Thursday, August 18, 2011

Brookfield Asset Management

I do not own this stock (TSX-BAM.A). One thing pops out on the financials for this company for 2010 and that is that values look much better under the new accounting rules of IFRS. This is probably why this company switched to the new accounting rules before they needed too. The other thing is that under these new rules, the financial statements for 2009 shows an earning loss, $1.54 rather than positive earnings of $0.72 that they originally reported in 2009.

I did not change my spreadsheet for 2009. I have to have a compelling reason to do so. I know that lots of sites revise their financial statements when companies do so, but I tend not to. I know that this might help compare the last two years, but I look at the last 10 years, and no one revises their statements on the new basis for the last 10 years.

I find an interesting thing for this company is that it has changed its name a number of times. In the 1980’s it was Hees International, in 1990’s it was Edperbrascan and in the 2000’s it was Brascan. These are the ones I know about. However, the Wikipedia entry does not give this history.

First of all, dividends are paid in US dollars. For a Canadian, that means that dividend payments can fluctuate. In Canadian dollar terms, the 5 and 10 year growth in dividends is 11.2% and 5.75% per year, respectively. However, dividends have not changed since 2008 in US$, but they have been decreasing in CDN$ as our currency has been strengthen against the US$. For Canadians, dividend decreased by 12.5% in 2009 and by 5% in 2010. They are up over the past 5 years as they increased 34% in 2008.

Total returns over the past 5 and 10 years have been about 6% and 20% per year, respectively. The dividend portion of this total return has been at about 1.8% and 3% per year, respectively. Dividend yields have been higher in the past than they are today. Today, they are relatively low at around 1.81%.

Growth in revenue, cash flow and book values over the past 5 and 10 years have been good in both US$ and CDN$ terms. For example, revenues have grown around 15% and 22% in CDN$ over the past 5 and 10 years. Over the same period, cash flow has grown around 20% per year over both these time periods.

The growth in earnings has not been as good. The 5 and 10 year growth in earnings per share (EPS) is -6% and 8.7% per year, respectively. The main problem with EPS is that they have fluctuated in both CDN$ and US$.

As far as Debt Ratios go, the Liquidity Ratio has always been good and it is currently at 1.95. The Asset/Liability Ratios is currently good at 1.64, but the 5 year median is 1.32 and the 10 year median is 1.29, both much lower and not so hot. Both the Leverage Ratio at 5.47 and the Debt/Equity Ratio at 3.34 are high, but this is rather typical for this sort of company. Both these last ratios are lower than the 10 year averages of 6.11 and 4.80.

For this company, the Return on Equity for 2010 at 50% is much higher than it has been in the past. The 5 year median ROE is 22.2%. This company seems to have increased their net income also for the first 6 months of this year and this has increased the ROE to 56% for the 12 months ending 30 June 2011.

I bought this company as Hees International in 1987, 1988, 1989 and 1990. I sold it has Edperbrascan in 1999. I made a return of 3.69% per year. I felt it was going nowhere, so I sold. I am not currently interested in owning it again, but I am still tracking it.

This Canadian Asset Managing company invests in and operates a variety of assets on its own behalf as well as co-investors. It is focused on property, power and infrastructure assets. It operates in Canada, US and internationally. The subsidiaries of the Company are Brookfield Homes Corporation, Brookfield Properties Corporation, BPO Properties Limited, Multiplex, Brookfield Power Inc., Great Lakes Hydro Income Fund, Brascan Brasil, S.A., Brascan Residential Properties, S.A. and Brookfield Investments Corporation. Partners Ltd owns 17%. Its web site is here Brookfield. See my spreadsheet at bam.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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