Tuesday, October 23, 2012

Brookfield Office Properties 2

On my other blog I am today writing about the Money Show in Toronto for 2012. I will be putting my notes up as I transcribe them...continue...

I do not own this stock Brookfield Office Properties (TSX-BPO). I started to track this stock because it was on the Dividend Aristocrats List (see indices) and I was not tracking it. . Note that this company is no longer on the Dividend Aristocrats list. This company is own 49% by Brookfield Asset Management Company (TSX-BAM.A).

The insider trading report says that there is minimal insider buying and $5.7M of insider selling. Net insider selling is $5.6M. The company has also been doing some buying back of outstanding shares.

This company not only has options, they have Deferred Units, Restricted Shares and Option Equivalents also. There are a lot of options outstanding, with CEO, CFO and officers having minimal to no shares, but lots of options and options like vehicles. There are a lot of officers with options and option like vehicles. Only Directors have more shares collectively than options.

Reuters shows very little institutional ownership, but NASDAQ says that some 93.3% is held by institutions (including Brookfield Asset Management). It also says that institutional ownership has gone done marginally by 1.8%.

The P/E Ratios have been quite low lately, with 5 year low, median and high median ratios at 4.66, 6.91 and 10.64. The 10 year low, median and high median ratios seems to be more in line with past values and these ratios are 11.76, 14.03 and 17.77. For the last couple of years the EPS have been unusually high. The current P/E ratio is 5.40. By any measure this shows that the stock price is a reasonable one.

I get a Graham Price of $21.98. The 10 year low, median and high median Price/Graham Price Ratios are 0.89, 1.02 and 1.21. The current P/GP Ratio is 0.73 which suggests a relatively low current stock price.

The 10 year median Price/Book Value per share Ratio is 1.87. The current P/B Ratio is 0.85. This new P/B Ratio is only 45% of the 10 year ratio and this low ratio suggests that the stock price is low. Also, when the P/B Ratio is below 1.00, it says that the stock price is lower than the book value.

I should point out that this company switched to IFRS account early (in 2010) and it seems that both earnings and book value have increased quite a bit under these new accounting rules. Since the P/E Ratios, P/GP Ratios and P/B Ratios use earnings and book value, you wonder how good these measures are in determining the current stock price's reasonability.

Only the dividend yield shows a different story. The current dividend yield at 3.50 is lower than the 5 year median dividend yield of 3.57. What you want is a dividend yield higher than the 5 year median year to suggest a good stock price. However, these are close and this would suggest that the stock price is probably reasonable. Recently the dividend yield has been higher than normal. The 10 year median dividend yield is just 2.27%. The stock price hit a high in 2007 and then over the next couple of years it crashed some 75%. The stock price is still some 57% off the highs of 2007.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The vast majority of the recommendations are in the Hold category. The consensus recommendation would be a Hold. I can only find one 12 month target price and that is at $17.00 from an analyst with a Hold recommendation. This implies a 9.09% return with 3.5% from dividends and 5.59% from capital gains.

This stock has come up in some stock screening articles like Value and dividends: Kissing cousins that together can boost your returns. However, my experience is that you have to be very careful about stocks coming up in such screening. You can get duds and you have to carefully investigate each one.

Scotia Capital Sets Brookfield Office Properties Price Target at $19.00 (BPO) from $19.25 on August 7, 2012. See article at Daily Political site.

One analyst with a strong buy said that the company is well managed and has a good yield. Another with a Buy recommendation said that this company will do well when inflation picks up. Another analyst with a buy recommendation said that it is a great company with great assets and that the current price is a good entry point.

I think that the price is reasonable. One objection I have with Brookfield companies is that insiders pay themselves very well. The CEO of this company has options worth some $50M. There are an awful lot of outstanding options, and other option like vehicles under this company.

Brookfield Properties is a leading North American commercial real estate company that invests in premier-quality office properties in high-growth markets driven by financial service, government, and energy tenants. The portfolio is composed of office properties in 12 top U.S. and Canadian markets. Its web site is here Brookfield Office Properties. See my spreadsheet at bpo.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 or StockTwits.


  1. I've got about a hundred shares of this one. I like it for diversification.

  2. This is something new to me about brookfield offices.