No. of Recommendations: 12
I would appreciation hearing your thoughts on the valuations of BN and BAM. Posts on The Motley Fool Brookfield Asset Management discussion board and The Motley Fool Berkshire Hathaway discussion board, as well articles on Seeking Alpha, give quite a range of valuation estimates, from about $45/share pre-split to $82/share pre-split. Brookfield's own 'plan value' was $82-$94 pre-split. Thank you for you insights.
I have added you to my favourites so I'll definitely get to this question - and what a timely and interesting question right now, given that we can finally see how the market is appraising BAM - and I will get back with a more considered reply later.
But very briefly, the total economic value (intrinsic value) of the old BAM is exactly the same as the sum of the two new firms - the new BN (replacing the old BAM) plus the new BAM (the spinoff).
However the market capitalisation of the BN plus the new BAM as fallen, compared to the old BAM, so collectively they are cheaper than than they were before the spinoff.
I would hypothesise that some investors are wanting to leave BAM to move capital to BN, so BAM's quote might be irrationally punished for a while, and thus a better investment than BN. I am definitely hesitant to move the capital from BAM to BN for now, until I do a lot more research. The dividend for BAM is not visible yet (the first quarter will be a small dividend only), so we need to look at BAM's distributable earnings to work out the dividend (it will be about 90% of distributable earnings), and then we can see observe what normalised dividend yield BAM is trading at. I imagine it will be too high, with BAM's price too low, but I have not done the calculations yet.
- Manlobbi
