Author Topic: BAM - Brookfield Asset Management  (Read 307426 times)

thepupil

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Re: BAM - Brookfield Asset Management
« Reply #90 on: June 10, 2013, 12:43:07 PM »
In my opinion, the idea was not to reduce their holdings. BPY was formed as the third leg of the tripod of "flagship listed entities" that BAM manages in their three main areas: Property (BPY), Renewable Power (BRP) and Infrastructure (BIP).

BPY was not very tax efficient in terms of distributing value (one reason why the size of the spinoff was a small percentage of BPY's value ~7.5%) and is much more of a "strategic" move that will (hopefully) be a source of low-cost permanent capital for expanding BAM's crown jewel: the asset management business.

It gives Bruce Flatt and co another currency that can be bought when cheap and issued to fund expansion when dear. I would expect BPY to make a BIG acquisition in the multifamily or industrial space to complete the empire (Retail-GGP, Office-BPO, Multifamily-???). Newly issued BPY units will probably be a very important part of that acquisition.



racemize

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Re: BAM - Brookfield Asset Management
« Reply #91 on: June 11, 2013, 08:26:23 AM »
Hey guys, I've just started looking into this one in a bit more depth.  One thing that bothers me on BAM is that they are very sporadic about how they value their long-term results.  For example, in the initial letters (and from what I gather the old Brascan letters) focused on share price appreciation, which I am not a fan of.  Then, they later have a new intrinsic value measurement that they used; however, they are not consistent about showing what the value is or how it changes over time.  For example, there is a nice chart in the 2011 annual report that shows their calculation (and how it was gotten) of intrinsic value, but I didn't find it in the 2012.

For those that follow this company, have you just figured out how to do the adjustments yourselves and recalculate it each quarter/year, or am I missing something obvious?

I also read through valuebygeorge's write-up.  For anyone who has studied this a lot, did you find his analysis on-target?

Thanks very much!

giofranchi

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Re: BAM - Brookfield Asset Management
« Reply #92 on: June 12, 2013, 12:31:21 AM »
Hey guys, I've just started looking into this one in a bit more depth.  One thing that bothers me on BAM is that they are very sporadic about how they value their long-term results.  For example, in the initial letters (and from what I gather the old Brascan letters) focused on share price appreciation, which I am not a fan of.  Then, they later have a new intrinsic value measurement that they used; however, they are not consistent about showing what the value is or how it changes over time.  For example, there is a nice chart in the 2011 annual report that shows their calculation (and how it was gotten) of intrinsic value, but I didn't find it in the 2012.

For those that follow this company, have you just figured out how to do the adjustments yourselves and recalculate it each quarter/year, or am I missing something obvious?

I also read through valuebygeorge's write-up.  For anyone who has studied this a lot, did you find his analysis on-target?

Thanks very much!

Quote
The total return for each Brookfield share was $5.39 in 2012, a 12.4% return on our calculated intrinsic value of the business, in line with our long-term goals. There are two components to this performance: $1.4 billion ($1.94 per share) of funds from operations amounting to approximately a 5% return from cash generated; and a further $2.2 billion ($3.45 per share) or approximately 8% from the overall increase in the value of the equity of the company. Values of real assets generally increased across the board, with a substantial increase in our private equity investments in the housing industry, offset in part by investments impacted by the low natural gas prices.
Q4 2012 Letter

I think BAM has a stated goal of achieving in between 12% and 15% annual increase in the intrinsic value of the business. And at the end of each year they openly comment on what was the actual result for the 12 months just passed.
Then, of course, they keep track on the share performance:
Quote
   Investment Performance
   Brookfield NYSE   Brookfield Intrinsic Value   S&P 500      10 Year Treasuries
1 35%                                12%                        16%                           4%
3 20%                                12%                        11%                           9%
5 3%                                  n/a                           2%                            7%
10 22%                              n/a                           7%                            6%
20 19%                              n/a                           8%                            6%
Q4 2012 Letter

Personally, I would not know how to calculate intrinsic value by myselfÖ how could you know the increase or decrease in value of a port, a railroad, or real estate scattered across the globe?! ÖThatís why I think that to invest in BAM you must trust management. :)

giofranchi
« Last Edit: June 12, 2013, 12:38:21 AM by giofranchi »
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racemize

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Re: BAM - Brookfield Asset Management
« Reply #93 on: June 12, 2013, 06:31:05 AM »
Hi Gio, I agree on needing to trust management, but I need to be sure I am buying at a decent price, e.g., I want to by FFH at ~1 of book, not 2.

giofranchi

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Re: BAM - Brookfield Asset Management
« Reply #94 on: June 12, 2013, 11:10:21 PM »
Hi Gio, I agree on needing to trust management, but I need to be sure I am buying at a decent price, e.g., I want to by FFH at ~1 of book, not 2.

Hi Joel,
Of course you are right! What I actually meant is that, when management says at year end 2012 that fair value has increased to $44.93 from $40.99 at year end 2011, it is very difficult to check if that figure ($44.93) is correct or otherwise. So, either you trust what they say, or you donít. If you trust management, it is plain to see that you now are able to buy something that might go on increasing in fair value 12%-15% annual for 0.77 x what it is actually worth today: so, it is a great bargain and you will invest! Instead, if you donít trust management, you wonít invest no matter what!
The fact that management has more or less $5 billion invested in BAM should provide at least some comfort! :)

giofranchi
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racemize

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Re: BAM - Brookfield Asset Management
« Reply #95 on: June 13, 2013, 05:24:10 AM »
Hi Gio, I agree on needing to trust management, but I need to be sure I am buying at a decent price, e.g., I want to by FFH at ~1 of book, not 2.

Hi Joel,
Of course you are right! What I actually meant is that, when management says at year end 2012 that fair value has increased to $44.93 from $40.99 at year end 2011, it is very difficult to check if that figure ($44.93) is correct or otherwise. So, either you trust what they say, or you donít. If you trust management, it is plain to see that you now are able to buy something that might go on increasing in fair value 12%-15% annual for 0.77 x what it is actually worth today: so, it is a great bargain and you will invest! Instead, if you donít trust management, you wonít invest no matter what!
The fact that management has more or less $5 billion invested in BAM should provide at least some comfort! :)

giofranchi

Gio, I think I should have been more clear--I was actually just looking for where they consistently showed that calculation, e.g., it was not in the 2012 annual report.   I presume the 44.93 figure also came from the q4? 

Personally, I wish they had a chart like Buffett on the front of every annual!

WhoIsWarren

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Re: BAM - Brookfield Asset Management
« Reply #96 on: June 13, 2013, 07:07:11 AM »
Personally, I wish they had a chart like Buffett on the front of every annual!

Racemize, you probably know this, but just in case, BAM changed how they account for the value of their assets in I think 2009 or 2010.  Previously everything accounted for at cost, under Canadian GAAP.  Now under IFRS they mark most assets to market, per the accounting rules, and for assets that aren't m2m they make adjustments to arrive at management's own estimate of intrinsic value.  You can dispute it, but as gio says if you trust them you should be willing to accept their aim is to give a conservative estimate of the worth of the company.

Anyway prior to the move to IFRS the company's 'long-term objective' was two-fold:
- Annual growth in operating cash flow per share (including disposition gains) of 12%
- Cash return on book equity per share of 20%

I just pulled up the 2008 AR and they show their achievements for the prior 5 years.  The 5-year numbers to 2008 were 20% (16% ex. disposition gains) and 26% respectively.  If you pull up the earlier ARs you'll be able to cobble together the company's historic numbers.  I did this at one time and the numbers were well-above targets.

Anyway the point I'm trying to make is that it is not possible to get BAM's historic intrinsic value track record because of the change in accounting treatment.



« Last Edit: September 02, 2013, 01:35:43 AM by WhoIsWarren »

racemize

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Re: BAM - Brookfield Asset Management
« Reply #97 on: June 13, 2013, 07:20:17 AM »
Personally, I wish they had a chart like Buffett on the front of every annual!

Racemize, you probably know this, but just in case, BAM changed how they account for the value of their assets in I think 2009 or 2010.  Previously everything accounted for at cost, under Canadian GAAP.  Now under IFRS they mark most assets to market, per the accounting rules, and for assets that aren't m2m they make adjustments to arrive at management's own estimate of intrinsic value.  You can dispute it, but as gio says if you trust them you should be willing to accept their aim is to give a conservative estimate of the worth of the company.

Anyway prior to the move to IFRS the company's 'long-term objective' was two-fold:
- Annual growth in operating cash flow per share (including disposition gains) of 12%
- Cash return on book equity per share of 20%

I just pulled up the 2008 AR and they show their achievements for the prior 5 years.  The 5-year numbers to 2007 were 20% (16% ex. disposition gains) and 26% respectively.  If you pull up the earlier ARs you'll be able to cobble together the company's historic numbers.  I did this at one time and the numbers were well-above targets.

Anyway the point I'm trying to make is that it is not possible to get BAM's historic intrinsic value track record because of the change in accounting treatment.

Thanks WhoIsWarren, I was aware of the accounting change and the reason for switching over to Intrinsic Value, so I see how it would be difficult for them to put together a nice chart for us.  Perhaps they will be able to with the intrinsic value calculation over time, e.g., like the chart Gio quoted, but they don't post the value every year!

I will go download the brascan letters and see if I can make a long term chart myself, as you suggest.

giofranchi

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nnayyar

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Re: BAM - Brookfield Asset Management
« Reply #99 on: June 18, 2013, 05:40:44 AM »
"Because money won is twice as sweet as money earned."