spark411 Posted January 9, 2018 Share Posted January 9, 2018 Does anyone have a good breakout of the valuation of BAM? I'm trying to sort out how much the value is from the asset management business and how much of the value is the underlying holdings of it's subsidiaries like BPY, BIP, BEP, etc. Thanks in advance. Link to comment Share on other sites More sharing options...
chrispy Posted January 9, 2018 Share Posted January 9, 2018 This may have been posted before, but here is a good place to start: Brookfield Asset Management: Value Growth Over Next 5 Years https://seekingalpha.com/article/4112673?source=ansh Link to comment Share on other sites More sharing options...
Uccmal Posted January 9, 2018 Share Posted January 9, 2018 Would appreciate some help understanding valuation of this company and some of its subsidiaries. Brookfield Asset Management BAM.A: PE ratio is 30, BV is 34 (P/B is 1.6). 50% debt to capital load. It appears on the surface to be overvalued by these metrics. I like the business a lot, but why should I buy it now? Brookfield Business Partners BBU.UN: PE ratio is 75, BV is $60 (P/B is 0.78). 37% debt to capital load. Better value??? Brookfield Infrastructure Partners BIP.UN: PE 36, BV 19.32 (P/B is 2.84). 44% debt to capital load. Very overvalued? I'm sure I'm oversimplifying everything here and I love the underlying business, but would it not be a risk going into a market correction given these values? With the exception of BBU.UN, they all seem overvalued (assuming my values are correct...) Thanks! Its hard to say. Other board members and I were discussing this privately when I was building my position in BAM.a in 2017. These companies are going to grow alot in the next few years, and I am sure there will be pullbacks. But I bought Bep.un at 75% of todays price (1.5 years ago), and Bam.a 6% cheaper (through last year). I suppose it depends on when a pull back occurs. If its tomorrow I will be underwater. If it goes up 30% from here and pulls back 20% I wont notice. I may buy more. Right now I am not adding because I have a sizable position, amd can wait to add more. I may edit this post because my 8 yr. old is bugging me and I cant concentrate. Link to comment Share on other sites More sharing options...
villainx Posted January 9, 2018 Share Posted January 9, 2018 Seems like it wouldn't be hard to bring that expertise in house via hiring... After all, paying a team $10-20m a year is nothing if they can put billions to work. It's one of the reason BAM and their various subs are worthwhile investment options. Not only operational expertise, but a lot of experience working in various governmental, regulatory, political, etc situations. The scale of the real asset purchases is likely something you want to be fairly certain you can pull off profitably. But with regards to partnering with BAM, BRK partners with 3G. If BAM ever needed BRK's backing, seems like a way in. But BAM's approach is likely more conservative/value oriented/long term - and they've seem to be okay with getting the capital they need. Link to comment Share on other sites More sharing options...
EricSchleien Posted January 9, 2018 Share Posted January 9, 2018 Would appreciate some help understanding valuation of this company and some of its subsidiaries. Brookfield Asset Management BAM.A: PE ratio is 30, BV is 34 (P/B is 1.6). 50% debt to capital load. It appears on the surface to be overvalued by these metrics. I like the business a lot, but why should I buy it now? Brookfield Business Partners BBU.UN: PE ratio is 75, BV is $60 (P/B is 0.78). 37% debt to capital load. Better value??? Brookfield Infrastructure Partners BIP.UN: PE 36, BV 19.32 (P/B is 2.84). 44% debt to capital load. Very overvalued? I'm sure I'm oversimplifying everything here and I love the underlying business, but would it not be a risk going into a market correction given these values? With the exception of BBU.UN, they all seem overvalued (assuming my values are correct...) Thanks! Partners Value Investments LP can be purchased at double digit discounts (at times) and the majority of their book value is in BAM stock. It's also levered up with preferred stock. Units are thinly traded as about 90% of the float is owned by BAM management. However, if you are able to get an order in (with patience) and double digit discounts to NAV (I've seen it near 20% before), and are willing to wait a few years, you should do even better than if just owning the common in that scenario. As for valuation of BAM stock -- I'd recommend first checking out their investor presentations. They do a pretty good job on explaining on they value their company and their estimates tend to be on the conservative side. Link to comment Share on other sites More sharing options...
John Hjorth Posted January 9, 2018 Share Posted January 9, 2018 Is BAM.A the right ticker for toronto ? dutchman, BAM Annual Report 2016, p. 172 is the place to read. Link to comment Share on other sites More sharing options...
no_free_lunch Posted January 9, 2018 Share Posted January 9, 2018 Partners Value Investments LP can be purchased at double digit discounts (at times) and the majority of their book value is in BAM stock. It's also levered up with preferred stock. Units are thinly traded as about 90% of the float is owned by BAM management. However, if you are able to get an order in (with patience) and double digit discounts to NAV (I've seen it near 20% before), and are willing to wait a few years, you should do even better than if just owning the common in that scenario. As for valuation of BAM stock -- I'd recommend first checking out their investor presentations. They do a pretty good job on explaining on they value their company and their estimates tend to be on the conservative side. Right now it looks like they are trading at a 20% premium to book (using Sept 30 book). Is that really a good deal at these prices? I know you say to wait for a double discount but.. that's not where it's at. Link to comment Share on other sites More sharing options...
John Hjorth Posted January 9, 2018 Share Posted January 9, 2018 Seems like it wouldn't be hard to bring that expertise in house via hiring... After all, paying a team $10-20m a year is nothing if they can put billions to work. Shane & villainx, Mr. Flatt and his management team aren't - and haven't become - rich just because they are good at what they are doing. BAM Annual Report 2016, p. 155: 2016YE outstanding shares: 958,168,417. 2016YE unexcersised options etc.: 43,798,733. 2016YE total diluted shares: 1,001,967,150. Link to comment Share on other sites More sharing options...
chrispy Posted January 10, 2018 Share Posted January 10, 2018 There was talk about carried interest. This is from the q3 2017 letter: " It is important to understand that fund profit, which drives carried interest, in a fund lifecycle is typically generated in three stages. In the early years, the fund generates minimal carried interest while investments are identified and capital is being deployed. At the mid-point of the fund lifecycle, capital has been fully deployed, value is being created and the fund assets should be generating a return above the preferred return. At this point the pace of carried interest generation accelerates. In the later stages the fund will continue to generate carried interest, albeit at a decelerated rate, until all remaining assets are sold and the fund is wound up. Looking forward, carried interest should become an increasingly larger part of our asset management earnings profile. While we have $41 billion of carry eligible capital at September 30, only 59% has been deployed, and a substantial portion is within funds that are of relatively recent vintages. Accordingly, our overall carry profile is still within that early stage. We expect generated carried interest to increase as we deploy the remaining dry powder, and our operational improvements and asset repositionings take hold. While we generate carried interest throughout the life cycle of the fund, we defer recognition in FFO until the carried interest is no longer subject to clawback. This is when the preferred return has been achieved through sales, cash has been paid and there is no significant uncertainty remaining. We do, however, report to you each quarter the amount of carry generated within our funds based on investment performance to date. We expect to realize about 60% of the potential carried interest within four to seven years and based on current funds in place we expect to earn $8 billion over the next 10 years. As an example, the recent sale of a European industrial real estate business, from one of our real estate funds, generated $300 million of carried interest. Given that we do not book carry until the end of life of a fund, we will not recognize this carried interest in our results, as it is still subject to clawback. Despite this, it is an “unrealized asset” and this puts us well on our way to realizing substantial carried interest from this fund. " Link to comment Share on other sites More sharing options...
villainx Posted January 10, 2018 Share Posted January 10, 2018 Mr. Flatt and his management team aren't - and haven't become - rich just because they are good at what they are doing. Was this intended to be a criticism of management? Link to comment Share on other sites More sharing options...
John Hjorth Posted January 10, 2018 Share Posted January 10, 2018 I was just trying to place some factual counterweight & mild pushback on Shanes post about a management compensation of 10 - 20 M, and giving my own confirmation bias about BAM some massage. I haven't made any calculations or studied it further, but to me it is evident that the total compensation to the BAM management team is in a different range. Link to comment Share on other sites More sharing options...
Shane Posted January 10, 2018 Share Posted January 10, 2018 Hi John, I pulled $10-20m out of thin air, totally hypothetical. My line of thinking was that if Berkshire Hathaway Energy has a team capable of analyzing the deals already (they have a strong M&A track record), it may be as easy as bringing in a small team to fill in the gaps they have operationally. No idea what it would cost to lure them away, maybe $20m a year for a team of 4-5? I was just trying to illustrate that a good team would be well worth the investment if they can put billions to work. Greg Abel's team are already working on tons of deals in the utility space, is a toll road/port that much different? Link to comment Share on other sites More sharing options...
cubsfan Posted January 10, 2018 Share Posted January 10, 2018 I think you have a totally different issue when you are dealing with different countries, tax laws, regulatory frameworks, etc , when it comes to establishing operations in these geographies. BAM has that infrastructure in addition to the operational expertise. Berkshire doesn't - and I don't thing they want to, unless all the management is in place. Link to comment Share on other sites More sharing options...
Shane Posted January 10, 2018 Share Posted January 10, 2018 Cubsfan - good point. Maybe BHE already looks at some less traditional infrastructure in North America and just hasn't come across an interesting deal. BAM has been public that they see few deals in the US. Link to comment Share on other sites More sharing options...
chrispy Posted January 10, 2018 Share Posted January 10, 2018 Bam and all funds are down 3%ish... Small and probably a blip on the radar but is this what the market thinks of Brookfield if interest rates rise? Gets back to the earlier discussion on inflation Link to comment Share on other sites More sharing options...
John Hjorth Posted January 10, 2018 Share Posted January 10, 2018 Bam and all funds are down 3%ish... Small and probably a blip on the radar but is this what the market thinks of Brookfield if interest rates rise? Gets back to the earlier discussion on inflation Yes, chrispy, I've noticed that, too. I've started charting SAN vs BAM daily, to decide when to start doing a roll gradually. Approx. 8 percent relative change to the good side for me alone since the beginning of the year. [bAM down relative to SAN]. Link to comment Share on other sites More sharing options...
John Hjorth Posted January 10, 2018 Share Posted January 10, 2018 Hi John, I pulled $10-20m out of thin air, totally hypothetical. My line of thinking was that if Berkshire Hathaway Energy has a team capable of analyzing the deals already (they have a strong M&A track record), it may be as easy as bringing in a small team to fill in the gaps they have operationally. No idea what it would cost to lure them away, maybe $20m a year for a team of 4-5? I was just trying to illustrate that a good team would be well worth the investment if they can put billions to work. Greg Abel's team are already working on tons of deals in the utility space, is a toll road/port that much different? So, basically, I think we agree, Shane. BAM management is - relatively - cheap - to us, as investors, because they appear to be good at what they are doing, combined with the scale of BAM in general. ["relativety - cheap" here in the meaning like "not Bigliari like", as an example]. The management options are a condition, that is, a condition for us for investing in BAM. This condition should be considered by us individually. However we just need to try to stay factual with numbers here on CoBF. That does not in any way guarantee against screw ups. Just look up my post a couple of days ago in the BAC topic about the BAC DTAs, where I ended up in the ditch in my efforts for calculating a number that was already out in open air from the company. Link to comment Share on other sites More sharing options...
cubsfan Posted January 10, 2018 Share Posted January 10, 2018 Bam and all funds are down 3%ish... Small and probably a blip on the radar but is this what the market thinks of Brookfield if interest rates rise? Gets back to the earlier discussion on inflation Well it's only one day in the markets. Longterm, future earnings look pretty good for BAM, when you examine the important factors like carried interest, buildup in committed bookings that turn to revenue, length of contracts, increased fee revenue, and funds raised. Those are going to carry the day in the long run. Short term, interest rates will make some nervous. Link to comment Share on other sites More sharing options...
villainx Posted January 10, 2018 Share Posted January 10, 2018 I was just trying to place some factual counterweight & mild pushback on Shanes post about a management compensation of 10 - 20 M, and giving my own confirmation bias about BAM some massage. I haven't made any calculations or studied it further, but to me it is evident that the total compensation to the BAM management team is in a different range. No problem. I follow the mainstream media's account of BAM and Flatt fairly closely, and compensation (high, low, fair or not) has not - to my memory - been an issue. I like the company and management, but always welcome any criticism or closer look. The few things to me is that it seems the board is fairly independent, and otherwise have no real motivation to enrich current management, other than for performance reason. And ... I guess Flatt was not part of the long standing Brascan/BAM insider machine (which I always seem to be think there is one), and had to perform his way to the top. I imagine Flatt like Michael J Fox in whatever romantic comedy it was where he was some kind of corporate whiz kid and had to convince the board/investors to help him. BAM before Flatt was very different, and he rose up and led a complete transformation. I give him the benefit of the doubt - in terms of compensation - because he likely had to chart and prove it to management/board/long time stakeholders. But again, level of compensation is significant with regards to whether to invest or not in a company like BAM. Link to comment Share on other sites More sharing options...
John Hjorth Posted January 11, 2018 Share Posted January 11, 2018 I was just trying to place some factual counterweight & mild pushback on Shanes post about a management compensation of 10 - 20 M, and giving my own confirmation bias about BAM some massage. I haven't made any calculations or studied it further, but to me it is evident that the total compensation to the BAM management team is in a different range. No problem. I follow the mainstream media's account of BAM and Flatt fairly closely, and compensation (high, low, fair or not) has not - to my memory - been an issue. I like the company and management, but always welcome any criticism or closer look. The few things to me is that it seems the board is fairly independent, and otherwise have no real motivation to enrich current management, other than for performance reason. And ... I guess Flatt was not part of the long standing Brascan/BAM insider machine (which I always seem to be think there is one), and had to perform his way to the top. I imagine Flatt like Michael J Fox in whatever romantic comedy it was where he was some kind of corporate whiz kid and had to convince the board/investors to help him. BAM before Flatt was very different, and he rose up and led a complete transformation. I give him the benefit of the doubt - in terms of compensation - because he likely had to chart and prove it to management/board/long time stakeholders. But again, level of compensation is significant with regards to whether to invest or not in a company like BAM. villainx, I'm really trying not to be rude here. The first emphasize of mine in your post, ref. above: It is all about variant perceptions, that make the wheels go around here on CoBF. This is what differs CoBF from everything else out there. So please, let's analyze this *thing* in cooperation with the use of available sharing here on CoBF. [the *thing* that nobody else has paid attention to]. The second emphasize of mine in your post, ref. above : I have read somewhere [i don't have the specific source at hand right now], that Mr. Flatt did use leverage - a lot of it - to gain effective control of BAM, with his team. I will find my source and post it here. And again, don't guess, please. Link to comment Share on other sites More sharing options...
racemize Posted January 11, 2018 Share Posted January 11, 2018 https://stayrichblog.wordpress.com/2017/05/02/profile-of-brookfield-and-bruce-flatt/ Link to comment Share on other sites More sharing options...
villainx Posted January 11, 2018 Share Posted January 11, 2018 The second emphasize of mine in your post, ref. above : I have read somewhere [i don't have the specific source at hand right now], that Mr. Flatt did use leverage - a lot of it - to gain effective control of BAM, with his team. I will find my source and post it here. And again, don't guess, please. I wouldn't think you are rude. I'm here to get investment help, so I appreciate any insight. I don't have any defense for your first emphasis, as my investment style is second hand, probably shoddy analysis - that would never be up to CoFB standards. I go more with feel, but dearly appreciate and learn from more rigid dives. In regards to your second emphasis, I have never heard that. Would like to hear more. I don't mean to offer my guesses as proof, but it's more to test my guesses until I learn more. Link to comment Share on other sites More sharing options...
chrispy Posted January 25, 2018 Share Posted January 25, 2018 They are trying to monetize their graftech gains: Brookfield-Backed GrafTech Files for IPO https://www.wsj.com/articles/brookfield-backed-graftech-files-for-ipo-1516384344 Link to comment Share on other sites More sharing options...
Jerry Capital Posted January 31, 2018 Share Posted January 31, 2018 Apologies if this has been posted before. It is from 2013 but this for lack of a better word, "short case", may help you understand $BAM http://sirf-online.org/2013/03/11/paper-world-of-brookfield-asset-management/ Link to comment Share on other sites More sharing options...
villainx Posted January 31, 2018 Share Posted January 31, 2018 Apologies if this has been posted before. It is from 2013 but this for lack of a better word, "short case", may help you understand $BAM http://sirf-online.org/2013/03/11/paper-world-of-brookfield-asset-management/ This comes up now and then, and has already upthread. But aside from some folks finding BAM confusing organizationally to begin with, the more nefarious claims have - yet - to be born out. Link to comment Share on other sites More sharing options...
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