Berkshire Hathaway Book Value and Intrinsic Value continue to grow slowly and steadily. At 4Q2017 Book Value per BRK.B share is $141 and Intrinsic Value projected stands at $200 per BRK.B share thanks to the reduced corporation tax rate in US.
Berkshire Hathaway value can be derived as a sum of parts based on Equity Investments per share + Cash and Fixed Income securities per share + Subsidiary company value per share. As of 2017 year end Equity Investments (Including Kraft Heinz) total $196B which equates to close to $80 per share. The cash position and fixed income securities at year end is $116B which equates to $47 per share. Berkshire private owned investments including Insurance, BNSF Railway, BH Energy, Manufacturing and Retailing companies continue to perform well. BRK Insurance float increased to $115B which is $46 per share in float although due to major events the insurance division generated a net loss for the year. Increased market share and premiums imply likely profits in next few years assuming no major catastrophe events. We can expect BRK to generate $30B in annualized cash earnings in 2018 and beyond with possible growth as the $116B net cash is invested productively.
We expect 2018 year end BRK.B Book Value to be $155 and Fair Value to be in the range of $215 to $225. We expect 2022 year end Fair Value per share to range between $275 to $350. This is a good return for a conservatively run company with businesses with moderate exposure to technology disruption.
Read Berkshire 2017 Annual Report for further details.
Saturday, February 24, 2018
Brookfield Continues to Compund Wealth
Brookfield Asset Management (BAM) Continues to Compund Wealth at a steady pace.
Brookfield Assets per share Excluding Corporate Level Debt and Preferred Shares increased to $25. At a recent price of $39 this implies $14 value for Asset Management Franchise. This is a significant discount to the intrinsic value which has $1.5B annualized Fee Revenue and $1B aanualized Target Carried Interest and has significant growth potential.
BAM Fee Bearing AUM has increased from $77B in 2013 to $126B in 2017 which is a 13% CAGR. In the mean time Fee Related Earnings have increased from $300M in 2013 to $896M in 2017 which is a 31% CAGR. With Brookfield expected to raise flagship funds in RealEstate and PrivateEquity in 2018 and new Infrastructure Fund in 2019 it is very much feasible to grow the Fee Bearing AUM to $200B over the next 5 years. This would imply Fee Related Earnings could be in range of $1.5B to $2.0B range annualized depending on margin improvement potential. There will also be valued ascribed to Carry from 2022 onward as past funds mature.
Consistent growth in Net Invested Capital from $25 per share in 2017 to $40 per share in 2022 is feasible as BIP, BPY, BEP, BBU continue to grow the business through organic investments, new acquisitions and capital recycling.
Acquisition of GGP by BPY if closes at a reasonable valuation there is more upside potential.
See 4Q2017 BAM Results in detail.
Estimated BAM Fair Value by 2018 end is $50 per share with buy under price recommended at $39.
Estimated BAM Fair Value by 2022 end is $75+ per share.
Brookfield Assets per share Excluding Corporate Level Debt and Preferred Shares increased to $25. At a recent price of $39 this implies $14 value for Asset Management Franchise. This is a significant discount to the intrinsic value which has $1.5B annualized Fee Revenue and $1B aanualized Target Carried Interest and has significant growth potential.
BAM Fee Bearing AUM has increased from $77B in 2013 to $126B in 2017 which is a 13% CAGR. In the mean time Fee Related Earnings have increased from $300M in 2013 to $896M in 2017 which is a 31% CAGR. With Brookfield expected to raise flagship funds in RealEstate and PrivateEquity in 2018 and new Infrastructure Fund in 2019 it is very much feasible to grow the Fee Bearing AUM to $200B over the next 5 years. This would imply Fee Related Earnings could be in range of $1.5B to $2.0B range annualized depending on margin improvement potential. There will also be valued ascribed to Carry from 2022 onward as past funds mature.
Consistent growth in Net Invested Capital from $25 per share in 2017 to $40 per share in 2022 is feasible as BIP, BPY, BEP, BBU continue to grow the business through organic investments, new acquisitions and capital recycling.
Acquisition of GGP by BPY if closes at a reasonable valuation there is more upside potential.
See 4Q2017 BAM Results in detail.
Estimated BAM Fair Value by 2018 end is $50 per share with buy under price recommended at $39.
Estimated BAM Fair Value by 2022 end is $75+ per share.
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