Author Topic: Fairfax India new issue  (Read 175684 times)

matts

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Re: Fairfax India new issue
« Reply #390 on: March 28, 2020, 11:46:38 PM »
Of all the things I own right now, FIH certainly looks the cheapest right now.

If the book value growth is about 6-8% per annum for next 10 years, with current discount to book you can lock in a very healthy rate of return even after fees. Book should grow at a higher rate than that.

What's your estimate for the current book value though?


bizaro86

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Re: Fairfax India new issue
« Reply #391 on: March 29, 2020, 08:24:33 AM »
Of all the things I own right now, FIH certainly looks the cheapest right now.

If the book value growth is about 6-8% per annum for next 10 years, with current discount to book you can lock in a very healthy rate of return even after fees. Book should grow at a higher rate than that.

What's your estimate for the current book value though?

Yeah, I still own this (worst mistake this year) but given the shenanigans with the airport mark, makes it pretty tough to trust their mark on the other private positions. And if you can't trust the external manager in a reasonable way, then why wouldn't this trade for a 40% discount permanently? There are lots of permanent capital vehicles that do and have lower fees.

Frustrating, as I think the assets are great. But trust is hard to get back, imo.


obtuse_investor

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Re: Fairfax India new issue
« Reply #392 on: March 29, 2020, 05:09:25 PM »
Of all the things I own right now, FIH certainly looks the cheapest right now.

If the book value growth is about 6-8% per annum for next 10 years, with current discount to book you can lock in a very healthy rate of return even after fees. Book should grow at a higher rate than that.

What's your estimate for the current book value though?

I don't have any fancy models. Two of their biggest assets are the airport and IIFL (finance & banking). Both these are going to get hit severely due to COVID, but we also know that the impact would not be forever. People will fly again and use their financial institutions again.

Do a DCF of a sample company... even if first two years there is zero earnings, the value drops much less than 30%.

If I simply assume that their Q4 book value has dropped ~30% similar to overall Indian stock market, then it will be around 11.8/shr. As of this writing FIH is selling at P/B of 0.57. If the underlying businesses return nominal 10% p.a. then at current price buyer is earning ~18% p.a.
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Scunny Bunny

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Re: Fairfax India new issue
« Reply #393 on: April 14, 2020, 10:46:52 PM »
Bit of reverse engineering here with no adjustments for future management fees and costs. Main interest to me is BIAL.  So take the market capitalisation, deduct value of publicly listed stocks, deduct value of unlisteds using 30% discount, adjust for debt/liquids. At 31 December, at share price of $12.82, doing this calculation gave you an implied value of FIH share of BIAL at $962million, or a 33% discount to stated book - harsh but fair IMHO.  At 14 April, at $7.08, taking the market value of listeds (down 32% in US$ terms), reducing unlisted exposures by 30% and still use a 30% discount - which values them at half BV - and adjusting for debt/liquids gives me an implied value of $520m for the stake in BIAL or a 64% discount to last stated BV, and a 46% reduction from the reverse engineered $962m at 31 December. Something like Sydney Airport has a share price off 36% from its high price ever in February - it's still open but one of its major airlines (Virgin) needs a Government bailout of will fail.  Obvious fear that the "parent" is wobbling given its draw down of revolver (I would have done the same!) Starting to be worth putting on the watchlist perhaps.     

petec

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Re: Fairfax India new issue
« Reply #394 on: April 14, 2020, 11:53:52 PM »
Bit of reverse engineering here with no adjustments for future management fees and costs. Main interest to me is BIAL.  So take the market capitalisation, deduct value of publicly listed stocks, deduct value of unlisteds using 30% discount, adjust for debt/liquids. At 31 December, at share price of $12.82, doing this calculation gave you an implied value of FIH share of BIAL at $962million, or a 33% discount to stated book - harsh but fair IMHO.  At 14 April, at $7.08, taking the market value of listeds (down 32% in US$ terms), reducing unlisted exposures by 30% and still use a 30% discount - which values them at half BV - and adjusting for debt/liquids gives me an implied value of $520m for the stake in BIAL or a 64% discount to last stated BV, and a 46% reduction from the reverse engineered $962m at 31 December. Something like Sydney Airport has a share price off 36% from its high price ever in February - it's still open but one of its major airlines (Virgin) needs a Government bailout of will fail.  Obvious fear that the "parent" is wobbling given its draw down of revolver (I would have done the same!) Starting to be worth putting on the watchlist perhaps.   

I donít think this sold off because anyoneís scared the parent drew the revolver. It sold off because itís an small illiquid closed end fund invested in illiquid/private foreign companies in the biggest recession ever.

I bought my holding back for half the price - superb value.
FFH MSFT BRK BAM ATCO LNG IHG TFG CGT DC/A

Scunny Bunny

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Re: Fairfax India new issue
« Reply #395 on: April 15, 2020, 12:48:08 AM »
Certainly agree the reason for the sell off plus India COVID fears I suspect. We agree it's excellent long term value. I do worry about the parent sometimes - I'm usually OK at dissecting complex structures but in the past these guys do so many post balance date things to put you off the scent. 

petec

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Re: Fairfax India new issue
« Reply #396 on: April 15, 2020, 12:53:21 AM »
Certainly agree the reason for the sell off plus India COVID fears I suspect. We agree it's excellent long term value. I do worry about the parent sometimes - I'm usually OK at dissecting complex structures but in the past these guys do so many post balance date things to put you off the scent.

How do you mean?
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Xerxes

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Re: Fairfax India new issue
« Reply #397 on: April 15, 2020, 07:50:39 AM »
Bit of reverse engineering here with no adjustments for future management fees and costs. Main interest to me is BIAL.  So take the market capitalisation, deduct value of publicly listed stocks, deduct value of unlisteds using 30% discount, adjust for debt/liquids. At 31 December, at share price of $12.82, doing this calculation gave you an implied value of FIH share of BIAL at $962million, or a 33% discount to stated book - harsh but fair IMHO.  At 14 April, at $7.08, taking the market value of listeds (down 32% in US$ terms), reducing unlisted exposures by 30% and still use a 30% discount - which values them at half BV - and adjusting for debt/liquids gives me an implied value of $520m for the stake in BIAL or a 64% discount to last stated BV, and a 46% reduction from the reverse engineered $962m at 31 December. Something like Sydney Airport has a share price off 36% from its high price ever in February - it's still open but one of its major airlines (Virgin) needs a Government bailout of will fail.  Obvious fear that the "parent" is wobbling given its draw down of revolver (I would have done the same!) Starting to be worth putting on the watchlist perhaps.   

I donít think this sold off because anyoneís scared the parent drew the revolver. It sold off because itís an small illiquid closed end fund invested in illiquid/private foreign companies in the biggest recession ever.

I bought my holding back for half the price - superb value.

The illiquidity air pocket are also aggravated by the very high US dollar.

Xerxes

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Re: Fairfax India new issue
« Reply #398 on: April 18, 2020, 05:16:49 AM »
unless I heard wrong what was said on AGM, OMERS is the minority buyer of the airport.

petec

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Re: Fairfax India new issue
« Reply #399 on: April 18, 2020, 05:25:57 AM »
unless I heard wrong what was said on AGM, OMERS is the minority buyer of the airport.

You heard right. But I think someone had identified that up-thread.
FFH MSFT BRK BAM ATCO LNG IHG TFG CGT DC/A