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80% Returns And A Fair Valuation Forced A Sell On Bridgemarq


  • Bridgemarq Real Estate Services was priced like it was going out of business in March.
  • Q1-2020 results were quite strong, but Bridgemarq has still to feel the full brunt of the pandemic.
  • Barring management fees being cut, the dividend looks increasingly endangered in 2020.
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When we last covered Bridgemarq Real Estate Services (OTCPK:BREUF), we took a bullish stance despite what appeared to be cataclysmic headwinds in the face of COVID-19. Specifically, we said,

We are upgrading this to a buy based purely on valuation. We still had to work hard to overcome the blatantly egregious fees that management is fishing out of this incredibly "easy to run" business. Yes, the climate is depressed but BREUF is trading at about 6X sustainable free cash flow. We think 8X-9X is achievable in the longer run and we are putting a price target at $10.00, about 50% higher. Dividends may be cut in the short term as management is unlikely to reduce its share of the pie.

Source: Bridgemarq: A (Rough) Gem Again At These Levels

That has worked out.


Bridgemarq released Q1-2020 results recently, and we had time to analyze more data from the ongoing impact of the pandemic. Based on that, we update our views on this stock.


Bridgemarq reported solid Q1-2020 numbers. Revenues from both fixed and variable fees were up, and distributable cash flow was up versus the prior year.

Source: Bridgemarq Q1-2020

Real estate transactions have a long lead time, and Bridgemarq was likely less impacted than most other companies during the late March time frame. The distributable cash flow, though, did not cover total dividends paid. In the case of Bridgemarq, that number is the sum of actual dividends paid and interest on exchangeable units (which is the equivalent to dividends to a different set of holders). A key culprit in the lack of coverage was the ridiculous management fees. Between management fees and administration expense, Bridgemarq paid out 42.5% of revenues. Bridgemarq also had one of its rare downticks in realtor counts during the quarter. That is something that bears watching.

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This article was written by

Trapping Value profile picture
Trapping Value is a team of analysts with over 40 years of combined experience generating options income while also focusing on capital preservation. They run the investing group Conservative Income Portfolio in partnership with Preferred Stock Trader. The investing group features two income-generating portfolios and a bond ladder. Trapping Value provides Covered Calls, and Preferred Stock Trader covers Fixed Income. The Covered Calls Portfolio is designed to provide lower volatility income investing with a focus on capital preservation. The fixed income portfolio focuses on buying securities with high income potential and heavy undervaluation relative to comparatives. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a short position in BBU over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (7)

Good to see you state when and why you exit a position versus only giving buys.
JAVAR profile picture
I think they will modify the pay structures to managers soon.... so says the rumours at ground zero. This company is constantly evolving and changing, like all good companies.
Trapping Value profile picture
Not sure why they would have grabbed such a huge piece of the pie just 18 months back and also changed how they show their cash flow to obfuscate the fact that shareholders are worse off, if they actually cared for shareholders.
JAVAR profile picture
Still like the company. Has plenty of room to run. Up 20-27% by year end. Unduly harshly damaged in China 🇨🇳 flu event. Will do just fine over time.
Trapping Value profile picture
When I was very positive on it, before new agreement, they were generating $2.00 per share. Now it is about half that. I’d buy it again in $7s and short if it got to $16.
BeaBaggage profile picture
this was such a good little company for years.. ruined by the Brookfield666.. like so many will be
Trapping Value profile picture
Yeah. I think they will struggle to generate more than a $1.20 of dcf over the long run.
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