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The Blackstone Group L.P. Message Board

holding38 1 post  |  Last Activity: Aug 10, 2014 6:17 PM Member since: Jun 22, 2009
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  • Reply to

    Back of envelope NOI projection for ACAS

    by donedealer Aug 9, 2014 9:10 PM
    holding38 holding38 Aug 10, 2014 6:17 PM Flag

    Done,

    You may be right--but then again you may not be. the problem with your calculation is that you are projecting into the future a capital structure and set of activities that are unlikely to be continued in their present form. The investment in floating rate debt, for example, is a temporary expedient to generate income flow from what otherwise would be cash held to facilitate the restructuring.

    In the future, I would expect ACAM to be a fairly high growth asset manager and to be valued as such. This will happen as new funds are added and existing ones expand in size. Take MTGE, for example, which I began investing into a little over a year ago and have continued to add to. The fears of sharply rising interest rates hit the company sharply and it was forced to restructure its holdings and increase its hedges to protect NAV; this is costly and reduced earnings, forcing cuts in dividends. The strategy has proven quite successful and dividends have leveled off; I believe that within about 6 months they will start increasing again (not bad for a stock yielding close to 13%). MTGE is still selling well below NAV, so additional stock cannot be sold to increase ACAM/ACAS earning assets. In the future, however, the stock is quite likely to sell above NAV and open the door to the sale of additional equity on a significant scale. The opportunity here can be seen by comparing the market cap of MTGE to that of AGNC. I also expect substantial expansion of the energy & infrastructure fund and the new funds now being rolled out.

    I expect the income-oriented business development company fund to focus on high-yield loans rather than equity or floating rate loans, thus increasing the potential for rising dividends. For these reasons, I don't think it is appropriate to project into the future a valuation based on the activities of the recent past.

    Sentiment: Buy

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