Author Topic: Fairfax India new issue  (Read 191859 times)

SharperDingaan

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Re: Fairfax India new issue
« Reply #410 on: July 15, 2020, 07:29:43 AM »
Assume FFH does NOT record the impairment - subject to an annual future MM impairment charge.
It is not unusual for different owners of the Toronto DT towers to have different valuations on their ownership portions of the same tower (precedent)- and just reflects their differing future opinions. IFRS accounting is accepting as long as the opinion and valuation is documented - and there is annual impairment testing (valuation model re-run with current data), if the opinion difference is material.

SD



Xerxes

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Re: Fairfax India new issue
« Reply #411 on: July 15, 2020, 07:42:28 AM »
It is no different than two different investors having a different opinion of a publicly traded stock, thereby moving the stock.

In illiquid assets samething happens but at a very slow speed paced by quarterly releases.
« Last Edit: July 15, 2020, 07:44:15 AM by Xerxes »

Tompety03

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Re: Fairfax India new issue
« Reply #412 on: July 15, 2020, 10:12:00 AM »
For sure - that makes sense that people can use their own internal valuation models absent a transaction.  But if Fairfax just sold more of the airport to Onex at a certain valuation, don't they have to adjust their mark to that valuation?

Chris

Xerxes

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Re: Fairfax India new issue
« Reply #413 on: July 15, 2020, 10:37:21 AM »
I am no expert.

I think the marked down ought to happen.
But marked down is not as bad as impairment that is typically not reversed back with a mark up.

bizaro86

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Re: Fairfax India new issue
« Reply #414 on: July 15, 2020, 11:38:38 AM »
For sure - that makes sense that people can use their own internal valuation models absent a transaction.  But if Fairfax just sold more of the airport to Onex at a certain valuation, don't they have to adjust their mark to that valuation?

Chris

Did you mean OMERS? Fairfax already marked the airport stake up to the value OMERS paid for it. That's a bad mark (imo) because they effectively guaranteed OMERS the price - if they don't IPO it at a certain valuation, OMERS gets more shares to make up the difference.

SharperDingaan

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Re: Fairfax India new issue
« Reply #415 on: July 15, 2020, 11:47:21 AM »
It will be a year-end 'discussion' item with their auditor.
One side will argue that it was isolated, and correctly accounted for via the loss recorded on date on sale. As a result of the sale, the valuation premise of the remaining stake was further strengthened - hence an impairment write-down is not required (opinion). The other side will most likely concur - subject to a disclosure note that outlines the material facts of the transaction. Reader makes his/her own decision.

Comes back to the trust, vision, and informational reporting thing.
One is either OK with this kind of thing, or not.

SD

Parsad

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Re: Fairfax India new issue
« Reply #416 on: July 18, 2020, 03:40:59 PM »
Why Silicon Valley's Biggest Companies are Investing Billions in India:

https://www.cnn.com/2020/07/17/tech/google-facebook-india-investment-jio/index.html

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No man is a failure who has friends!

wondering

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Re: Fairfax India new issue
« Reply #417 on: July 22, 2020, 10:23:09 AM »
https://economictimes.indiatimes.com/industry/banking/finance/banking/fairfax-backed-csb-bank-weighs-buying-out-other-old-private-banks-to-expand-its-balance-sheet/articleshow/77093694.cms

Sorry, besides the headline, the rest of the article you have to login. I didn't bother, but it's interesting to see that CSB is looking to expand.

Xerxes

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Re: Fairfax India new issue
« Reply #418 on: August 25, 2020, 07:51:25 PM »
Sensex has largely snapped back from 27K lows in march to 38K, i am guessing fuelled by Reliance Industries*, but not yet surpassing its pre-pandemic highs.
Fairfax India, however, has barely recovered in fact badly lagging the market, probably held down on the weight of its exposure on financial services. I am not too sure if Sensex is the right benchmark, perhaps there is another.

i am guessing the financial services where FIH had invested has led the downturn for FIH through their mark to market accounting in Q1-Q2, but as financials their cyclical recovery is probably lagged as well. So the snapback hasn't really happened. That said, IIFL Securities seemed to have recovered better, i am guessing due to trading and issuance of fixed-income securities. CBS bank seem to have recovered very well. In fact it had the most mark to market decline in Q1 and the biggest bounce back. 

As for the rest that are mostly illiquid investments, I think FIH has more leeway on the magnitude of impairments (if required) and can argue for patience, which is fine. The underline portion is notable as it shows a continuous decline on some holdings even through Q2. One potential tailwind for the whole lot is the potential weakness in the US Dollar against the rest.

*if only Jack Welch has built General Electric like Reliance Industries.


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Q1
Highlights for first quarter of 2020 included the following:

Net change in unrealized losses on investments of $274.3 million, principally from decreases in market prices of the company's investments in the public companies CSB Bank ($105.4 million), IIFL Finance ($77.1 million), Other Public Indian Investments ($37.3 million), IIFL Wealth ($22.4 million), Fairchem ($16.4 million), IIFL Securities ($11.8 million) and 5paisa ($7.6 million), and a decrease in the fair value of the company's private investment in Sanmar ($8.7 million), partially offset by an increase in the fair value of the company's private investment in NSE ($13.5 million).
Full recovery of the performance fee of $47.1 million, which was accrued to the benefit of Fairfax Financial Holdings for the period from January 1, 2018 to December 31, 2019. The performance fee, if any, will only be finally determined by December 31, 2020 at the end of the three year measurement period.
At March 31, 2020 common shareholders' equity was $2,178.9 million, or book value per share of $14.37, compared to $2,577.9 million, or book value per share of $16.89, at December 31, 2019, a decrease of 14.9%, primarily related to a net loss during the first quarter of 2020 and unrealized foreign currency translation losses as a result of the weakening of the Indian rupee relative to the U.S. dollar.

Q2
Highlights for second quarter of 2020 included the following:

Net change in unrealized gains on investments of $70.5 million, principally from increases in market prices of the company's investments in the public companies, including CSB Bank ($65.9 million), Fairchem ($37.1 million), IIFL Securities ($14.0 million), 5paisa ($10.5 million), IIFL Wealth ($5.2 million), and Other Public Indian Investments ($11.7 million) partially offset by a decrease in the fair value of the company's private investments in Sanmar ($56.8 million), NSE ($14.5 million), and NCML ($7.7 million).
On June 26, 2020 the company extended its $550 million secured term loan facility with a syndicate of Canadian banks to June 28, 2021 with an option to extend for an additional year.
At June 30, 2020 common shareholders' equity was $2,220.0 million, or book value per share of $14.75, compared to $2,577.9 million, or book value per share of $16.89, at December 31, 2019, a decrease of 12.7%, primarily related to a net loss during the first six months of 2020 and unrealized foreign currency translation losses as a result of the weakening of the Indian rupee relative to the U.S. dollar.

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« Last Edit: August 25, 2020, 08:02:56 PM by Xerxes »

valueinvesting101

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Re: Fairfax India new issue
« Reply #419 on: August 27, 2020, 10:06:29 AM »
I find that private investment valuation hasn't changed much except Sanmar and NSE.
Following note from the latest quarterly report is interesting:

Quote
updates to estimated airport tariffs for the third control period commencing in BIAL's fiscal year 2022 to reflect a recovery of lost return during the lockdown and subsequent period;

I believe BIAL gets to update user development fees (UDF) charged per passenger from AAI based on the expected equity return during the period and actual returns achieved during the period last period.

If UDF is adjusted in 2022 to reflect lost of revenue/returns due to COVID then there should not be much impact for the airport valuation. This could the reason for 0.1% reduction in BIAL valuation vs. ~15% reduction in Sanmar valuation.

Any more details about impact of COVID on BIAL valuation and UDF collection in the future?
« Last Edit: August 27, 2020, 10:09:36 AM by valueinvesting101 »