glider3834

yeh not sure whats driving this one - I can see there was higher than usual vol on Wed & Thu - stock dropped back 11% or so on Fri

Some thoughts I have been having on BIAL -bear in mind I have not been to visit BIAL yet- so its mostly a combination of reading & youtube videos. As with all my posts, below is not investment advice, don't rely on my numbers & always do your own due diligence. T2 effectively triples the size of the retail (duty free, fashion, cosmetics shopping etc) & food & beverage areas at BIAL .T2s retail & F&B areas are double T1's. Further from this week, all international passengers/flights are operating from T2 and international passengers are the highest spenders (vs domestic). this is an old survey from 2020 below but shows Bangalore traditionally lagged Mumbai & Delhi particularly in revenue from retail incl duty free shopping, thats where T2 expansion I think is important https://www.knightfrank.co.in/research/transit-retail-2020-think-india-think-retail-6990.aspx?search-id=859c257a-80c9-4678-8896-094896b8d359&report-id=1923&rank=1 T2 increases the terminal capacity of BIAL to 52.5M (note actual numbers which have been higher than capacity for T1) - what is important when we think about earnings margins is the capacity utilization projection which is forecast to run from from 70s% area range up to around 90-100% range by 2026. Bottom line, likely will take a few years to hit full capacity utilisation based on AERA paper forecast (bearing in mind actuals could differ , this is a forecast!). Head of Strategy at BIAL on a recent podcast indicated BIAL are expecting around 40M passengers from T1 & T2 in FY24 https://www.internationalairportreview.com/podcast/bangalore-airport-from-dream-to-reality-and-beyond over the FY17-FY19 period, BIAL ran a net profit margin in the 40% area - during this period BIAL averaged 32 employees per million.With lower capacity utilisation as T2 ramps up passenger numbers, BIAL expected to average 44-45 employees per million passengers. it is difficult to derive forecast on BIAL's expect net profit margin without the FY23 (ending Mar) financials - don't have their current financing costs & depreciation/amortisation expense - However, for FY17-FY19 period (for T1 only) it was around 40%. Deriving the new net profit margin for T1 & T2 & Airport City is a key question going forward. The revenue per passenger for FY23 was around US$6.34 (assuming exchange rate 80.3 & spend of INR 509 per passenger). The FY24 AERA forecasts appear to suggest increase of revenue per passenger into the US$7s range and increasing non-aero spend will be key. There is an excellent quote 'happy airports make more money' https://amadeus.com/en/insights/blog/happy-airports-make-money-satisfied-passengers-spend-45-airport-retail-purchases . The extensive investment that BIAL has made in art, gardens, design, technology etc of T2 along with upcoming reno on T1 has a real purpose here & the focus of customer experience front & centre - Hari discusses here On aero revenue - there should be a boost from higher UDF rates from Apr-23 https://bangaloremirror.indiatimes.com/bangalore/others/from-april-2022-flying-to-become-a-tad-pricier/articleshow/85964418.cms

agree - great interview & thanks for posting

the payout ratio Eurobank have indicated is 25%, I just wonder if they meant to say increase in payout ratio to 30%

https://www.bnnbloomberg.ca/investing/video/greece-will-stick-with-its-fiscal-targets-greek-pm-adviser~2764203

By my calcs in Q3 so far, FIH public equities are up by around USD$161M (pre-tax) , so potentially a $1 or so impact on BVPS - not sure what MTM will be on their private equities.

Greece credit rating raised to investment grade for first time since debt crisis https://www.ft.com/content/fc17f901-e219-4656-bb76-f088c84de3e7

I just saw this report AXIA who have increased their PT for Eurobank as a result of this deal - here are some comments - they are estimating a 13% increase in EPS from Hellenic deal which is lower than 20% I thought might be possible, but they are assuming 100bp reduction in interest rates by ECB in this estimate so they are calling their model estimate 'rather conservative' - here is the article link below which I have translated to English from Greek https://www.insider.gr/epiheiriseis/289381/axia-ti-fernei-sti-eurobank-i-elliniki-trapeza-oi-kryfes-axies-poy-agnoei-i In the further strengthening of Eurobank 's position in Hellenic Bank , through the acquisition of an additional percentage of 7.2% (29,710,012 shares), thus reaching 55.3% and pending the approval of the regulatory authorities that will make it as a subsidiary of the group, turns AXIA , revealing the hidden values for the domestic systemic bank . To the surprise of the analysts, the stock did not react to these developments and despite the size of the acquisition which is expected to further strengthen profitability, as well as its strategic position. AXIA estimates that through these moves Eurobank will boost pro forma EPS by 13%, bringing its return on equity ratio, ROTE, to 15.5% by the end of 2024, 100 basis points higher than analysts' previous estimates. The transaction is expected to reduce the CET1 ratio by 120 basis points, which is negligible given the bank's enhanced profitability generation capacity and current CET1 base. The Eurobank - National "battle" on the board of the Stock Exchange and the Hellenic "game changer" In fact, AXIA considers its estimation model to be rather conservative as it assumes a reduction in interest rates by the European Central Bank by 100 basis points, without synergies of reducing costs in Cyprus and without any additional enhancement of net income through the bank's investment portfolio ( NII), despite excess liquidity. From a strategic point of view , through the acquisition Eurobank: a) further diversifies its profitability "mix" outside the domestic market (domestic banking base will cover only 56% of net profitability by the end of 2024, from 65% in previous estimates ), b) creates the second largest player in the Cypriot market with a complementary loan portfolio, c) increases excess liquidity at the right time and d) acts as a basis for a further opening to other international markets, which include Middle Eastern countries , but also India , which is the home country of Fairfax CEO (Prem Watsa), the largest shareholder of Eurobank. Clearly, even a small percentage of the market in them could be a "game changer" , as AXIA claims. At the same time, Eurobank offers a high quality, with a stable and diversified profitability base, while the acquisition of Hellenic Bank - which at the moment has gone rather unsought by the market and has not passed through valuations - offers the short-term "catalyst" for a further re-rating of the stock. The group's expanded base is expected to lead to the highest ROTE ratio among the rest, reaching 15.5% 2024, which explains a P/TBV ratio of 1x or €2.4 that AXIA sets as a target price, up from €2 previously (51% upside), with a firm 'buy' recommendation. For 2024, the more "open" and new Eurobank will have: - Higher net profits of €1.268bn, up 13% for adjusted ROTE to 15.5%, which is 100 basis points higher than Eurobank's previous base. - The CET1 ratio will decrease by 120 basis points due to the consolidation of Hellenic Bank's higher risk assets. - EPS (earnings per share) will increase by 13% to €0.35 (2024 P/E ratio at 4.5x from 5.1x) and the dividend will also increase to €0.30 (+25%) ), as AXIA estimates that the group will be able to increase the distribution rate on earnings.

Yep they have secured 55.3%, subject to customary approvals, and you are right it will take time to get regulatory approvals https://cyprus-mail.com/2023/08/24/cysec-chairman-eurobank-mandated-to-bid-for-100-per-cent-of-hellenic-hank/

Just looking at this Hellenic Bank deal (I have re-edited this post) Eurobank now owns around 55% of Hellenic Bank https://www.ekathimerini.com/economy/1219382/hfsf-divestment-from-eurobank-is-put-off/ Eurobank reported €111M of negative goodwill gain in 2Q23 on the initial 29.2% stake acquired. Assuming remaining 70.8% of Hellenic (estimate around 293M more shares - float is 413M approx) can be acquired at €2.35 per share & TBV was €3.02 at 30 Jun-23, I estimate Eurobank will have additional negative goodwill/bargain purchase gain of around €196M still to come. Fitch has viewed the acquisition positively “If completed, the acquisition will enhance Eurobank’s business model, increase geographical diversification, and result in a better balance between retail and corporate banking activities,” Fitch noted. https://cyprus-mail.com/2023/08/28/hellenic-bank-acquisition-by-eurobank-viewed-positively-by-fitch/ Hellenic had a 1H23 profit from continuing ops of €141M & has revised its FY23 forecast to €300M pre-tax (Assuming 13% (rounded) cyprus corp tax rate , thats around €260M profit after tax) Eurobank had adjusted net profit of €599M in 1H23, so assuming around €1.2-1.3B annualised - this Hellenic transaction could potentially add around 20% increase to Eurobank's EPS & Fairfax's share of Eurobank profit. Plus Eurobank's expected repurchase of 1.4% of its shares held by HFSF will add to EPS. Both Eurobank and Hellenic are benefiting from higher interest rate environment - a lot of their interest income floating so a key risk is that a drop in rates brings down their profitability. The path & duration of rates is a question mark https://www.reuters.com/breakingviews/europe-faces-dirtier-inflation-fight-than-us-2023-09-06/ Other risks - deal integration risks, persistent inflation/cost of living pressures, financial impact from recent wildfires & flooding in Greece, ongoing war in Ukraine, uncertainty around upgrade of Greece's credit rating to investment grade.

https://www.routesonline.com/airports/2360/athens-international-airport-sa-eleftherios-venizelos/news/299661933/strong-first-half-of-2023-places-athens-airport-in-the-lead-in-europe-and-beyond/

I think Idalia will be a test for Brit which has been de-risking its US prop cat exposure this year - remember half of Ian's cat loss came from Brit. Also it appears Idalia will impact insurers more than reinsurers https://www.reinsurancene.ws/hurricane-idalia-expected-to-be-earnings-event-reinsurers-to-be-minimally-impacted-am-best/

thanks for posting

Eurobank, currently holds 29.2% in Hellenic Bank, therefore after the completion of the Transaction, its total holding in Hellenic Bank will amount to 46.5%. Consequently, in accordance with the provisions of the Takeover Bids Law of 2007 in Cyprus, Eurobank will proceed, following the completion of the Transaction, to a mandatory tender offer for all the outstanding securities of Hellenic Bank not already held by it at the time.

Eurobank making a move on Hellenic https://cyprus-mail.com/2023/08/23/eurobank-to-increase-share-in-hellenic-bank-to-46-5-per-cent/ https://knews.kathimerini.com.cy/en/business/eurobank-secures-full-control-of-hellenic-with-pimco-share-acquisition

unclear what the size of this acquisition is for Fairfax - article paywall protected https://www.unquote.com/uk/official-record/3029870/exponent-divests-significant-stake-in-meadow-to-canadian-investor meadow foods - recent results https://www.thegrocer.co.uk/dairy/meadow-foods-reports-strong-growth-with-sales-and-profits-up/674367.article https://meadowfoods.co.uk/about/ MEADOW HAS GROWN OVER 30 YEARS INTO A £550M VALUE-ADDED INGREDIENTS BUSINESS SPECIALISING IN THE DAIRY, CONFECTIONERY, ICE CREAM, PREPARED FOODS AND PLANT-BASED INDUSTRIES.

https://www.zawya.com/en/press-release/companies-news/gulf-insurance-group-announces-net-profit-of-kd-253mln-825mln-for-the-first-half-of-2023-n33dfufu GIG paid a div of close to US$50M in 1H23, which I think is one reason why increase in shareholders equity didn''t increase in line with US$82M profit in 1H23

So Fairfax had $2.7B div paying capacity in subs at end of 2022, given their operating performance over 2023 in 1H has exceeded the corresponding period in 2022, seems reasonable to assume we are north of $3B now. Adding that to the $1B or so of cash & investments at the holdco & we have over $4B. With interest & dividend income pushing close to $500M per qtr - the rate of build in dividend paying capacity in the subs should accelerate going forward IMHO. I think we need to have a look at volatility of results too - with Allied one of the key reasons for recent credit rating upgrade was that they have reduced their cat exposure so that potentially reduces volatility of underwriting profit - we can see that in Allied's lower CR. Looking at NPW growth rates for Allied, Odyssey & Northbridge for 1H'23 YTD these were 9.6%, 5.2% & 4% respectively. For the same period in 1H'22, NPW growth rates were 21.8%, 31.3% & 11.1%. So that looks like decelerating growth to me and that IMHO should be supportive of theses subs building their div paying capacity further. I suspect they don't want to publish their div paying capacity on a quarterly basis before they do their reserving audit in Q4 & thats why we get it annually. I do think tax planning would be a consideration, liquidating investments in the subs to pay the holdco would potentially trigger tax & they might want to avoid which is why when they are sending divs to holdco it is generally coming from sale proceeds from divested businesses - this is just my hunch. Also credit ratings would be a consideration at the sub level - higher upgrades (eg recently for Odyssey, Crum & Allied) I would think would reduce borrowing costs and a higher rating also benefits their insurance business - so a good thing. So the reasons why they are not sending more cash to the holdco I think go beyond supporting NPW growth although I agree that is a key consideration.

I don't think PacWest deal is fully included either - was expected to close end of Q2 or early Q3 I think The closing of the Transaction and the sale of each Loan is subject to the satisfaction of customary closing conditions (including Pacific Western Bank securing certain counterparty consents and waivers), and it currently expected to close in multiple tranches during the second and early part of the third quarter of 2023.

pretty decent jump on consolidated interest & dividends $464M in Q2 ( vs $382M Q1)

starting new thread for Q2 out next Thurs

viking with Excess of fair value over book value number that Fairfax reports, I believe it excludes non-market traded, non-insurance consolidated subs like Sporting Life Group or AGT

1H results out today 'Mytilineos recorded its historically best H1 year performance led by the energy sector, achieving another large increase in net profitability and consolidating high performance. In particular, turnover increased to €2,516 million compared to €2,154 million in the first half of 2022, marking an increase of 17% despite the significant de-escalation of energy and metal prices. Earnings before Taxes, Interest and Depreciation (EBITDA) also recorded a significant increase, by 49%, to €438 million compared to €293 million in the corresponding period of the previous year, benefiting from the steady increase in the profitability of the Energy Sector and in particular the activity of Renewable Energy Sources (RES), which contributed the largest percentage (29%) to the Sector's EBITDA, as well as the supply of electricity and natural gas, as a result of the continuous internationalization of the company's activities. Mytilineos achieved its historically best performance in the first half of the year led by the Energy Sector. In particular, in addition to the significant contribution of M Renewables (RES of Greece and abroad), which saw its profitability more than double (+117%) compared to the first half of 2022, the Energy sector was also favored by the substantial strengthening of the presence of Mytilineos in the supply of natural gas in the wider region of the Balkans and SE Europe. ' https://www.capital.gr/epixeiriseis/3729301/mytilineos-alma-61-stin-kathari-kerdoforia-to-a-examino/

yes agree nwoodman - its a really brilliant study While not a 10 bagger, Fairfax India has had close to 6-7xbagger with NSE India & after around 7 years! They paid $27M & on grey mkt valuation their 1% appears to have value close to $200M https://www.livemint.com/market/ipo/nse-ipo-creates-buzz-in-unlisted-market-shows-the-investor-interest-in-issue-11687254813352.html - what I didn't realise is they originally wanted to buy 5% & not 1%!