BAM - Brookfield Asset Management

[Packer16]

IMO if the amount of shares spun-off to make the total value of LPs and % of the total value of BAM less than 10%, then you are talking about less than a 2 to 3% discount (20 to 30% discount on 10% total value) which would be de minmus for me.  I believe even the discussion of a plan to do this by management would reduce the discount.

 

Packer

[John Hjorth]

From an accounting perspective, BAM buying BPY units as recently taking place, is accretive to book value per BAM share. Minority interests are being bought out below BPY book value per BPY unit by the use of BAM cash [not BAM stock], from the perspective of BAM consolidated financials.

[Spekulatius]

From an accounting perspective, BAM buying BPY units as recently taking place, is accretive to book value per BAM share. Minority interests are being bought out below BPY book value per BPY unit by the use of BAM cash [not BAM stock], from the perspective of BAM consolidated financials.

 

Are you sure about this? Why would buying BPY be accretive to BAM’s book value, unless BOY goes up in value of course and is valued at market.

[John Hjorth]

Yes, I'm sure - dead sure, Spekulatius,

 

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Again, this is from an accounting perspective, not an IV perspective. [important to note!]

 

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BPY is not consolidated by BAM based on market value into BAM consolidated financials, instead the consolidation based on book values - "line by line", from BPY's book balance sheet.

 

That also means that minority holders of BPY [from a BAM perspective] in the consolidated BAM balance sheet are booked at book value.

 

Today, BPY closed at USD 19.94, while BPY equity per unit at End2018Q2 was 31.23 [p. 13].

 

Now where would you post this gain, if you were a BAM group accountant? - There are only two feasible answers: P/L or comprehensive income.

[Spekulatius]

 

Today, BPY closed at USD 19.94, while BPY equity per unit at End2018Q2 was 31.23 [p. 13].

 

Now where would you post this gain, if you were a BAM group accountant? - There are only two feasible answers: P/L or comprehensive income.

 

Ok, understood. BPY trades below book value. That makes sense.

[John Hjorth]

Ok, understood. BPY trades below book value. That makes sense.

 

Actually, I was just trying to be straight here, from an accounting perspective.

 

- Some days, I speculate if BAM is actually trading at a "bloat discount" [ : -) ]

[Spekulatius]

I don’t want to go off tangent, but if you like infrastructure, you can buy some of these assets fairly cheaply currently, without the additional layer of financial engineering (not meant in a negative sense) that BAM adds in.

I own ENB (one of my largest positions ), NGG, PPL (the latter two are US/ British utilities) WMB and KMI in this space. except, WMB, they are all buys, IMO. The first 3 all yield above 6%. You get paid well to wait.

[ValueMaven]

I really like getting my dividends from BAM (which I reinvest back into BAM).

 

“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”

–John D. Rockefeller

[OnTheShouldersOfGiants]

Can someone explain the large disposition on the 27th?

 

https://www.canadianinsider.com/node/7?menu_tickersearch=bpy

[John Hjorth]

There is a SC 13D/A of September 19^th 21^st 2018 filed by PBY at SEC that ties up nicely on daily basis with the reported figures already linked to here. Perhaps the next one will shed some light on this particular transaction.

 

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Edit: Fixed date.

[ValueMaven]

Anything below $41 - $42 currently is a steal here.  I bought more last week

[chrispy]

Agree and I did as well.

[Uccmal]

Agree and I did as well.

 

I would but my combined Bam, bip, bpy, and bep holdings make up 25% of my total portfolio.  Unless it gets real cheap I am fully loaded. 

 

So lets hope Bruce doesn't have any dangerous or illegal hobbies. :-). 

[chrispy]

BBU is valued at 5.2B and should be approaching 1B in EBITDA over the next year or so. Their income stream has become much more diversified, businesses are profitable and big players in their respective industries, they have continuous deal flow, and BBU participates in many deals that are significantly greater than a company their size can usually participate in

[Spekulatius]

BBU is valued at 5.2B and should be approaching 1B in EBITDA over the next year or so. Their income stream has become much more diversified, businesses are profitable and big players in their respective industries, they have continuous deal flow, and BBU participates in many deals that are significantly greater than a company their size can usually participate in

 

Their enterprise value is $12.5B roughly so with  $1B EBITDA, they seem fairly valued. New deals will require new equity and debt, so it all depends on how they buy and how they manage the assets. increasing size alone is good for BAM, but not necessarily for BBU limited patterns.

[vince]

BBU is valued at 5.2B and should be approaching 1B in EBITDA over the next year or so. Their income stream has become much more diversified, businesses are profitable and big players in their respective industries, they have continuous deal flow, and BBU participates in many deals that are significantly greater than a company their size can usually participate in

 

Their enterprise value is $12.5B roughly so with  $1B EBITDA, they seem fairly valued. New deals will require new equity and debt, so it all depends on how they buy and how they manage the assets. increasing size alone is good for BAM, but not necessarily for BBU limited patterns.

 

Now that is a great post!!

[chrispy]

Good point about EV.

 

With regards to issuing debt or equity and how the deals work out, is that not true for most companies? BBU is the only LP who's kickback to BAM is based on share price. It seems like that aligns their interest better with common shareholders.

 

I appreciate the feedback.

[Spekulatius]

Good point about EV.

 

With regards to issuing debt or equity and how the deals work out, is that not true for most companies? BBU is the only LP who's kickback to BAM is based on share price. It seems like that aligns their interest better with common shareholders.

 

I appreciate the feedback.

 

Yes, it is absolutely true that it all depends on the quality of deals and how the assets acquired are managed. I just wanted to point out the EV and the fact that funds need to be raised , because I think mentioning $1B in EBITDA and  $5.2B in market cap just by itself is misleading.

 

I mentioned this before, but I believe the real entity to own is BAM, because they can “skim the top” without providing capital. That’s the beauty of the GP/ LP structure.

[ValueMaven]

What do others pay for BAM's Foreign Security Withholding on Stock Dividends??

 

I have very limited knowledge of this topic

[chrispy]

The EV comment was well taken and not something I had considered in judging its evaluation.

 

My view is that if one is to invest in Brookfield, BAM is a must own. But, due to Mr market, one can find bargains here and there in the LPs. For instance BIP dropped quite a bit and I believe was at a great price in the high 30s. I also share the view that others have the BIP is a compounder. BBU may also be and currently has very little following relative to the others (also low volume, don't know if that means anything)

[Spekulatius]

What do others pay for BAM's Foreign Security Withholding on Stock Dividends??

 

I have very limited knowledge of this topic

 

Should be 15% in a taxable account in the US and zero in an IRA. At least that’s how ENb works for me and I don’t see why BAM should be any different. Anyways, BAM dividend yield is so low, they it hardly matters.

[vince]

Anyone have a handle on whether KKR is a good business and what it is worth.  Seems like they have a similar business model tp bam an d look even cheaper.  Any analysis would be greatly appreciated

[Packer16]

You need to take a look at BBU on a proportionate not consolidated basis.  If you do net debt is only $100m.  The EV to EBITDA is closer to 10x with a current EBITDA of $570 with a goal of increasing EBITDA to $900m to $1b over the next few years.  BBU buys companies in states of distress so there is typically a pick-up in EBITDA over time.  At the target BBU is reasonably priced.  BBU also has an after fee target rate of return of 15 to 20%.  (see investor day presentation)

 

As to BAM, they do hold the AM but it only represents 33 to 45% (depending upon how you value the AM) of its total asset value.  The other assets are minority interests in the partnerships whose value is discounted by the market.  The discount will not go away unless they spin-off these stakes.  So from a growth perspective BAM is a weighted average across all their platforms and the growth rates in the fees.  I would not be surprised that the growth of BIP & BBU would be higher than BAM, which is what has happened historically.  The real winners from the BAM fees are the employees as they get a more pure exposure to BAM's fee growth. 

 

Packer

[apparat]

I was following along the discussion earlier in the thread - did you get a response as to why BAM management would prefer to keep the current structure without spinning off their remaining stakes in BBU, BIP etc?

[sdev]

What's up with BEP post earnings?