BAM - Brookfield Asset Management

[John Hjorth]

It seems it got spooked and bucked. I hope nobody got tossed off.

[Uccmal]

What's up with BEP post earnings?

 

I think this is a case where we just need to totally ignore the stock gyrations.  The nature of any of the brookfield subs is to have lumpy results due to the near continuous deal making.  These guys (BEP) are entrenched in an industry that could easily eclipse the size of the oil industry one day. 

 

People worry about the payout ratio.  This will ebb and flow as deals are made, capex is expended, gains are harvested, and so on.  The deals will just keep getting bigger. 

[chrispy]

Agree.

 

One item that jumped out during both BEP and BPY conference calls was that they mentioned investors have shown interest in buying partial and/or majority stakes in assets in order to keep Brookfield on as operators. This is another signal of their ability to operate assets very well

[chrispy]

BBU recorded a quarter in line with expectations. The share price

went up nearly 7% before dropping by about 10% from it's intraday high that may have been from,

 

The stock trades less then a million dollars a day

Broad market moves

Or a few tidbits from the call:

Westinghouse is doing fine but will be seasonal and very lumpy, this was a great quarter though.

Difficulties with the Brazilian water sanitization business (hopefully new government can settle this?)

Project issues with their middle East construction business. They expect to wind the business down sometime next year once these projects are completed.

A new smaller business they are acquiring ran into a development that the owner may have had police filings. Still in development and Brookfield has not committed the funds yet.

 

 

My takeaway is that Westinghouse is a great investment and the lumpiness is going to lead to poor quarterly comparisons, Brazil will hopefully turn around with the election past it, Middle East is a small business and will be over with soon.

 

The charges is in relation to a deal that has not gone through but is always a fear with Brookfield for me::

 

"

Cyrus Madon

 

So let me -- I'm going to leave the BRK question for Peter, who is very, very close to that business. But I do want to comment on OB Jeff we continue to have this business under contract. What has happened is that founder has been charged with some form of proceedings under some form of police proceedings. We don’t know the detail. We are not aware of any related issues at the company or with the company's management. We are still very keen on the industry. We are very keen on the business. But we are working through some structures in light of what happened to the founder. And we can't ultimately get comfortable we will walk away from this transaction but we are hoping we can find a way to make it work. So that’s the comment on OV and I'll turn it over to Peter to talk about BRK.

"

 

[chrispy]

Similar to what Uccmal posted, BIP has lower FFO due to selling their Chilean power asset. They have something like 1.7b under contract or in the works that will juice 2019 to levels greater then 2017 and certainly in excess of this year. They also believe the Brazilian real is near it's lows which will benefit future quarters in relation to today

 

The dividend yield is about at it's historical average for BIP and growth is in the pipeline. This is a fine price to pay I believe.

[John Hjorth]

I don't ride the same day as I saddle with this thingy - I still need to get a better understanding of the whole BAM system on the go [please feel free to call it trial and error method, if you want].

 

From what has been discussed in this topic, and also covered in news releases etc. from BAM & BPY, the GGP deal is to some extent critical to the success of BPY [short/mid term, I think]. In short, it's a large transaction [& bet], and the to-do list is complicated, and long. Add to that the special BPR company structure, which I have tried to dive into today, to get a better understanding of that structure and it's financial standing.

 

I can't find any 2018Q3 10-Q for BPR as of now on the SEC website to study the structure. I can only find this BPR 8-K. [Which by the way is absolutely rubbish to me.]

 

Honestly, is this all we get to look at for this thing called BPR? -I mean, it's a listed entity [for the sake of Christ].

[LongTermView]

From what has been discussed in this topic, and also covered in news releases etc. from BAM & BPY, the GGP deal is to some extent critical to the success of BPY [short/mid term, I think].

 

I agree that GGP is important but I disagree on the short/mid timing. I think it will be a long term project and the redevelopments will be spread out over many years imo.

[John Hjorth]

I agree that GGP is important but I disagree on the short/mid timing. I think it will be a long term project and the redevelopments will be spread out over many years imo.

 

LongTermView,

 

Please don't hang your hat on my personal phrasing here too much [ : - ) ]. I mean, BAM isen't really in the business of postponing to tomorrow, what can be done today. But sure, the GGP deal has long term economic consequenses.

[cubsfan]

From what has been discussed in this topic, and also covered in news releases etc. from BAM & BPY, the GGP deal is to some extent critical to the success of BPY [short/mid term, I think].

 

I agree that GGP is important but I disagree on the short/mid timing. I think it will be a long term project and the redevelopments will be spread out over many years imo.

 

I think they pretty much said that during their Capital Markets Day in September. They like the operations of GGP, but

BAM has the platform to transform GGP since GGP was a retail only operation. BAM brings a different set of skills to

the ballgame to add density and living units to some of their very well located urban locations. The potential for

that type of redevelopment is what BAM brings to the game. BAM is very supportive of the operating capabilities of GGP.

[John Hjorth]

I agree, Mike,

 

But how can we follow the progress [or lack of the same], if we're not furnished full reporting for BPR?

[cubsfan]

I agree, Mike,

 

But how can we follow the progress [or lack of the same], if we're not furnished full reporting for BPR?

 

Sorry John, I misunderstood - that I can't help with.

[John Hjorth]

It's certainly OK, Mike, thanks,

 

Any fellow board member who can contribute here? - Honestly, I'm really confused here.

[Uccmal]

Transcript:

 

https://seekingalpha.com/article/4220083-brookfield-asset-management-inc-bam-ceo-bruce-flatt-q3-2018-results-earnings-call-transcript

 

 

[cubsfan]

Transcript:

 

https://seekingalpha.com/article/4220083-brookfield-asset-management-inc-bam-ceo-bruce-flatt-q3-2018-results-earnings-call-transcript

 

BAM looking to buyback a lot of capital over next 10 years. This management team is great.

 

[vince]

Transcript:

 

https://seekingalpha.com/article/4220083-brookfield-asset-management-inc-bam-ceo-bruce-flatt-q3-2018-results-earnings-call-transcript

 

BAM looking to buyback a lot of capital over next 10 years. This management team is great.

 

I dont quite understand why they havent done that aggressively already.  They preach about the intrinsic value and how growth in value and closing of the gap results in 20 percent compounded returns for 10 years.  And I believe them.....so it really doesnt  make sense to me

[Jerry Capital]

They would prefer the market to close the gap at BPY so they can collect higher management fees (which they don't get I'd they buy the BPY shares themselves)

[John Hjorth]

BAM prefers to hold relatively high cash levels over buying BPY units as of now, to stay flexible going forward.

 

From the letter:

 

... But, while global economies are strong, at some point the strong fundamentals must slow down. With this in mind, we continue to prudently invest our capital, while remaining focused on preparing for this inevitability. ...

 

Please also refer to the description of cash at group level in the BAM 2017 financials.

[ValueMaven]

Another great q...Always impressed w/mgmt...all 5 shareholder letters are very well written and must reads

 

Flatt has been laying out some very interesting valuation on the BAM structure recently...buybacks, incentive fees, divy increase, fee bearing capital up, valuation of the asset mgmt arm etc etc...

[John Hjorth]

Another great q...Always impressed w/mgmt...all 5 shareholder letters are very well written and must reads

 

Flatt has been laying out some very interesting valuation on the BAM structure recently...buybacks, incentive fees, divy increase, fee bearing capital up, valuation of the asset mgmt arm etc etc...

 

Yes, the overall business seems to be in great momentum. Lots of stuff going on here and there all the time. But it's actually very hard to follow in detail, what's going on.

 

My major concern is still the accomplished GGP acquisition with regard to BPY. [Which I suppose also is why both BPY and BPR are so cheap at the moment.]

[ValueMaven]

The 'float' to me generated by BAM's asset management arm (incentive fees and mgmt fee) is more attractive then Berkshire's 'insurance float' as it contains no liability risk on the back-end.  I realize this is a bit of a mute point given the differences in scale etc - but it is worth thinking about over the next 5yr - 10yr as a solid source of cash generation.

 

What do others think?

 

 

[no_free_lunch]

The valuation models I have seen already include the fees, so the 'float' is already considered.

[gokou3]

The 'float' to me generated by BAM's asset management arm (incentive fees and mgmt fee) is more attractive then Berkshire's 'insurance float' as it contains no liability risk on the back-end.  I realize this is a bit of a mute point given the differences in scale etc - but it is worth thinking about over the next 5yr - 10yr as a solid source of cash generation.

 

What do others think?

 

I am quite long in BAM (via PVF.UN) and its LPs, but I have always wondered if the reason for BAM's (and other asset managers like BX) low valuation is their tail risk of bad investment performance.  Specifically, we have seen in recent years of a multi-year performance slump of various asset managers, e.g. Legg Mason, Greenlight, Och-Ziff, etc. which followed by the collapse of their own stock prices and asset outflow.  BAM has been on fire for quite a long time but the market may have priced in the possiblity that they cannot adapt to a cliche black-swam event and things turn out bad for a couple of years.

 

That said, I think one difference between BAM and a typical mutual/hedge fund is that BAM mostly have control of its investees and have many more levers to pull.  As long as they don't put both feet into unfamiliar industries / geographies they should continue to do fine.

 

[vince]

The 'float' to me generated by BAM's asset management arm (incentive fees and mgmt fee) is more attractive then Berkshire's 'insurance float' as it contains no liability risk on the back-end.  I realize this is a bit of a mute point given the differences in scale etc - but it is worth thinking about over the next 5yr - 10yr as a solid source of cash generation.

 

What do others think?

 

I dont understand the comparison to float?  Float is a non interest bearing liability (ideally anyway), whereas mgmt fees and incentive fees are earnings from operations.

[Uccmal]

In two months BAM has bought 7 million shares of BPY: 140 M US in two months on a market cap of around 5 Billion.  Thats 2.8% of the company and they show no signs of slowing down. 

 

At the same time they are buying their own shares: prefs and common.  At a slower rate but still well above any dilution from issuances. 

 

I like a company that does what they say.  I also like a company that buys shares at a discount.  These guys certainly have a good handle on this process unlike 90% of the others out there. 

[vince]

In two months BAM has bought 7 million shares of BPY: 140 M US in two months on a market cap of around 5 Billion.  Thats 2.8% of the company and they show no signs of slowing down. 

 

At the same time they are buying their own shares: prefs and common.  At a slower rate but still well above any dilution from issuances. 

 

I like a company that does what they say.  I also like a company that buys shares at a discount.  These guys certainly have a good handle on this process unlike 90% of the others out there.

 

Dont you think they should be buying back more based on what they claim is their intrinsic value is now and over the next 5 years, in addition to the fact that they have lots of liquidity?