Author Topic: Fairfax Africa  (Read 2019 times)

FairFacts

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« Last Edit: February 07, 2019, 12:42:41 PM by FairFacts »


wondering

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Re: Fairfax Africa
« Reply #1 on: February 08, 2019, 06:08:04 AM »
thanks for posting.

the Daily Mail article mentioned that Fairfax Africa had an investment in GroCapital Holdings.  I thought I was following FAH pretty closely, but I guess not because I have never heard of this GroCapital investment.

FairFacts

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Re: Fairfax Africa
« Reply #2 on: February 08, 2019, 11:07:18 AM »
Wondering,

See www.GroCapitalHoldings.com at the bottom of their home page which shows the corporate structure including Fairfax Holdings  and Fairfax Africa.

Ihave edited the link to the correct one, thanks Petec.
« Last Edit: February 08, 2019, 02:19:37 PM by FairFacts »

petec

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Re: Fairfax Africa
« Reply #3 on: February 08, 2019, 11:53:15 AM »
I think you meant this link: http://grocapitalholdings.com/

By the looks of it it might have been part of AFGRI, which might be why you don't know of it separately. It's the holding company for the South African Bank of Athens, bought from National Bank of Greece last year.
« Last Edit: February 08, 2019, 11:56:05 AM by petec »

wondering

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Re: Fairfax Africa
« Reply #4 on: February 08, 2019, 05:41:29 PM »
Ok. Thanks.

I am little surprised that this announcement did not appear on the FAH website.  I would think that the additional role that Michael Wilkerson is taking on (CEO of Atlas Mara) would warrant a press release.

By the way, FAH made a $51m investment in Consolidated Infrastructure Group last month.  I am glad to see they are putting their cash to use (I just hope it was a good purchase ;)

petec

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Re: Fairfax Africa
« Reply #5 on: February 08, 2019, 11:32:18 PM »
By the way, FAH made a $51m investment in Consolidated Infrastructure Group last month.  I am glad to see they are putting their cash to use (I just hope it was a good purchase ;)

Thereís a lot of good info on CIG on their website. Only glitch I can see is investors didnít exercise their rights, but it would have been a non-event/disappointing for FAH if they had. At first glance FAH have bought half the company at a big discount to book, and it was healthily profitable before one of the divisions got into trouble.

Edit: not such a big discount to book; didnít see how much they lost in 2018!
« Last Edit: February 08, 2019, 11:39:20 PM by petec »

petec

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Re: Fairfax Africa
« Reply #6 on: February 13, 2019, 02:27:50 AM »
My notes on the recent CIG deal, if anyone's interested:

FAH agreed to recap CIG in 2018/2019 in three stages: a $21m loan (2.5% fee, prime+4%, 1 year), $51m in a rights issue at R4/sh (underwritten by FAH for 2.5% fee. Uptake was only 10.5% because the share price was below the offer price, so FAH got most of the shares which I imagine was the intention), and then conversion of the loan into equity at R5.20. After the conversion FAH will have 56% of the stock at an average price of R4.14. As of Feb 2019 CIG trades at R3.10 but the company's own SOTP (p17 here: http://www.ciglimited.co.za/wp-content/uploads/2018/08/Project-Wakanda-Shareholder-meeting-re-convert_13August2018_vF.pdf), which looks reasonably conservative at first glance, says it's worth R7.10. CIG is a pan-African diversified energy infrastructure holding company exposed to growing investment in power generation & grids etc. The problem is that the construction arm got into classic construction trouble with cost overruns etc. This caused the holdco to breach covenants on its long term debt, triggering a holders call clause and the need for a rights issue. There seems to be value in the other subsidiaries, so with a better debt structure this opportunity might never have arisen. The major assets are Conco and Conlog. Conco builds substations and high voltage electrification projects including wind parks and solar farms across Africa and the Middle East. This is the business that got the holdco into trouble. It has been restructured and reorganised to improve execution and project selection, management have been given CFops incentives for the next 3 years, and CIG believes it will return to profitability over the next 12-18 months. Conlog makes prepaid and smart electric meters. These can be sold or leased or bundled as a service (e.g. revenue management and load management for utilities and municipalities). Conlog will receive an equity injection to accelerate the buildout of the lease/service annuity streams at an anticipated 20-25% ROE. Other assets include AES (Angola Environmental Services - does waste disposal for the oil and gas industry in Angola, debt free), CIGenCo (develops mid-sized generation projects, made its first profit in 2018, targets a 20-25% ROE, and has 6 out of 14 projects coming online soon), CPM (maintains renewables and transmission sites), Tractionel (electrifies railways), and CBM (Consolidated Building Materials, consisting of Drift Supersand which mines aggregates and West End Claybrick which manufactures clay bricks and concrete roof tiles). A number of these businesses are currently depressed either due to the oil price (Angola rig count is at historic lows) or the South African economy (construction has been in a recession for some time).

In summary FAH seem to have got reasonable value, there's a clear reason why that opportunity existed, and there's a decent platform for future growth.

wondering

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Re: Fairfax Africa
« Reply #7 on: February 13, 2019, 06:37:10 AM »
Thanks for posting.

I have buying more FAH as the price is below initial issue price and book value.  I know that the South African zand took a beating against the US dollar, but the zand has recovered somewhat since the summer.