rohitc99
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Posts posted by rohitc99
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i tried to put in an order in fidelity and it was blocked with a 144A restriction. as per fidelity, the stock has been placed on a restricted list for retail in the US as the company did not register its public issue from 2017. does anyone have any information on it ?
the fidelity rep checked on bloomberg terminal and confirmed that this is not a fidelity issue
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I think you may want to check the last bit. You need to be atleast a person of indian origin to open an account directly. However not sure if that has changed recently
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You may want to keep an eye on what is happening in india. Currency has depreciated by close to 15% YTD. There is some level of liquidity squeeze and also financial firms like IIFL have seen their stock price drop a lot. It may all work out in the long run, but in the short term several headwinds
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Kempegowda international airport sees 32.8% jump in passenger traffic
Read more at:
http://timesofindia.indiatimes.com/articleshow/65295980.cms
KIA has also reported a record 98,869 passenger arrivals and departures on June 30, making it the busiest day since the airport commenced operations in 2008. KIA recorded a footfall of 26.9 million passengers in 2017-18.
Domestic and international passengers grew by 35.8% and 16.8%, respectively, between April and June this year. As many as 6.94 million domestic flyers and 1.08 million international travellers passed through the airport.
Fairfax India has paid for $653 million so far for 54% stake in the airport but currently carrying on the book at $643. I believe this significantly undervalues the airport which is growing at such a high rate and expected to grow with addition of new terminal and growth in Indian economy and especially Bangalore.
also what gets missed is the land around the airport ..the pace at which the city is expanding (exploding is a better term), this land is going to be very valuable.
air travel has become affordable for a very large segment of the population and its going to grow for some time
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recent fall seems to be linked to be this news - an ex- director of the company seems to be linked to a bribery scandal
https://www.sundayguardianlive.com/news/ed-revives-agusta-westland-case-fresh-leads
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What are the odds of Fairfax's Thomas Cook and Quess stakes being swapped for Fairfax India shares at some point?
that would require fairfax india to list in india for the minority shareholders of these companies? not sure about the exact rules, but as an investor in the indian markets, i dont know of any foreign company being dual listed in india. the reverse exists where a few indian companies are listed in the US via ADRs
I think he's saying that FFH would give the shares to FFH india in exchange for FFH india shares. Since they are both in Canada, I don't think there would be an issues?
oh ok, got it. just change of control for thomas cook.
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What are the odds of Fairfax's Thomas Cook and Quess stakes being swapped for Fairfax India shares at some point?
that would require fairfax india to list in india for the minority shareholders of these companies? not sure about the exact rules, but as an investor in the indian markets, i dont know of any foreign company being dual listed in india. the reverse exists where a few indian companies are listed in the US via ADRs
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Looks like Fairfax has a approx $850m pretax gain in Thomas Cook India...not bad for a group that has lost their touch. LOL
Thomas cook recently sold around 5.5% of quess and booked a gain of close to 100 Mn on the sale. The company plans to use it to pay down debt at the thomas cook level.
Thomas cook in itself is an interesting company operating on float via the forex and travel business. Except for recent quarters, it has run the travel and forex business on close to zero capital due to this float. as it grows, this float should allow it to make further accquisitions
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https://www.bseindia.com/corporates/anndet_new.aspx?newsid=0f84fd68-9a81-4d73-bdc5-7e1ec0a5e9bc
The Board of Directors (“Board”) of Thomas Cook (India) Limited (“Company”) at its meeting held today have given their consent to the management to explore the possibility of an internal corporate restructuring exercise that would (i) enable the Company to focus on travel related business, (ii) give the shareholders direct exposure and shareholding in the business of Quess Corp Limited; and (iii) enhance the stakeholders’ value (“Proposed Restructuring”).
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MUMBAI: US-based investor Mohnish Pabrai's funds bought 64.18 lakh shares or 2.73% stake in rice exporter KRBL, bulk deal data on the BSE showed
So Rohit, have you analyzed this? My preliminary analysis indicates a 12-15% ann return for the next 5 years. Better than most opportunities in US but not a slam dunk that Pabrai looks for. Your thoughts?
yes, i had a looked at it and on the face of it the brand looks good, distribution and sourcing is nearly impossible to replicate by a new competitor. company for sure enjoys a premium over other brands, but that may not say much considering that the pricing power for this product is limited.
the average operating margin is around 15-17% with the recent spike to 24% mainly from the gains the company is making due to low inventory cost. i am not sure how sustainable that is ..if we normalize the earnings, company is selling @ 40 times earnings. looks pricey.
my guess is mohnish is playing the long game ..stock goes sideways for sometime and then tracks earnings. your estimate looks about right to me
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MUMBAI: US-based investor Mohnish Pabrai's funds bought 64.18 lakh shares or 2.73% stake in rice exporter KRBL, bulk deal data on the BSE showed.
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Not really, indian markets were up in december, including IIFL which was up close to 10%. again quite a few of the assets such as BIAL are not listed. irrespective of the reason, the drop was good to raise the position
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They follow IFRS rules in their valuation of BIAL, using a DCF model, giving a calculated value $1.2b, but that does not mean that is what they really think the thing is really worth. It is not their style to buy at almost twice the price they really think its worth, even if they have to call this 'fair value' in their verbiage:
"The cash consideration paid for the additional 10.0% equity interest in BIAL exceeded the fair value of those additional shares acquired, as a result $74,202 (approximately 4.8 billion Indian rupees) of the cash consideration paid was attributable to the costs incurred to (i) motivate GVK to sell its remaining 10.0% equity interest in BIAL, (ii) increase the company's holdings in BIAL to enhance the company's investment returns, and (iii) accelerate the development of a second runway and terminal, and make improvements to the existing runway".
I would call this legalese verbiage. Yes, they paid more because they really wanted it, and a high price is often what is required to get the owner of a good asset to sell, but that is all perfectly obvious. I have been able to obtain their first draft, nixed by the lawyers, which said:
"We bought 38% in March, for an implied value of $1.01b, IFRS rules force us to apply crazily conservative DCF parameters like 10-13% discount rates, 3% growth rates even though is is growing like a weed, over 20% growth in traffic in recent years, not counting the value of commercial development on sited. Using those estimates, the value comes out at $1.23b - garbage in, garbage out. On the other hand, we love it so much, we were happy to buy another 10% of this fantastic asset at an implied valuation of over $2b in July. You be the judge of whether it is worth $1.2b or $2b or much more."
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air traffic is growing 15%+ across india. Most airlines are operating with a PLF of 85% and still growing. I have been to the airport several times over the last 10 years and the traffic is up several times. when the airport was built, it was way out of the city and with expansion of the city, it wont be long before the airport comes within the city.
A 3% growth in anything in india is almost equivalent to 0 growth or recession. when i looked at the DCF assumptions for BIAL, it was more than obvious they are very very conservative. Look at IIFL ..they are growing 30% and thats not really too high in the space they operate. A lot of other well managed financial services companies of the same size are growing at the same rate. It may sound odd to call 30% growth as conservative, but the tailwinds in the financial services space is quite high
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https://www.cnbc.com/2017/12/07/ge-announces-12000-job-cuts-at-ge-power.html
General Electric announced on Thursday it was axing 12,000 jobs at its global power business as the struggling industrial conglomerate responds to dwindling demand for fossil fuel power plants.
and
GE rival Siemens is cutting about 6,900 jobs, or close to 2 percent of its global workforce, mainly at its power and gas division, which has been hit by the rapid growth of renewables.
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the potential for bangalore airport is massive..that alone should be worth the current market cap 5 years down the line
Do you have any supporting maths for this claim? ;)
Yes, Bangalore Airport publishes an annual report with all the numbers.. I have read a couple ..they are way ahead of their targets put out in 2007-08 period. You can also find some of these numbers in Fairfax India annual meeting presentation..you can find it here http://www.fairfaxindia.ca/news/Events/default.aspx
slide 31
I lived in bangalore for a long time and have often travelled through the airport. The 3% growth assumptions by the company is very conservative. air traffic is growing low double digits. also the land around the airport has a large optionality and future value as the city is expanding towards the airport too
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Are you gents looking at this as investors?, - or what?
John, personally I'm just interested by the tech and by the field, which I've been following for almost 20 years. I haven't seen anything that makes me want to invest in energy, clean or otherwise. Seems like a hard business to invest in.
+1 ...the field is interesting to follow. also if it works out, then there are some non energy businesses which will get disrupted big time.
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I have started a new RIA firm and we currently quite small. I am looking for an RIA compliance service on an ongoing basis. would appreciate any recommendation of a firm which you are aware of or have worked with. please dm me if you dont want to share here
thanks
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Fairfax Financial and Fairfax India have a very very big advantage in India that you are not going to find on the balance sheet and something that Charlie Munger has mentioned many times about Mr. Buffett and Berkshire Hathaway. Fairfax and Prem Watsa are the Berkshire of India. The Icici-Lombard company is an example of a great company that was built from scratch almost 20 years ago. It's a template so to speak. Prem has sat on the boards of major Indian corporations for many years and Fairfax investing record in India is unparrlleled.
As you have seen with Fairfax india and Thomas Cook (a home run for Fairfax Financial)...they are going to get the best deals because they not only have deep pockets they have the trust behind them. That's something that Berkshire has prospered from greatly over the years and Fairfax and all of its subsidiaries will do the same in India. Besides Prem's respect in India he has a seasoned and prolific investing and management team in India that has been there for 20 years.
It's a huge head start and will be a major driver of growth over the next decade...you can't buy trust you have to earn it...unless you piggy back on Fairfax in India...Warren Buffett in the U.s!
If someone can show me another investment vehicle in India that has this advantage I will listen and probably follow...normally you could just buy what they have...the problem is that the biggest investment gains that Fairfax will make will be from private purchases that normal investors will not have access to (Buffett has this too) and building another Indian insurance powerhouse organically.
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fully agree with you dazel. If you cannot invest directly in india, this is a good option. If like me, you can do both - invest in fairfax and directly in india (being an indian citizen), this is still a viable option as fairfax has access to great private companies which a public investor will not get
that said, as an aside, the indian market are seeing pockets of over heating specially in the mid and small cap space. would make sense to be cautious. also the indian markets are very very volatile, so one has to be careful.
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To the Fairfax India Investors,
I just recently started doing work on this. I wanted to get your opinion on something.
I really like the idea of buying into a company that has a strong board and good investors partaking in a really fast growing region of the world. But why do they focus on change in book value as a proxy for their success? You don't see Markel or Berkshire or others focus on change in book value for their private businesses. I know in general they have focused on it for the insurance side and MKL still does for the insurance operations because the majority of it is still liquid and marked to market, but for the private pieces they do not really emphasize that. Certainly you don't see them do a level 3 valuation for the private businesses. You see them disclose earnings.
Fairfax India do a subpar job of disclosing earnings trends for their private businesses, so you have to trust their internal valuation. But the way they value stuff - at first glance - is so incredibly subjective and for them to reward themselves based on this is really odd.
As an example of why it could be goofy, Let's assume I bought 100% of GM stock at 6x earnings ($6.00 per share/ $36 dollar stock). And then I turn around and say using a 10% discount rate , i value it at $60. Well, that may be fair, but something seems a bit off about that to me. Isn't that some of what's going on at Fairfax India? They're buying both public and private businesses, but then they're re-valuing upwards the private businesses..which may be justified by improved earnings power, increased capital retained and an increased business outlook, but it also may be a valuation arbitrage.
The stock is now trading at a 35-40% premium to book value, which already bakes in some of the upside from the private businesses because the investments are getting valued upwards on their books. They may have great assets but it seems like not a great buy.
Just trying to get your food for thought. Thank you.
I would actually say they are being too conservative in their valuation. for example, in case of BIAL their DCF assumes a growth of 3% or something like that. i think thats the case for almost all the private holdings where they have assumed such low single digit growth rates.
they may sound right in NA, but in india (where i invest), this way below par. inflation itself is 6-7%. on average 10% is the starting point and finding companies growing at 15%+ in not difficult. for example IIFL is growing 30%+ and thats not extra-ordinary ..par for the course in this sector for well managed companies.
BIAL has been growning passenger traffic at 20%+ and i have travelling via that airport for ages. that part of the city is expanding the land around airport is going to far more valuable in the future.
that does not mean the stock is fairly priced or something like that ..just that these companies have very good growth opportunities ahead of them
ok that's helpful. thank you. Do you believe that at 1.35x book per share, that this stock is still worth kicking the tires on at this point? It has all the makings of a really good investment potentially...
the stock is not undervalued for sure, but i think they do have some good assets on the book. there seems to be good upside in sanmar where the CPVC plant, once operational could work out well (lots of demand for CPVC piping in india). same is true for saurashtra too. in addition fairfax seems to have built a team which is getting access to good deals.
i think they should be able to compound at a good rate in the future ..i would not be surprised to see 20% compounding for some time.
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To the Fairfax India Investors,
I just recently started doing work on this. I wanted to get your opinion on something.
I really like the idea of buying into a company that has a strong board and good investors partaking in a really fast growing region of the world. But why do they focus on change in book value as a proxy for their success? You don't see Markel or Berkshire or others focus on change in book value for their private businesses. I know in general they have focused on it for the insurance side and MKL still does for the insurance operations because the majority of it is still liquid and marked to market, but for the private pieces they do not really emphasize that. Certainly you don't see them do a level 3 valuation for the private businesses. You see them disclose earnings.
Fairfax India do a subpar job of disclosing earnings trends for their private businesses, so you have to trust their internal valuation. But the way they value stuff - at first glance - is so incredibly subjective and for them to reward themselves based on this is really odd.
As an example of why it could be goofy, Let's assume I bought 100% of GM stock at 6x earnings ($6.00 per share/ $36 dollar stock). And then I turn around and say using a 10% discount rate , i value it at $60. Well, that may be fair, but something seems a bit off about that to me. Isn't that some of what's going on at Fairfax India? They're buying both public and private businesses, but then they're re-valuing upwards the private businesses..which may be justified by improved earnings power, increased capital retained and an increased business outlook, but it also may be a valuation arbitrage.
The stock is now trading at a 35-40% premium to book value, which already bakes in some of the upside from the private businesses because the investments are getting valued upwards on their books. They may have great assets but it seems like not a great buy.
Just trying to get your food for thought. Thank you.
I would actually say they are being too conservative in their valuation. for example, in case of BIAL their DCF assumes a growth of 3% or something like that. i think thats the case for almost all the private holdings where they have assumed such low single digit growth rates.
they may sound right in NA, but in india (where i invest), this way below par. inflation itself is 6-7%. on average 10% is the starting point and finding companies growing at 15%+ in not difficult. for example IIFL is growing 30%+ and thats not extra-ordinary ..par for the course in this sector for well managed companies.
BIAL has been growning passenger traffic at 20%+ and i have travelling via that airport for ages. that part of the city is expanding the land around airport is going to far more valuable in the future.
that does not mean the stock is fairly priced or something like that ..just that these companies have very good growth opportunities ahead of them
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If you look at china and india, where a lot of incremental demand is coming in - ICE vehicles are simply unsustainable. you have visit a bejing or new delhi during the winter months to believe it. you cannot breathe in the open. both the countries are already putting plans in place to move to EV/ Solar due to these issues. In a lot of these places, it has gone beyond the point of cost - the externalities have become huge.
I can share a personal example - when india went from gasonline to natural gas in cities, the drop is pollution was quite big. moving to EV is becoming critical in a lot of cities
also all these countries have very high population densities. so the problems of low population density in midwest (where i live) is a non issue in these places
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there are parts of the world such as rural india or africa, where you dont get electricity with any reliability or sometimes none at all. in such places, even an intermittent power source is better than the alternative (firewood which causes cancer, lung disease , expensive kerosene or nothing)
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In terms of consumer behavior, is it reasonable to compare an ipod/iphone to a car. the first one costs 200-650 dollars and the worst that will happen is that one can replace it in a year or two. In contrast a 35K+ purchase will be far more involved. To ditch a fully depreciated ICE engine car and upgrade to a EV will be a bigger economic decision than changing your phone. also at 35K and higher, not everyone would like to pay too much of a premium for the brand/ emotional appeal, especially at the lower end.
i dont have an answer, but will it not be tougher for a tesla to disrupt other car makers compared to the cell/ electronic industry where there have been several waves of disruption (motorola, blackberry and then apple) compared to auto
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I wrote to clarke inc and they have confirmed they are mostly likely not a PFIC. ofcourse, there is always the disclaimer to check with your accountant
Fairfax India new issue
in Fairfax Financial
Posted
docsnowball - i did that a few months ago too and it worked then. Per fidelity, there was no hold then and was done recently. you can sell your stock now, but not buy
eclecticvalue - how do we get this fixed. is there anyone in the company we write to ? this seems to be an issue from 2017. seems to be very sloppy and careless on their part to miss something so basic