Author Topic: Fairfax India new issue  (Read 144540 times)


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Re: Fairfax India new issue
« Reply #300 on: August 22, 2019, 12:45:49 AM »

In other news (I am not sure if anyone has posted yet).  CSB formerly Catholic Syrian Bank is going public.

Ha - IPO prospectuses have been nicknamed red herrings for a long time but I have never seen it used as an official term. Very funny!


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Re: Fairfax India new issue
« Reply #301 on: September 03, 2019, 12:04:16 PM »
Did I miss some major headline or something? Up 15% today?


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Re: Fairfax India new issue
« Reply #303 on: September 03, 2019, 12:21:33 PM »
Interview with Prem Watsa over the weekend, maybe:

Doubtful. It opened near flat. Only been the last 2-3 hours that it's rocketed higher. The only India related headline I've seen has been speculation that India is joining the global recession - nothing to send this bad boy up 15%.

Was hoping it'd continue to trend lower so I could buy more :/


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Re: Fairfax India new issue
« Reply #304 on: September 05, 2019, 11:59:45 AM »
I struggle to understand all the businesses in detail, but believe in the long-term India story, and hope that Fairfax should be in place to benefit.

Asian Airports can be fine businesses (Shanghai International is a case in point at the moment), but I don't know enough about the Bengaluru management to feel confident about how how well they'll execute the expansion.  I'm sure I just need to sit down and research more.

The Finechem chemicals business had a decent reputation (so I heard, but not from primary research) before Fairfax got involved.

Stock exchanges are great businesses I think if you believe in long-term capitalism.

I need to do a lot more work, but overall the sectors they've gone into look very appealing.

Having said that, don't forget there are a heap load of well-run family companies in India to choose from - it's not tricky to create a small basket, or find a fund manager who knows what they're doing.

One thing I am noting from the latest filing is Sanmar common equity went from 554 (million Indian rupees) to 208,854. There is a section that gives reasoning but it is a 376 fold increase in a quarter and holds up the shareholder equity and book value per share in the bottom line for the year and the quarter. How does such a dramatic increase work out?
"Sanmar Common Shares
At September 30, 2018 the company estimated the fair value of its investment in Sanmar common shares using a discounted cash flow analysis based on multi-year free cash flow projections with assumed after-tax discount rates ranging from 13.4% to 16.6% and long term growth rates ranging from 3.0% to 4.0% (December 31, 2017 - 15.2% to 19.5% and 2.0% to 3.6%, respectively). Free cash flow projections were based on EBITDA estimates derived from financial information for Sanmar's four business units (with additional financial information and analysis completed for Chemplast's underlying business units involved in new capital projects) prepared in the third quarter of 2018 by Sanmar's management. Discount rates were based on the company's assessment of risk premiums to the appropriate risk-free rate of the economic environment in which Sanmar operates. In the third quarter of 2018 Fairfax India recorded unrealized gains of $225,013 on its investment in Sanmar common shares primarily as a result of: (i) positive operational developments at Sanmar Egypt (successful completion of its increased capacities in Egypt) and Chemplast (will benefit from the completion of new capital projects); (ii) continued strong demand for PVC and related products in India, Europe, the Middle East and North Africa; and (iii) the decrease in the after-tax discount rates (principally related to the decreased risk at Sanmar Egypt as a result of the completion of its capital expenditure project to increase capacity). At September 30, 2018 the company's internal valuation model indicated that the fair value of the company's investment in Sanmar common shares was $208,854 (December 31, 2017 - $556). The changes in fair value of the company's investment in Sanmar common shares for the third quarters and first nine months of 2018 and 2017 are presented in the tables disclosed earlier in note 5."

Didn’t Sanmar repay a big loan to FFH? My recollection was the original equity investment was valued almost at 0 and most of the financing was the loan, so when the company repaid the loan the equity value will have risen dramatically.

I am not sure that can be the reason. Fairfax India reports loans and stocks separately. Indeed, the report for that year included another, specific, line for the loan to Sanmar. Additionally, FIH explained the reason for the difference; more specifically, it provided three reasons. None of them related to the loan.
But maybe I am not understanding you correctly, and what you mean is that part of the loan was repaid, and that repayment was in kind, actually, stocks. There is actually some comments that might point to that, but then why did the loan line "Sanmar bonds" not decrease accordingly? It actually increased...
Jan 1, 2018 - Dec 31, 2018
Sanmar equity: 556 - 217,000 (increase classified as net change in unrealized gains on investments)
Sanmar bonds: 333,000 - 392,000 (increase classified as net change in unrealized gains on investments 60,000, and net unrealized currency translation loss (30,000))

EDIT Well, apparently the bonds were a very good investment, and the amount Sanmar owed to FIH at their maturity was ca $600,000 From that we can easily see how "Sanmar equity" increased to $200,000 even when "Sanmar bonds" did also increase by ca $100,000 Chapeaux for FIH
« Last Edit: September 05, 2019, 12:21:22 PM by elliott »