A Member of Pat McKeough’s Inner Circle recently asked for his advice on Bridgemarq Real Estate Services, a leading Canadian provider of services to residential real estate brokers.
Pat likes the high yield and consistent revenue growth as its recent asset acquisition strengthens its market position and stability. However, he notes there are some earnings challenges associated with that acquisition in addition to the volatile nature of the Canadian housing market overall.
Bridgemarq Real Estate Services Inc. (Symbol BRE on Toronto; www.bridgemarq.com) is a leading provider of services to residential real estate brokers and a network of more than 21,000 real estate agents.
The company operates in Canada under the Royal LePage, Proprio Direct, Via Capital®, Johnston & Daniel and Les Immeubles Mont-Tremblant brands.
In March 2024, Bridgemarq acquired several assets from Brookfield Business Partners, its largest shareholder, for $34 million. The assets included residential real estate brokerages, operating in key Canadian markets. Among them were 25 Royal LePage and Johnston & Daniel brokerages, and three Via Capitale brokerages. Propio Direct, a leading virtual brokerage based in Quebec, was also part of the deal.
In addition, Bridgemarq acquired Bridgemarq Real Estate Services Manager Ltd., the Brookfield-owned management services company that has provided it with management services for the past 20 years. As part of the deal, Bridgemarq retained the employees of Bridgemarq Real Estate Services Manager Ltd., which managed Bridgemarq and the newly acquired brokerages.
The acquisition means Bridgemarq will no longer pays management fees to Brookfield. It also simplified Bridgemarq’s organizational structure.
[ofie_ad]
Bridgemarq Real Estate Services: Volatile Canadian housing markets are a key factor for the company
In the three months ended September 30, 2024, Bridgemarq’s revenue jumped to $126.8 million from $12.8 million a year earlier. The gain reflects the Brookfield Business Partners acquisition completed on March 31, 2024 (see above).
Excluding one-time items, the company made $2.7 million, or $0.17 a share, down 26.1% from $3.7 million, or $0.29. The decline was primarily due to higher interest expenses and increased amortization of intangible assets acquired as part of the transaction, partly offset by the operating results of the acquired businesses.
Bridemarq remains affiliated with the Brookfield family of businesses. Indeed, with the March 2024 deal, Brookfield Business Partners increased its ownership in the company to 41.7% from 28.4%. That’s a plus overall for Bridgemarq as it gives it ready access to capital and advice.
The company’s outlook is positive, although that performance remains tied to the volatile Canadian residential housing markets. In addition, the current dividend, which yields a very high 10.2%, appears sustainable and adds to the stock’s appeal.
Recommendation in Pat’s Inner Circle: Bridgemarq Real Estate Services Inc. is okay to hold.
