Facebook (FB) Slowing Growth Could Lead to Better Investing Entry Point in 2019.
FB revenue growth might slow from 40% to the 20-30% growth as the company matures, user growth stalls (in US & Europe) and expenses ramp up due to increased spending on Investment in Security and Regulations.
A price per share of $150 when forward EPS is projected to be $9 offers an appealing risk reward in our opinion. FB 2018 EPS projected is $7+ and currently shares trade between $165 to $185.
Tuesday, August 14, 2018
Brookfield Business Partners Update - Westinhouse Purchase & Graftech Monetization
Brookfield Business Partners (BBU) Closes Westinhouse Purchase which Equity Investment of $420M. This investment over the next 3-5 years has the potential to be a 5 to 10 bagger if Brookfield can expand the service offering and add enhance customer service and broaden the portfolio with synergistic acquisitions.
BBU has started monetizing the Graftech investment which has been a 10 bagger so far worth a total of $2.7B so far. Prospects are good to monetize the North American Palladium investment as well over the next 1-3 years.
Company continues to progress the business plan at BRK Ambiental, Greenergy, Canadian Gaming and Gas Station Assets, Teekay Offshore etc. The Construction Services business Multiplex has been disappointing and will likely take 1-2 years more to turnaround and get to stage of providing dividends to BBU.
Target price for BBU is $50 by 2019 end and the growth prospects are very strong over next 5 years.
BBU has started monetizing the Graftech investment which has been a 10 bagger so far worth a total of $2.7B so far. Prospects are good to monetize the North American Palladium investment as well over the next 1-3 years.
Company continues to progress the business plan at BRK Ambiental, Greenergy, Canadian Gaming and Gas Station Assets, Teekay Offshore etc. The Construction Services business Multiplex has been disappointing and will likely take 1-2 years more to turnaround and get to stage of providing dividends to BBU.
Target price for BBU is $50 by 2019 end and the growth prospects are very strong over next 5 years.
Brookfield Asset Management 2Q2018 Update
Brookfield Asset Management (BAM) 2Q2018 results were on trend as expected.
Total AUM was $287B, Fee Bearing Capital increased 12% to $129B, Fee Related Earnings increased 34% to $1.1B and Annual run rate of Fees plus Target Carry increased 23% to $2.6B.
In the last few months BAM have advanced or completed a number of large transactions – including the acquisition of the balance of GGP for $15 billion, a large mid-stream natural gas gathering system in western Canada for $3.3 billion, the closing of the acquisition of Westinghouse Electric Company for a total purchase price of $4 billion, the commitment to acquire Forest City Realty Trust and Enercare for $6.8 billion and $2.5 billion, respectively, and the acquisition of a number of solar and wind facilities in Spain for $1.2 billion.
Brookfield is in the market to raise the next Real Estate Fund and Private Equity Fund and plans to start raising the next Infrastructure Fund from 4Q2018.
We believe BAM shares are worth $50 today with $22 attributed to Asset Management Franchise and $28 attributed to Balance Sheet Assets. It is likely that growth over next 4-5 years will lead to $80+ with Asset Management Franchise worth $40 and Balance Sheet Assets worth $40.
Brookfield 2Q2018 Results
Total AUM was $287B, Fee Bearing Capital increased 12% to $129B, Fee Related Earnings increased 34% to $1.1B and Annual run rate of Fees plus Target Carry increased 23% to $2.6B.
In the last few months BAM have advanced or completed a number of large transactions – including the acquisition of the balance of GGP for $15 billion, a large mid-stream natural gas gathering system in western Canada for $3.3 billion, the closing of the acquisition of Westinghouse Electric Company for a total purchase price of $4 billion, the commitment to acquire Forest City Realty Trust and Enercare for $6.8 billion and $2.5 billion, respectively, and the acquisition of a number of solar and wind facilities in Spain for $1.2 billion.
Brookfield is in the market to raise the next Real Estate Fund and Private Equity Fund and plans to start raising the next Infrastructure Fund from 4Q2018.
We believe BAM shares are worth $50 today with $22 attributed to Asset Management Franchise and $28 attributed to Balance Sheet Assets. It is likely that growth over next 4-5 years will lead to $80+ with Asset Management Franchise worth $40 and Balance Sheet Assets worth $40.
Brookfield 2Q2018 Results
Monday, July 23, 2018
BRK Changes BuyBack Policy to Remove 1.2 Times Book Value Restriction
Since 2012, Berkshire (BRK.A)
has restricted buybacks to prices below 120 percent of the stock's book
value, which is an estimate of the company's value after liabilities
are subtracted from assets.
Given the company's massive cash pile of $120B+ , the rule change Remove 1.2 Times Book Value Restriction for share buybacks. It will not do so if it reduces its cash below $20 billion.
BRK has not done a good job deploying capital over last 3 years. A share buyback at $125 to $145 range over last 2-3 years would have been a good use of excess capital in the absence of any meaningful acquisitions.
Given the company's massive cash pile of $120B+ , the rule change Remove 1.2 Times Book Value Restriction for share buybacks. It will not do so if it reduces its cash below $20 billion.
BRK has not done a good job deploying capital over last 3 years. A share buyback at $125 to $145 range over last 2-3 years would have been a good use of excess capital in the absence of any meaningful acquisitions.
GOOGL 2Q2018 Results Analysis - Revenue UP 26% Year Over Year
GOOGL Revenues up 26% Year Over Year to $26B (32.5B revenue - TAC 6.5B) and excluding currency gains organic growth in revenue was 23%. GOOGL expected revenue for 2018 will be > 100B. The current valuation is in range of $850B. So it is trading at 8 times revenue.
Profit will depend on operating margin which has been shrinking steadily over the years. GOOGL also has excess net cash balance of $120B+ which is $150+/share.
Excluding the fines EPS for the quarter would be $11.75. So on an annualized basis GOOGL is currently earning $50 EPS. So excluding cash ($150 per share) GOOGL can be considered as trading at 22 times Forward earnings [($1200-$150)/50].
If GOOGL can continue to grow top line at 24% per year over next 4 years to 2022 then revue will double and earnings will double if margins remain comparable. So an investor today at $1200 needs to hope for this to happen to start making 10% business return per year 4-5 years from today and hope the business is sustainable in the long run.
The economics on the shares purchase a year ago at $950 per share are 6.25% earnings yield currently if we exclude the $150/share cash and divide EPS $50 by share price $800.
Tuesday, June 12, 2018
Brookfield Renewable now owns 30% of TERP
Brookfield Renewable (BEP) increased its total commitment to $420 million and now its interest in TerraForm Power (TERP) is 30%.
With change to tax subsidy rules in US there are fewer players in Solar and Wind Energy development. This will allow TERP to emerge as a major player in US in this attractive market and allow the company to deleverage with cost reductions, organic growth and synergies when merged with Saeta Yield.
With change to tax subsidy rules in US there are fewer players in Solar and Wind Energy development. This will allow TERP to emerge as a major player in US in this attractive market and allow the company to deleverage with cost reductions, organic growth and synergies when merged with Saeta Yield.
Monday, May 14, 2018
GOOGL and FB are Best Large Cap Tech Growth Stocks at Reasonable Value
GOOGL and FB are Best Large Cap Tech Growth Stocks at Reasonable Value as of 1Q2018 end. Excluding Cash both GOOGL at $1050 and FB at $160 trade at 20 times Forward Earnings assuming GOOGL earnings growth of 20%+ and FB earnings growth of 25%+.
Both Alphabet (GOOGL) and Facebook (FB) continue to invest in future growth drivers including Artificial Intelligence, Cloud Services etc.
Both Alphabet (GOOGL) and Facebook (FB) continue to invest in future growth drivers including Artificial Intelligence, Cloud Services etc.
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