to the reallocation into private funds. But then, I don't see these assets included in page 15 nor in Brookfield's own valuation model in their Investor's Day presentation.

 

 

[racemize]

In Q1, they have already hit their projected value from the 5-year guidance from 2013 investor day.

 

I don't have their 2013 Investor Day powerpoint, but I have the 2014 one.  Their asset management business is on track to meet the most aggressive forecast made back in 2014.  However, it also forecasted an invested capital of $52B in the *least* optimistic case and yet as of 2018Q1 (supplemental page 15) it only has ~$34B.

 

On the other hand, I understand BAM puts up capital for its own private funds (supplemental page 25). I wonder if the reason for the performance "lag" of the invested capital is due to the reallocation into private funds. But then, I don't see these assets included in page 15 nor in Brookfield's own valuation model in their Investor's Day presentation.

 

Yes, they are lagging on the invested capital, although I think some of that can be due to spin outs (BBU/Trisura).  Mostly, I track the projected IV, and they have hit that number already, basically by making it up for with the extra fees.

 

Edit: Also, it is worth noting that in the investor day presentations they typically list the amount of capital available to invest, not the net amount, so that $54 should net down to ~$44 with leverage/overhead capitalization/etc.

[osowi]

Given the history of distributions and spinoffs, Is it better to own BAM in an IRA or non IRA regular account?

thank you in advance.

[racemize]

Given the history of distributions and spinoffs, Is it better to own BAM in an IRA or non IRA regular account?

thank you in advance.

 

Personally, I view this as a long term holding and they've largely created the subs they wanted, so I would own something else in an IRA that is shorter term.

[chrispy]

https://www.reuters.com/article/us-usa-kushner-property/brookfield-in-talks-to-acquire-stake-in-kushner-owned-manhattan-tower-source-idUSKCN1II2RH

[Studesy]

I am shocked, given that these figures are correct. Who would have signed off on such a sale?!?!  Ontario Liberal decision making at its finest! 

 

https://www.theglobeandmail.com/opinion/article-ontario-gets-taken-to-the-cleaners-in-casino-deal/

 

[flesh]

I am shocked, given that these figures are correct. Who would have signed off on such a sale?!?!  Ontario Liberal decision making at its finest! 

 

https://www.theglobeandmail.com/opinion/article-ontario-gets-taken-to-the-cleaners-in-casino-deal/

 

Whoa.

[villainx]

I am shocked, given that these figures are correct. Who would have signed off on such a sale?!?!  Ontario Liberal decision making at its finest! 

 

https://www.theglobeandmail.com/opinion/article-ontario-gets-taken-to-the-cleaners-in-casino-deal/

 

This implies a good deal for BBU, right?  The outrage is for the seller?

[Studesy]

I am shocked, given that these figures are correct. Who would have signed off on such a sale?!?!  Ontario Liberal decision making at its finest! 

 

https://www.theglobeandmail.com/opinion/article-ontario-gets-taken-to-the-cleaners-in-casino-deal/

 

This implies a good deal for BBU, right?  The outrage is for the seller?

 

Yes.  This is a fire sale price.  Difficult to believe the Ontario gov't  couldn't find other interested parties/more reasonable offers, in selling these assets.

[DTEJD1997]

I am shocked, given that these figures are correct. Who would have signed off on such a sale?!?!  Ontario Liberal decision making at its finest! 

 

https://www.theglobeandmail.com/opinion/article-ontario-gets-taken-to-the-cleaners-in-casino-deal/

 

1X EBIDTA?

 

Heck, why didn't they sell the casinos to me?  I would have given them 1.5x EBIDTA!

 

When you see government sell stuff at giveaway prices, it raises some questions...

 

A). The attorneys and investigators should be ALL OVER the politicians who made this "decision".  I would be checking their bank accounts, watching their spouses/children/relatives like hawks.  Good chance they are on the take in some way.

 

B). This is reason #454,768,111 that government needs to be limited to the basics and essentials.  Why in the world is government in charge of gambling/owning assets in Canada?  Why don't they own auto parts manufacturers?  Restaurants? Strip clubs? 

 

The less government is involved in, the less chance there is for MONUMENTAL screw ups like this.

 

C). Why was this not put up for auction?  You can't tell me the best bid was only 1x EBIDTA!

 

Just like roaches in the kitchen, how many other harebrained schemes/ideas is the government of Ontario involved in?

 

Shocking transfer of wealth from the public to shareholders of BAM.

[Studesy]

I am shocked, given that these figures are correct. Who would have signed off on such a sale?!?!  Ontario Liberal decision making at its finest! 

 

https://www.theglobeandmail.com/opinion/article-ontario-gets-taken-to-the-cleaners-in-casino-deal/

 

1X EBIDTA?

 

Heck, why didn't they sell the casinos to me?  I would have given them 1.5x EBIDTA!

 

When you see government sell stuff at giveaway prices, it raises some questions...

 

A). The attorneys and investigators should be ALL OVER the politicians who made this "decision".  I would be checking their bank accounts, watching their spouses/children/relatives like hawks.  Good chance they are on the take in some way.

 

B). This is reason #454,768,111 that government needs to be limited to the basics and essentials.  Why in the world is government in charge of gambling/owning assets in Canada?  Why don't they own auto parts manufacturers?  Restaurants? Strip clubs? 

 

The less government is involved in, the less chance there is for MONUMENTAL screw ups like this.

 

C). Why was this not put up for auction?  You can't tell me the best bid was only 1x EBIDTA!

 

Just like roaches in the kitchen, how many other harebrained schemes/ideas is the government of Ontario involved in?

 

Shocking transfer of wealth from the public to shareholders of BAM.

 

Crazy isn't it.  So BBU has a partnership with GC (Great Canadian Gaming).  I'm not sure about the structure of this parntership but, on May 9th GC shares rose from 37-50.  GC has ebitda of ~$150mm. These new Ontario assets will produce ~$158mm in EBITDA.  Does anyone know how these assets are divided between BBU and GC??

[villainx]

From one of the press release:

 

"Great Canadian and Brookfield will invest through a newly formed partnership, Ontario Gaming GTA LP (the "Partnership"), with Great Canadian and Brookfield each holding a 49% interest in the Partnership. Clairvest Group Inc. will hold a 2% interest. Great Canadian will operate the gaming facilities within the GTA Bundle on behalf of the Partnership."

[rkbabang]

Thanks Canada!

[Spekulatius]

One way or the other, a crime has been committed with this transaction.? This is sort of how the Oligarch in Russia made their fortune buying then state owned assets for almost nothing.  I think this should be immediately investigated and given enough evidence I think a couple of folks will go to jail and possibly this fraudulent transaction could be reversed.

[villainx]

I don't see it as a crime.  Unless the bidding process was flawed in a meaningful way.  It's just an opinion piece, not economic/financial analysis.

 

edit: I don't mean to say that the government couldn't have erred.  Just that I assume there was a competitive process, and BBU and partners came out ahead.  In this forum/case, I care more about my investment via any outrage against politicians.

[Studesy]

One way or the other, a crime has been committed with this transaction.? This is sort of how the Oligarch in Russia made their fortune buying then state owned assets for almost nothing.  I think this should be immediately investigated and given enough evidence I think a couple of folks will go to jail and possibly this fraudulent transaction could be reversed.

 

I agree.  I'm surprised this story hasn't been more publicized, especially in light of the ongoing Ontario political race.  Would have thought Doug Ford would have used this.

[Studesy]

I don't see it as a crime.  Unless the bidding process was flawed in a meaningful way.  It's just an opinion piece, not economic/financial analysis.

 

edit: I don't mean to say that the government couldn't have erred.  Just that I assume there was a competitive process, and BBU and partners came out ahead.  In this forum/case, I care more about my investment via any outrage against politicians.

 

I find it hard to believe that a fair and "competitive process" only fetched 1x EBITDA for these assets plus some other valuable rights.  This just doesn't make sense. 

[John Hjorth]

BBU Press Release [January 23^rd 2018]: Great Canadian Gaming and Brookfield Complete Acquisition of the GTA Bundle in Ontario Gaming Modernization Process.

 

The price mentioned here does not match to the contents of the article, and there are nuances in this press release about the identity of the buyers, that does not tie to the contents of the article.

 

 

[chrispy]

Cyrus (BBU CEO) has mentioned how they are going to remodel and drastically expand the amount of table games. The future earnings could be significantly higher.

 

This is certainly an eye opening news release. Another view; is BAM starting to receive the first phone call for deals because of their work with institutions?

[DTEJD1997]

BBU Press Release [January 23^rd 2018]: Great Canadian Gaming and Brookfield Complete Acquisition of the GTA Bundle in Ontario Gaming Modernization Process.

 

The price mentioned here does not match to the contents of the article, and there are nuances in this press release about the identity of the buyers, that does not tie to the contents of the article.

 

Geez, how crazy is that?  Newspaper reporters didn't get the facts right?  They misreported something?  How could that possibly happen?

 

In America I have great disdain for most of the press and journalists.  I've met some of them in person, and they are not the sharpest cue balls on the table.

[villainx]

BBU Press Release [January 23^rd 2018]: Great Canadian Gaming and Brookfield Complete Acquisition of the GTA Bundle in Ontario Gaming Modernization Process.

 

The price mentioned here does not match to the contents of the article, and there are nuances in this press release about the identity of the buyers, that does not tie to the contents of the article.

 

Geez, how crazy is that?  Newspaper reporters didn't get the facts right?  They misreported something?  How could that possibly happen?

 

In America I have great disdain for most of the press and journalists.  I've met some of them in person, and they are not the sharpest cue balls on the table.

 

This article was an opinion piece.  Not to argue about press/journalistic rigor, but this had a lower threshold.

[John Hjorth]

Personally, I'm thinking about if there are other - alternative - ways to triangulate the facts related to this BBU deal?

[John Hjorth]

Posted by Vinod, in the Oaktree Capital topic about KKR, today [here, unedited]:

 

Not related to OAK, but in general to how these private equity managers view investors can be found in this quarter KKR's conf call:

 

When we listed, we had $55 billion of AUM. We now have almost $200 million. Our book value per share was about $6. It's now $14.50. So, this is a much bigger discussion. Our stock price has really just not grown at the same pace as our company. So, we've really spent the last eight years working to sort out why. And if you think back, we've worked on articulating our story and we thought about reporting changes. We went out and tried to find new investors with many of you. We worked with back offices of mutual funds to help them operationalize K-1s. But honestly, after eight years of effort, it's not clear we've made a lot of lasting progress. So, where this is really coming from is we're stepping back and simplifying our thought process about what's been going on.

 

So, the high level is as best we can sort out, over 60% of the capital investing in the U.S. equity markets cannot or will not buy PTPs. And if you think about where flows have been going, it's been going to passive smart beta indices, none of which invest in PTPs. So, in other words, virtually 100% of net flows could not or would not buy us and 60% of existing capital can't buy us. So, we kind of stepped way back and it's no wonder it's been hard.

 

So, it kind of became clear to us that we've been fishing in a small pond with a slow leak and wondering why we weren't catching anything. So then, it was pretty clear there's a big ocean nearby, we had a lot of fish that might like our bait, so we started thinking about moving over to the ocean. And then, we asked our largest shareholders, what do they think, what's their advice. And that was virtually all consistent that moving to the ocean was a good idea.

 

The analogy of investors as fish to be baited kind of shows their thinking.

 

Vinod

Somebody are thinking, somebody are acting, and then somebody are thinking AND acting! [ ; - ) ]

[sleepydragon]

It took them so many years to figure this out?! An analyst with 2 years of work experience on wall st would know this. They are either too stupid and ignorant or they are pretending.

 

Posted by Vinod, in the Oaktree Capital topic about KKR, today [here, unedited]:

 

Not related to OAK, but in general to how these private equity managers view investors can be found in this quarter KKR's conf call:

 

When we listed, we had $55 billion of AUM. We now have almost $200 million. Our book value per share was about $6. It's now $14.50. So, this is a much bigger discussion. Our stock price has really just not grown at the same pace as our company. So, we've really spent the last eight years working to sort out why. And if you think back, we've worked on articulating our story and we thought about reporting changes. We went out and tried to find new investors with many of you. We worked with back offices of mutual funds to help them operationalize K-1s. But honestly, after eight years of effort, it's not clear we've made a lot of lasting progress. So, where this is really coming from is we're stepping back and simplifying our thought process about what's been going on.

 

So, the high level is as best we can sort out, over 60% of the capital investing in the U.S. equity markets cannot or will not buy PTPs. And if you think about where flows have been going, it's been going to passive smart beta indices, none of which invest in PTPs. So, in other words, virtually 100% of net flows could not or would not buy us and 60% of existing capital can't buy us. So, we kind of stepped way back and it's no wonder it's been hard.

 

So, it kind of became clear to us that we've been fishing in a small pond with a slow leak and wondering why we weren't catching anything. So then, it was pretty clear there's a big ocean nearby, we had a lot of fish that might like our bait, so we started thinking about moving over to the ocean. And then, we asked our largest shareholders, what do they think, what's their advice. And that was virtually all consistent that moving to the ocean was a good idea.

 

The analogy of investors as fish to be baited kind of shows their thinking.

 

Vinod

Somebody are thinking, somebody are acting, and then somebody are thinking AND acting! [ ; - ) ]