Author Topic: BAM - Brookfield Asset Management  (Read 422069 times)

John Hjorth

  • Hero Member
  • *****
  • Posts: 2931
Re: BAM - Brookfield Asset Management
« Reply #1290 on: February 05, 2020, 11:42:40 AM »
So most of the old discussions were on the issue of IFRS consolidation and asset values. Those I'm fine with. Others have noted that BPY sells things regularly above IFRS values and does realize a loss from time to time, so I don't think BAM's accounting of asset values is suspect.

There are 2 things that give me pause:

1) when faced with the statement that BAM's accounting is opaque, most people say "look at the supplemental". The supplemental is mgmt created metrics, and essentially every fraud ever has created a story to drive investors eyes toward these metrics and AWAY from the actual IFRS/GAAP financials. If you don't take it on faith, it's a red flag, NOT BAM being helpful.

2) take BIP:

1) BIP has a 379 page annual report. It takes them more than 1 page per day to tell us what they did in a year.

2) BIP generates FFO from the operations in which it has LP stakes and then some other one offs. We get cash from operations in 2018 they generated $1362mn in cash from operations, and distributed $140mn to the GP, $775mn to other unitholders, $676mn to  non-controlling interest for a total of almost $1.6bn.

Now, BIP also generated $546 mn in 2018 in FFO from JV's and associates. If you read through their annual report they outline that any JV/Associate is structured so that all cash flow generated is swept out UNLESS BAM explicitly agrees to keep the cash in the JV.  They recieved $56mn in dividends.

SO the BIP narrative is that FFO covers the $1.6bn distribution because they generate $546mn of FFO in JV's. However, FFO is not free cash flow. In other words, you MUST trust management that FFO converts to cash and that the cash covers the distributions. We don't know what's in the JV's, but let's take real estate as an example. Towers convert ~90-95% of FFO to AFFO and cash. Office buildings covert about 66% of FFO to AFFO and cash. So how much cash is actually avaliable for BIP depends hugely on what type of assets these are.

If you take BIP's consolidated CFO + distributions from JV's, it empirically does NOT cover the sum of distributions to unitholders, minority interests and the GP.

This is what I mean by "opaque" accounting. The risk is that the off balance sheet JV's don't actually generate teh cash required in which case, BIP is basically a ponzi scheme that relies on taking in cash from LP's and unit issuances in order to pay the distribution. If not that, then at the very least, if BIP can't access the CASH from the JV's because they don't actually generate that much, then if capital markets shut, the structure falls apart and BAM has to ride to the rescue, and you know they're going to take their pound of flesh for doing that.

Again, I'm long BAM, but it concerns me I haven't seen this issue mentioned once and the rebuttal to it is "well you just can't figure it out, look at the metrics management is directing you to look at".

To me, it's pretty evident, that Pete is working quite hard on BAM these days! [ : - ) ] - Great!

- - - o 0 o - - -

Now back to Peter's post quoted above [,which I do not remember to have ever replied to].

I've been caught up in IRL stuff in a period since September / October 2019, and I'm now - gradually - "resurfacing" - and "getting back to "normal"" [at least I think so, right now] here, meant as participation here on CoBF.

So, Peter, please don't take my lack of commentary on your post quoted above as if you for my part were ignored [or, even worse as "just ditched", without commentary].

We've had discussions about complexity versus opacity related to BAM earlier. Pete's quoting of your your post has been an eye-opener for me now, combined with other stuff [,more later below]. Somehow, you managed to bent your stance in neon tubes for me now [now, because I wasn't paying sufficient attention while you posted it.]

There are quiite some other posts recently related to your post, that deserve attention, too [especially the posts by normax and Joel [CoBF member racemize]].

- - - o 0 o - - -

Peter, have your read this book?

- - - o 0 o - - -

Here, we're dealing with financial engineers [former auditors and lawyers, who haven't forgotten their "original merit", actually using their fund of [basic and advanced] professional knowledge very actively].

- - - o 0 o - - -

I'll need all BAM, subs  & sub-subs [BPR] 10-K's to engage here [Last year, I got really p**ssed, because at some point in time I was missing the 10-K for BPR, so it was impossible to make any considerations for BPY also.]
« Last Edit: February 05, 2020, 11:46:16 AM by John Hjorth »
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai


K2SO

  • Newbie
  • *
  • Posts: 36
Re: BAM - Brookfield Asset Management
« Reply #1291 on: February 05, 2020, 12:43:25 PM »
FT on Brookfield's notorious lack of transparency:

Brookfield: inside the $500bn secretive investment firm

https://www.ft.com/content/595a77d0-3867-11ea-a6d3-9a26f8c3cba4


cubsfan

  • Hero Member
  • *****
  • Posts: 1549
Re: BAM - Brookfield Asset Management
« Reply #1292 on: February 13, 2020, 04:44:04 AM »

rkbabang

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 4537
Re: BAM - Brookfield Asset Management
« Reply #1293 on: February 13, 2020, 06:06:56 AM »
3:2 Stock split, 12% dividend increase

https://bam.brookfield.com/press-releases/2020/02-13-2020-115348450

"Brookfield is undertaking the stock split to ensure its shares remain accessible to individual shareholders and to improve the liquidity of the shares."

The split is odd. They are trading at $64, I don't see that as out of reach to individual shareholders.

petec

  • Hero Member
  • *****
  • Posts: 2016
Re: BAM - Brookfield Asset Management
« Reply #1294 on: February 13, 2020, 06:12:47 AM »
3:2 Stock split, 12% dividend increase

https://bam.brookfield.com/press-releases/2020/02-13-2020-115348450

"Brookfield is undertaking the stock split to ensure its shares remain accessible to individual shareholders and to improve the liquidity of the shares."

The split is odd. They are trading at $64, I don't see that as out of reach to individual shareholders.

Agreed. Pointless. But they’ve done it before, and it costs nothing.
FFH MSFT BRK BAM SSW LNG IHG TFG BEG CGT DC/A

vince

  • Sr. Member
  • ****
  • Posts: 496
Re: BAM - Brookfield Asset Management
« Reply #1295 on: February 13, 2020, 01:24:46 PM »
I realize it's kind of silly to complain about Bam's returns but what a mistake it was not to repurchase shares.  And I'm not just playing the 20-20 hindsight game.....I previously posted that they should be aggressively repurchasing shares when the share price was much lower maybe 18 months ago.  I mean does it really make sense to claim every year that the stock is undervalued by 40% and not buyback shares?

Gregmal

  • Hero Member
  • *****
  • Posts: 2912
Re: BAM - Brookfield Asset Management
« Reply #1296 on: February 13, 2020, 01:28:34 PM »
BX did the same thing and the argument was quite simple. Even if they are undervalued, they can make more putting the cash to work in the business. The example from BX was something along the lines of "if they can start a $40B fund and their commitment requirement is 2%, thats 800M in cash that will then earn 1.5% annually in fees." In other words, that $800M generates $600M every year, plus an additional profit cut. Hard to argue there.

ValueMaven

  • Sr. Member
  • ****
  • Posts: 369
Re: BAM - Brookfield Asset Management
« Reply #1297 on: February 13, 2020, 04:11:27 PM »
Awesome quarter and what a year - what great results!! Not a fan of the split - but it is what it is ... would like some aggressive buybacks here - or at least knowing that it something being seriously considered.  Nice job by Flatt re: Partners section too.  I really want to invest in the Renewable C-Corp once that starts trading. 

You really do wonder about Berkshire now - with all of the P/E, direct lending, alternative capital, and BAM etc - buying things; you really wonder how Berkshire can deploy all of that capital. 

Also this German elevator deal is coming down to the wire - which would be massive for BAM ...

Others thoughts?

vince

  • Sr. Member
  • ****
  • Posts: 496
Re: BAM - Brookfield Asset Management
« Reply #1298 on: February 14, 2020, 08:58:10 AM »
BX did the same thing and the argument was quite simple. Even if they are undervalued, they can make more putting the cash to work in the business. The example from BX was something along the lines of "if they can start a $40B fund and their commitment requirement is 2%, thats 800M in cash that will then earn 1.5% annually in fees." In other words, that $800M generates $600M every year, plus an additional profit cut. Hard to argue there.

That is a great point.  However I think they could have still been more aggressive on the repurchases without hindering their ability to invest in their business.

vince

  • Sr. Member
  • ****
  • Posts: 496
Re: BAM - Brookfield Asset Management
« Reply #1299 on: February 14, 2020, 09:02:36 AM »
Awesome quarter and what a year - what great results!! Not a fan of the split - but it is what it is ... would like some aggressive buybacks here - or at least knowing that it something being seriously considered.  Nice job by Flatt re: Partners section too.  I really want to invest in the Renewable C-Corp once that starts trading. 

You really do wonder about Berkshire now - with all of the P/E, direct lending, alternative capital, and BAM etc - buying things; you really wonder how Berkshire can deploy all of that capital. 

Also this German elevator deal is coming down to the wire - which would be massive for BAM ...

Others thoughts?

I wouldnt really want aggressive buybacks at these prices