Q: Hello,
TD believes that BN is only pricing in BIP, BEP and BAM and ascribing no value to BBU, oaktree, insurance and the real estate.
Do you agree? If so, this must be a deal of a century?
TD- After subtracting the market value of BN's stakes in BAM/BEP/BIP, the stock is ascribing negative value to the stake in BBU (~$1.75/share), real-estate (~$20.00/share), insurance (~$2.50/share), and carried interest (~$3.60/share). BN's ~$4bln of annual FCF provides considerable firepower to address the discount, although share buybacks must be weighed against the prospect of growing the franchise. We believe that BN's conviction in the intrinsic value of its stock price is evidenced by ~$750mm of TTM share repurchases and ~ $100mm of share purchases in the open market by the senior executive team.
TD believes that BN is only pricing in BIP, BEP and BAM and ascribing no value to BBU, oaktree, insurance and the real estate.
Do you agree? If so, this must be a deal of a century?
TD- After subtracting the market value of BN's stakes in BAM/BEP/BIP, the stock is ascribing negative value to the stake in BBU (~$1.75/share), real-estate (~$20.00/share), insurance (~$2.50/share), and carried interest (~$3.60/share). BN's ~$4bln of annual FCF provides considerable firepower to address the discount, although share buybacks must be weighed against the prospect of growing the franchise. We believe that BN's conviction in the intrinsic value of its stock price is evidenced by ~$750mm of TTM share repurchases and ~ $100mm of share purchases in the open market by the senior executive team.
5i Research Answer:
We agree that the value of the company is worth more than the current trading price and the stock is attractive today. It is aggressively buying back stock so at least the company believes in its future. It does own real estate, but investors' fear of this exposure is likely overblown. It has a massive amount of capital available for deployment and as it makes deals we would expect investor interest to increase.