Corner of Berkshire & Fairfax Message Board

General Category => Fairfax Financial => Topic started by: FairFacts on February 07, 2019, 12:37:39 PM

Title: Fairfax Africa
Post by: FairFacts on February 07, 2019, 12:37:39 PM
Changes at the top at Atlas Mara.....

https://www.bloomberg.com/news/videos/2019-02-06/bob-diamond-steps-down-as-atlas-executive-chairman-video

More details here and their relevance to Fairfax

https://www.dailymail.co.uk/money/markets/article-6673811/Former-Barclays-boss-Bob-Diamond-gives-chairmanship-African-venture-Atlas-Mara.html?ns_mchannel=rss&ns_campaign=1490&ito=1490
Title: Re: Fairfax Africa
Post by: wondering 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.
Title: Re: Fairfax Africa
Post by: FairFacts 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.
Title: Re: Fairfax Africa
Post by: petec 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.
Title: Re: Fairfax Africa
Post by: wondering 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 ;)
Title: Re: Fairfax Africa
Post by: petec 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!
Title: Re: Fairfax Africa
Post by: petec 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.
Title: Re: Fairfax Africa
Post by: wondering 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.
Title: Re: Fairfax Africa
Post by: wondering on February 19, 2019, 08:34:18 AM
https://www.fairfaxafrica.ca/News/Press-Releases/Press-Release-Details/2019/Fairfax-Africa-Appoints-Lieutenant-General-Romo-Dallaire-to-Its-Board-of-Directors/default.aspx
Title: Re: Fairfax Africa
Post by: elliott on July 10, 2019, 02:05:19 PM
Is the FAH team investing in some businesses which maybe in too much of a distressed situation? Is this typical Fairfax (parent company) behaviour? (I dont know much of FFH, and started looking at FAH only a couple of weeks ago).

Atlas Mara. I would not consider Atlas Mara to be in a distressed situation ar they have been and are generating positive earnings (even if somewhat inflated with "gains" on transactions), but it would seem that the company overreached and capital needs arised, thats why they had to call FAH. Share price has dropped 50% since Fairfax made their biggest purchase (the rights offering).
CIG. This company is clearly going through some tough years, financially and operationally (like South Africa!). FAH has provided some much needed capital but still. Share price has dropped 75% since FAH made its biggest purchase (the rights offering).
Undisclosed infrastructure stock, traded in the JSE. A USD 3M position initiated during 2018 than less than a year later has lost ca 90% of its value. It was either a case of fraud or a case of a company in distress.

I do not pretend to be negative with management here. I actually think they are doing some serious work, and like what I read in the reports, but the short term performance of, at least, the publicly traded stocks is appalling.



Title: Re: Fairfax Africa
Post by: petec on July 11, 2019, 01:17:00 AM
Is the FAH team investing in some businesses which maybe in too much of a distressed situation? Is this typical Fairfax (parent company) behaviour? (I dont know much of FFH, and started looking at FAH only a couple of weeks ago).

Atlas Mara. I would not consider Atlas Mara to be in a distressed situation ar they have been and are generating positive earnings (even if somewhat inflated with "gains" on transactions), but it would seem that the company overreached and capital needs arised, thats why they had to call FAH. Share price has dropped 50% since Fairfax made their biggest purchase (the rights offering).
CIG. This company is clearly going through some tough years, financially and operationally (like South Africa!). FAH has provided some much needed capital but still. Share price has dropped 75% since FAH made its biggest purchase (the rights offering).
Undisclosed infrastructure stock, traded in the JSE. A USD 3M position initiated during 2018 than less than a year later has lost ca 90% of its value. It was either a case of fraud or a case of a company in distress.

I do not pretend to be negative with management here. I actually think they are doing some serious work, and like what I read in the reports, but the short term performance of, at least, the publicly traded stocks is appalling.

Fairfax (as in the parent) are value investors with a long history of low p/bv and arguably distressed investing. Sometimes it's worked, sometimes it hasn't.

In fairness to them they also have a history of attracting very good people to build impressive businesses over the long run, and one thing I'd pay attention to is who they've hired or appointed to the board of their companies since taking control.

Another thing I think will be intriguing long term is the ability to share knowledge across group companies. They've mentioned doing this in agriculture (where they have assets in Canada, Ukraine, Africa, and India) and digital insurance. I suspect it will also happen in banking now they control ATMA and Catholic Syrian.

In ATMA's case the value is fairly apparent since it trades at a big discount to the value of the three listed stakes it owns (I'm including EGH, although that deal has not yet closed). It has been buying back shares steadily in 2019. FAH have taken over the chairmanship of the board and also appointed Richie Boucher (who led the turnaround of BKIR which Fairfax was heavily involved in, and who sits on the board of Eurobank, another Fairfax investment) and Hisham Ezz al-Arab (MD of CIB in Egypt, a phenomenal bank and also a Fairfax investment).

CIG has several segments. Only one is distressed. Others are variously at the bottom of their cycles, or about to move from an investment phase into a harvesting phase, or have huge potential with a bit of growth capex. The distressed one is the E&C business and its problems provided with Fairfax with the opportunity to control the whole firm at a decent price. They've already revamped management and last I heard the turnaround was on track although I haven't looked for a couple of months. My sense is that CIG will do well, but I could be wrong.

I suspect the best business in FAH, although it's a small stake, is Nova Pioneer.

One thing I personally wouldn't pay a lot of attention to is short term market moves. Fairfax tend to take advantage of distress when they see it rather than try to time the bottom.

FD: I hold FFH, FAH, and FIH. I am a fan of the group, but they have made plenty of mistakes. If you buy this go in with your eyes open.

EDIT: Hisham Ezz al-Arab left the ATMA board when FAH revamped it in Feb 2019, but he is on the board of FAH itself.

Title: Re: Fairfax Africa
Post by: elliott on July 11, 2019, 07:09:39 AM
Thanks for the reply, it provides some useful background.
I will try to read about the people in the team, specially Wilkerson, and also Pectorum.

One note though regarding Atlas Mara. According to my numbers, its trading at less of a discount than what most financial websites report, ex morningstar. First, is that I prefer to use PTBV. Second, Atlas Mara has UBN recorded at USD 530M approximately, when the fair value of their interest is worth much less, USD 300M (a little below the actual equity owned through that ownership - UBN trades slightly below BV). So, morningstar reports a 0.45 PBV, my numbers are close to 0.8 PTBV. Its still a figure that would be typically considered cheap, though.
Title: Re: Fairfax Africa
Post by: petec on July 11, 2019, 02:04:40 PM
I agree, but to be clear I wasnít referring to book value. I was referring to the value of the listed stakes in UBN, ABCBotswana, and (soon) Equity Group Holdings.
Title: Re: Fairfax Africa
Post by: elliott on July 11, 2019, 02:37:31 PM
My mistake!

Quote
it trades at a big discount to the value of the three listed stakes it owns

I assume then that you are talking here about Atlas Mara market cap and that of its stakes?
Atlas Mara, USD ~250M
Stakes, USD ~495M composed of
I wonder however if we can make this comparison. Atlas Mara took on some debt in order to fund some of those acquisitions. That is, there is debt in Atlas Mara balance sheet that is not part of the normal banking business. What I am thinking is that if we want to compare what we get if we buy Atlas Mara against something that something has to be the cost of acquiring Atlas Mara, and that includes Market cap and that portion of the debt, which amount I dont know.

Btw, nice conversation about FAH here!
Title: Re: Fairfax Africa
Post by: petec on July 12, 2019, 01:42:16 AM
Youíre right itís a risk. The remaining unlisted asset is ABCZimbabwe. Any debt not associated with that is holdco debt and needs to be factored against the assets. Same goes for holdco costs. Those arenít easy to break out (although it may become easier once the EGH deal is done) so itís not a perfect valuation method. But Iíll be surprised if the holdco debt and costs account for the whole difference.

Mind you if you think ATMA is cheap you can just buy it. The reason Iím in FAH is a) I like the concept of investing in places with great potential where others arenít looking and b) on balance I think Fairfaxís record, although far from perfect, of building and turning around businesses will play out well over time.
Title: Re: Fairfax Africa
Post by: elliott on July 14, 2019, 03:04:32 AM
I should continue researching Atlas Mara, although I am more interested in FAH at this moment (Atlas Mara is how I discovered Fairfax Africa, actually). I like very much how they play their thesis - they are much more sophisticated than me just purchasing some shares.
There are several points I need to address regarding FAH, though.

The African thesis Probably, the growth/demographics/political improvements argument could have been made several times during the last few decades, and I am not sure how the bet would have played out. Farnam Street has invested in FAH recently, and they argued that Africa could replicate the growth Asia has achieved in the last 50 years. Yeah, the problem is, why did Africa not achieve such growth already? Undoubtedly, some regions in Africa have achieved extraodinary accomplishments, but... I simply think Asia has improved much more, so I dont know why the next 50 years should be different (and I really hope they are).

Comparables. Farnam Street did not mention having compared the company against similars, which is unfortunate as it would have given us some names. At least, I think I need to read about similar firms to help me better understand FAH. If I cannot find any, then I need to look for actively managed funds investing in Africa.

Fairfax positive bias FAH is backed by Fairfax, but it is not Fairfax (or is it?). I am not sure how it is at the present moment, but at IPO time all of the companys executive directors, including the CEO, were based outside of Africa. They sure make some trips but... The only ones in the region were independents. HWIC is not in Africa either... So, regardless of their past experiences, this leaves only Pactorum permanently in the region. It makes me think that Pactorum is probably the biggest originatior of ideas, and the main researcher too (afgri and nova, both were investments that agrigroupe, the seed/precendent of Pactorum, had already made before FAH had even been born). So I wonder, if Pactorum had set up a fund, without the Fairfax brand attached, how would I see them?

Conflicts of interest This expression may be misleading though. I am not talking about HWIC first telling about an invesment to FFH instead of FAH, or things like that. I am thinking of situations like the "initial investment", AFGRI. It was not just FFH that sold its stake to FAH. Wilkerson, Holzapfel, and other members of the team sold part of their AFGRI stakes to the company, when they had purchased AFGRI only 3 years earlier or so. It is not that I think there was something fishy there, it is just that it is hard for me to believe that they would have sold at a loss even if an objective valuation at the moment would have been lower than the price they initially paid for AFGRI. And I dont like that. I could be wrong here, though, as the whole transaction is rather convoluted (the company indicated there was a conflict of interest in the prospectus). Also, Chris Venter, CEO of AGH/Afgri holdings, is a director in one of FAHs internal companies. I wonder the CEO of an acquired compoany should be director somwhere in the "structure" of FAH. Surely he has a competent background, but...
Title: Re: Fairfax Africa
Post by: John Hjorth on July 14, 2019, 12:37:36 PM
... The reason Iím in FAH is a) I like the concept of investing in places with great potential where others arenít looking and b) on balance I think Fairfaxís record, although far from perfect, of building and turning around businesses will play out well over time.

elliott,

I think both Fairfax Africa Holdings Corp. and Fairfax India Holdings Corp. are two Fairfax investments, that both have the potential to become repetitions of the original long term Fairfax story itself - which - long term - is an amazing one. If that actually happens - perhaps over the next one or two decades - it would be transformational to Fairfax itself, being big contributers to bringing Fairfax to the next level. There is an enormous abundance of capital some other places, and there is so much to do both places [Africa & India].

However for this really to work out, the companies need to get it right in the first place, to build a good track record - to be able to attract new capital to grow, thereby creating a fly-wheel effect.

- - - o 0 o - - -

Atlas Mara : "Why Africa?" (http://atlasmara.com/media/1189/atlasmara_ar2014_why-africa.pdf). [Old stuff from the 2014 Annual Report that you may have read already because you already have studied Atlas Mara - I personally think this still applies to great extent].
 IMF - World Economic and Financial Surveys - Regional Economic Outlook - Sub-Saharan Africa - Sub-Saharan Africa Regional Economic Outlook: Recovery Amid Elevated Uncertainty [April 2019] (https://www.imf.org/en/Publications/REO/SSA/Issues/2019/04/01/sreo0419#TOC).

- - - o 0 o - - -

elliott, I seldom post in the Fairfax part of CoBF. FFH is a fairly small position for me, now for some years actually. I have no intentions to reduce or sell my position, exactly because of Fairfax India Holdings and Fairfax Africa Holdings. I just try to shut up and learn more about FFH by avid reading FFH stuff here on CoBF. Well, here I failed on that - I hope that at least one of the links is of avail to you.
Title: Re: Fairfax Africa
Post by: hobbit on July 22, 2019, 12:58:54 PM
If you go thrugh the annual reports , the original thesis for ATMA was to turn around bank's fortunes by getting a new CEO . In less than 1.5 years it changed to selling almost all the assets( excluding BancABC) at a price( ~100 million )  which is probably way below their intrinsic value. This makes me question the ability of FAH management to find good bets in Africa in general. FAH management has to be more open about this sudden change in strategy regarding their biggest position.
Title: Re: Fairfax Africa
Post by: petec on August 19, 2019, 07:34:54 AM
If you go thrugh the annual reports , the original thesis for ATMA was to turn around bank's fortunes by getting a new CEO . In less than 1.5 years it changed to selling almost all the assets( excluding BancABC) at a price( ~100 million )  which is probably way below their intrinsic value. This makes me question the ability of FAH management to find good bets in Africa in general. FAH management has to be more open about this sudden change in strategy regarding their biggest position.

On the other hand if you get in a new CEO and he says: the best way to realise value is to reinvest heavily in this asset (UBN) while swapping these ones for a stake in one of Africa's best banks (EGH), should you argue?

More importantly, Fairfax have a long history of being highly active in the investments they own. Sometimes it works, sometimes it doesn't, but changing strategy is definitely not new to them. If sticking to the initial strategy is what you require, look elsewhere!

ATMA keeps weakening and on the face of it there is real value there. Company is in the market buying back shares every day.
Title: Re: Fairfax Africa
Post by: elliott on September 12, 2019, 08:18:15 AM
Bought shares a couple of days ago. The discount to BV, with public investments updated, will make up for a few years of fees I think.

I may also buy Atlas Mara shares, if the price drops to below the minimum of a few days ago. The company has been profitable even when it has not been operating at its best. If Wilkerson's push for cutting costs down has any real impact, and the new strategic direction (divestitures, new investments) pays off, then earnings will only rise.
Title: Re: Fairfax Africa
Post by: elliott on November 01, 2019, 03:34:03 AM
Third quarter interim report is now available in FAH website.

Quote
The book value per share at September 30, 2019 was $8.54 compared to $9.60 at December 31, 2018

I have recalculated the BVPS using updated market data (public stocks). Almost no change at all from the reported figure above. Shares closed yesterday at USD 5.90

There might be several reasons for the discount:

In the first 9 months of the year the company has bought back and cancelled close to 5% of total outstanding shares at the end of fiscal year 2018.
Title: Re: Fairfax Africa
Post by: petec on December 17, 2019, 02:37:40 AM
Updated valuation attached. My conclusions are:

- Valuation is 0.7x P/BV or 0.6x if you value ATMA at TBV.
- The holdco is hugely underlevered, with $170m of cash and only $8m of liability.
- ATMA is clearly undervalued and Nova Pioneer is exciting but neither really moves the needle.
- The rest is stodge: cash, loans with little upside optionality, and AGH, which hasn't performed in years.
- I don't really see where the performance comes from, at least until they have deployed more capital, and frankly their record on that isn't great.
Title: Re: Fairfax Africa
Post by: hobbit on January 06, 2020, 08:59:53 AM
https://taarifa.rw/analysis-what-does-the-flopped-equity-bank-atlas-mara-deal-mean/
Title: Re: Fairfax Africa
Post by: elliott on January 13, 2020, 07:11:00 AM
...not to mention that last november Equitys stock went up 50%. meaning, the 6-7% stake that Atlas Mara was to receive is much more valuable now than when the deal was initially disclosed - if my memory doest no fail. I wonder how the parties will deal with this.
Title: Re: Fairfax Africa
Post by: hobbit on March 03, 2020, 12:19:24 PM
At $4.35 per share , common stocks worth 232 mil are being marked at zero and on top of that ATMA is trading at less than its stake in UBN which has been posting good results. can easily double from here
Title: Re: Fairfax Africa
Post by: Xerxes on March 06, 2020, 10:03:29 AM
I was at the AGM last year, I recall the team had to do a lot of explaining for FAH performance
I am eager to see what they will say in AGM this year with share price down so much.

Incidentally the Letter is out this weekend
Title: Re: Fairfax Africa
Post by: hobbit on March 06, 2020, 04:35:42 PM
Annual letter-


mistakes with ATMA ( significantly less value in holdings in countries apart from Nigeria) , UBN might turn out decent.

CIG - debt restructuring in place but do not be hopeful of turn around anytime soon. I would classify this as a mistake too.

No significant changes anywhere else.

My conclusion - extremely undervalued at these prices unless you put the value of their entire equity stake at zero which clearly does not seem to be the case. PT $8+

Title: Re: Fairfax Africa
Post by: petec on March 07, 2020, 02:47:50 AM
Annual letter-


mistakes with ATMA ( significantly less value in holdings in countries apart from Nigeria) , UBN might turn out decent.

CIG - debt restructuring in place but do not be hopeful of turn around anytime soon. I would classify this as a mistake too.

No significant changes anywhere else.

My conclusion - extremely undervalued at these prices unless you put the value of their entire equity stake at zero which clearly does not seem to be the case. PT $8+

I read it more positively. UBN is going actively well, and ATMA is starting to receive dividends from UBN and ABCBotswana. CIG is in deep turnaround but got better in 2h, especially 4q, and liberalization of electricity in SA might be a boost.

Iím not invested but itís looking deeply undervalued. How much of the ATMA stake is covered by UBN now? And Nova Pioneer is going to be a superb long term holding.
Title: Re: Fairfax Africa
Post by: jfan on March 27, 2020, 01:27:02 PM
FAH seems to be trading quite below reasonable cash and cash equivalent values with no fund level debt.

At this stage, what are the risks associated with investing at this point in time? Here is a short list that I can see:
a) Sudden increasing inflation in the countries they are in
b) Default risk of their underlying loans and bonds especially with CIL
c) Poor future capital allocation of cash and cash equivalents
d) For us Canadians, US-Canadian exchange rates
e) Falling interest rates causing it to not be able to cover fund expenses

Anything else?
Title: Re: Fairfax Africa
Post by: petec on March 27, 2020, 01:34:16 PM
Honestly I think at this price the ďriskĒ is that something goes right.
Title: Re: Fairfax Africa
Post by: hobbit on March 27, 2020, 02:04:25 PM
https://www.canadianinsider.com/node/7?ticker=FAH

CEO bought 7K shares
Title: Re: Fairfax Africa
Post by: bearprowler6 on March 27, 2020, 02:10:10 PM
This stock is very thinly traded. At the first annual meeting, 2 years ago now, management indicated they would be taking steps to address this issue. Nothing has been done. Depending on the size of your investment this may become a problem down the road should you wish to or need to liquidate. I believe this to be a major knock against the stock and one of the major reasons it has drifted towards zero since the IPO. You will never get major buying or institutional support for this stock until this issue is addressed.
Title: Re: Fairfax Africa
Post by: petec on March 28, 2020, 01:09:30 AM
This stock is very thinly traded. At the first annual meeting, 2 years ago now, management indicated they would be taking steps to address this issue. Nothing has been done. Depending on the size of your investment this may become a problem down the road should you wish to or need to liquidate. I believe this to be a major knock against the stock and one of the major reasons it has drifted towards zero since the IPO. You will never get major buying or institutional support for this stock until this issue is addressed.

Maybe not, but equally it will go up a lot if performance improves because *any* buying will move the stock.
Title: Re: Fairfax Africa
Post by: bearprowler6 on March 28, 2020, 05:51:23 AM
This stock is very thinly traded. At the first annual meeting, 2 years ago now, management indicated they would be taking steps to address this issue. Nothing has been done. Depending on the size of your investment this may become a problem down the road should you wish to or need to liquidate. I believe this to be a major knock against the stock and one of the major reasons it has drifted towards zero since the IPO. You will never get major buying or institutional support for this stock until this issue is addressed.

Maybe not, but equally it will go up a lot if performance improves because *any* buying will move the stock.

Petec.....respectively, the issue is not whether the stock price goes up or not on good performance. The lack of liquidity of the stock makes it impossible for all but he smallest investor to take a position in the stock and have any hope at all of exiting when they need or want to. The traded volume yesterday was 3509 shares (closing share price is $3.01). So sure a very small retail investor can accumulate a couple of thousand shares at the current price and then trade out when/if the price recovers to...lets say even the IPO price of $10. But honestly, is this really what we are trying to do here?

Fairfax Africa shares cannot be accumulated in any meaningful amount without dramatically moving up the share price. Also, once accumulated, a significant number of  shares cannot be disposed of without greatly influencing the share price downward.

In my view, why bother. There are simply too many other opportunities out there where similar profit opportunities exist without the constraint of trading liquidity to worry about.

Furthermore, management did say they would address this issue (lack of liquidity for the shares) and have not done so. Perhaps this alone is reason enough to avoid these shares.
Title: Re: Fairfax Africa
Post by: matts on March 28, 2020, 06:04:00 AM
This stock is very thinly traded. At the first annual meeting, 2 years ago now, management indicated they would be taking steps to address this issue. Nothing has been done. Depending on the size of your investment this may become a problem down the road should you wish to or need to liquidate. I believe this to be a major knock against the stock and one of the major reasons it has drifted towards zero since the IPO. You will never get major buying or institutional support for this stock until this issue is addressed.

Maybe not, but equally it will go up a lot if performance improves because *any* buying will move the stock.

If you look at it as a multi-year hold, it's less of an issue. In 3 years either the fund is successful, which means it will have a much higher market cap and likely more liquidity, or it will keep languishing and possibly even get liquidated.
Petec.....respectively, the issue is not whether the stock price goes up or not on good performance. The lack of liquidity of the stock makes it impossible for all but he smallest investor to take a position in the stock and have any hope at all of exiting when they need or want to. The traded volume yesterday was 3509 shares (closing share price is $3.01). So sure a very small retail investor can accumulate a couple of thousand shares at the current price and then trade out when/if the price recovers to...lets say even the IPO price of $10. But honestly, is this really what we are trying to do here?

Fairfax Africa shares cannot be accumulated in any meaningful amount without dramatically moving up the share price. Also, once accumulated, a significant number of  shares cannot be disposed of without greatly influencing the share price downward.

In my view, why bother. There are simply too many other opportunities out there where similar profit opportunities exist without the constraint of trading liquidity to worry about.

Furthermore, management did say they would address this issue (lack of liquidity for the shares) and have not done so. Perhaps this alone is reason enough to avoid these shares.

If you look at it as a multi-year hold, it's less of an issue. In 3 years either the fund is successful, which means it will have a much higher market cap and likely more liquidity, or it will keep languishing and possibly even get liquidated.

It seems to me like you are looking at it as some levered ETF that you want to get out of once it pops, and in that case, you are right, it's not going to do a good job at that.

Title: Re: Fairfax Africa
Post by: petec on March 28, 2020, 06:38:22 AM
This stock is very thinly traded. At the first annual meeting, 2 years ago now, management indicated they would be taking steps to address this issue. Nothing has been done. Depending on the size of your investment this may become a problem down the road should you wish to or need to liquidate. I believe this to be a major knock against the stock and one of the major reasons it has drifted towards zero since the IPO. You will never get major buying or institutional support for this stock until this issue is addressed.

Maybe not, but equally it will go up a lot if performance improves because *any* buying will move the stock.

If you look at it as a multi-year hold, it's less of an issue. In 3 years either the fund is successful, which means it will have a much higher market cap and likely more liquidity, or it will keep languishing and possibly even get liquidated.
Petec.....respectively, the issue is not whether the stock price goes up or not on good performance. The lack of liquidity of the stock makes it impossible for all but he smallest investor to take a position in the stock and have any hope at all of exiting when they need or want to. The traded volume yesterday was 3509 shares (closing share price is $3.01). So sure a very small retail investor can accumulate a couple of thousand shares at the current price and then trade out when/if the price recovers to...lets say even the IPO price of $10. But honestly, is this really what we are trying to do here?

Fairfax Africa shares cannot be accumulated in any meaningful amount without dramatically moving up the share price. Also, once accumulated, a significant number of  shares cannot be disposed of without greatly influencing the share price downward.

In my view, why bother. There are simply too many other opportunities out there where similar profit opportunities exist without the constraint of trading liquidity to worry about.

Furthermore, management did say they would address this issue (lack of liquidity for the shares) and have not done so. Perhaps this alone is reason enough to avoid these shares.

If you look at it as a multi-year hold, it's less of an issue. In 3 years either the fund is successful, which means it will have a much higher market cap and likely more liquidity, or it will keep languishing and possibly even get liquidated.

It seems to me like you are looking at it as some levered ETF that you want to get out of once it pops, and in that case, you are right, it's not going to do a good job at that.

Exactly.

Separately, Iím sceptical management can really do much about liquidity.
Title: Re: Fairfax Africa
Post by: elliott on March 28, 2020, 08:30:02 AM
FAH seems to be trading quite below reasonable cash and cash equivalent values with no fund level debt.

At this stage, what are the risks associated with investing at this point in time? Here is a short list that I can see:
a) Sudden increasing inflation in the countries they are in
b) Default risk of their underlying loans and bonds especially with CIL
c) Poor future capital allocation of cash and cash equivalents
d) For us Canadians, US-Canadian exchange rates
e) Falling interest rates causing it to not be able to cover fund expenses

Anything else?

several of the companies they hold are not making money, at least in a significant amount.  I think what they need is for the businesses to become profitable, or at least for investors to believe that will happen. I exited some months ago because I simply could not see that moment coming.  And I like the way they do things, the common sense they bring into the companies they invest in...
Title: Re: Fairfax Africa
Post by: petec on March 28, 2020, 11:42:57 AM
FAH seems to be trading quite below reasonable cash and cash equivalent values with no fund level debt.

At this stage, what are the risks associated with investing at this point in time? Here is a short list that I can see:
a) Sudden increasing inflation in the countries they are in
b) Default risk of their underlying loans and bonds especially with CIL
c) Poor future capital allocation of cash and cash equivalents
d) For us Canadians, US-Canadian exchange rates
e) Falling interest rates causing it to not be able to cover fund expenses

Anything else?

several of the companies they hold are not making money, at least in a significant amount.  I think what they need is for the businesses to become profitable, or at least for investors to believe that will happen. I exited some months ago because I simply could not see that moment coming.  And I like the way they do things, the common sense they bring into the companies they invest in...

I agree with this and also exited. I think the gems are Nova Pioneer, UBN, and ABC Botswana. There may also be gems in AFGRI but the overall business has not performed. I suspect there are some very good bits of CIG too. But both CIG and AFGRI need the economy to work, especially in SA, and thatís a long way away sadly. In the end I decided the good bits were too small to move the needle. But that was at more than twice the current price. I suspect there are good returns to be had from here. But I suspect thatís also true of a lot of things. I recently re-bought FIH. That has more visibility for me.
Title: Re: Fairfax Africa
Post by: elliott on April 15, 2020, 01:00:11 PM
during the webcast of today Wilkerson admitted that they learned some lessons from Atlas Mara and CIG
specifically, he said they were up against too many challenges there, and he summarized the idea quoting Buffett

Quote
I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.

at least, thats something
Title: Re: Fairfax Africa
Post by: Xerxes on April 15, 2020, 05:29:39 PM
during the webcast of today Wilkerson admitted that they learned some lessons from Atlas Mara and CIG
specifically, he said they were up against too many challenges there, and he summarized the idea quoting Buffett

Quote
I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.

at least, thats something

IMHO, the difference between buffet wannabes and buffet is that the former quotes him a lot, while the latter stick to their guns no matter what. I think the initial idea of an African investment fund is great thing and a potential call option on Africa growth, but I would have never made that a separate ship from the rest of the FFH family.

FIH is different as I think there is enough concentration and is large enough.

incidentally, here is a great article in The Economist on Africa

https://www.economist.com/special-report/2020/03/26/africa-is-changing-so-rapidly-it-is-becoming-hard-to-ignore

My favorite part of the article "After centuries on the periphery, Africa is set to play a much more important role in global affairs, the global economy and the global imagination. Asiaís economic and population booms may continue to dominate the first part of this century, but Africaís weight will grow in the second half....Demography is a big part of it. Africaís population will almost certainly double by 2050, giving it more than a quarter of the worldís total. That alone commands attention. But if accompanied by matching growth in GDP, economies such as Nigeria could overtake France or Germany in size Ö."


Title: Re: Fairfax Africa
Post by: petec on April 16, 2020, 01:18:15 AM
Notable that just cash and treasuries here, less all liabilities (there are virtually none), is about $2.30 per share.

At $2.90 you're paying 60c for some genuinely attractive assets in UBN, Nova Pioneer, ABC Botswana, maybe bits of CIG and AFGRI. And if they can deploy some cash in this selloff...

Title: Re: Fairfax Africa
Post by: elliott on April 16, 2020, 06:51:52 AM
Notable that just cash and treasuries here, less all liabilities (there are virtually none), is about $2.30 per share.

At $2.90 you're paying 60c for some genuinely attractive assets in UBN, Nova Pioneer, ABC Botswana, maybe bits of CIG and AFGRI. And if they can deploy some cash in this selloff...

I would be cautious looking at cash.
its certainly possible (they said this yesterday) that some of the businesses need more cash to survive in the next months/years, and that Fairfax will provide it. so, the question comes back again to whether you think those businesses will be profitable one day, thus the extra cash well invested, or whether they will not, and thus Fairfax is just falling into the sink hole phallacy.
Title: Re: Fairfax Africa
Post by: elliott on April 16, 2020, 06:53:31 AM
oh, regarding new acquisitions, consider that now travel is very difficult in many parts of Africa.
management said that acquisition work is certainly affected by the covid19 situation.
Title: Re: Fairfax Africa
Post by: petec on April 16, 2020, 06:57:42 AM
Cash - yes - but it is still a lot.

Travel - yes -  but plenty of potential investments are listed and don't require cash.

They said they were hoping to have news on CIG and ATMA soon. I wondered if they are thinking of taking them private.
Title: Re: Fairfax Africa
Post by: petec on April 23, 2020, 07:29:50 AM
Pure speculation, but if FAH consolidates ATMA at any point, and ATMA consolidates UBN, the P/BV and P/E metrics here get transformed overnight.