Fairfax India new issue

[thepupil]

10 hours ago, glider3834 said:

I did this chart for Fairfax India showing CAGR in share price & book value - notice how they have diverged since 2017 - some narrowing since end of 2020 but still a gap

 

Is there a magic CAGR in BVPS gets them to trade at book value? It is also consistency in results as well.

 

Ignoring the post IPO excitement & ratios in 2015 & 2016, if we look at 2017 the CAGR in BVPS hit 13.5% & they traded at small premium to book (1.04x book value).

 

However, they have mostly traded at a discount to book since 2017 hitting a low point of 0.59 x book value at end of 2020 although in a 'covid' affected market when their CAGR in BVPS fell to 8.7%.

 

If they can move that CAGR in BVPS needle above 12% & do  it consistently, is it reasonable to expect the shares to trade at least at book value? 

 

 

 

 

 

 

 

 

 

 

as a holder of PSH and TFG which trade for 30-70% discounts and have inception to date ROE's above 10%, I can assure you there is no magic number. If the discount closes, it will be because people are willing to pay more for the stock. I recognize that is a captain obvious statement, but illiquid externally managed PFICs are the red headed stepchild of capital markets. discount could close in 1 year or in 10 years. 

Edited October 1, 2021 by thepupil

[ICUMD]

FFH seems to also have a discount to book value, maybe 20% or so?

 

Perhaps it's a Fairfax franchise discount at the moment.  

 

I see Prem has buybacks on both FIH and FFH.  

 

Regardless to me, FIH prices entering the $12 range seem like a no brainer considering you can probably sell it back to Prem on the next Dutch auction.

 

I'm quite certain Prem wants to own the whole of FIH outright as his Indian version of Brookfield.

[Viking]

I have updated my spreadsheet that captures Fairfax India's publicly traded equity holdings. In Q3 the publicly traded holdings were up nicely... about $150 million. With 142 million shares outstanding this will add increase BV by $1.00/share.

 

At end of Q2 BV for Fairfax India was $19.26. At the end of the dutch auction the reduction in share count increased Q2 BV to $20. So my guess is Q3 BV for Fairfax India will be north of $21/share. With shares trading at $13.10 today my guess is P/BV is approaching 0.60

 

I do not capture the impact from the completed Chemplast Sanmar IPO. I am going to wait and get the details when Fairfax India reports Q3 results. My guess is the IPO should increase BV higher. Chemplast Sanmar went public at about INR 536 and shares increased 14% to 612 on Sept 30. Proceeds from the IPO were already used to reduce leverage at Chemplast Sanmar which is nice to see. 

 

We also with the completion of the partial sale of Anchorage to OMERS we will see how it flows through results. And we will likely get a little more information on Fairfax India's newest acquisition Maxop Engineering Corp. 

 

Bottom line, the management team at Fairfax India has built a pretty nice collection of assets that are performing very well. 

 

PS: tab 1 in the spreadsheet also captures Fairfax's octopus of assets for those who did not see my post on the Fairfax thread  

 

Fairfax Equity Holdings Sept 30 2021.xlsx

Edited October 1, 2021 by Viking

[Spekulatius]

On 9/29/2021 at 8:39 PM, StubbleJumper said:

Prem's a pretty smart dude.  I recommend that people always follow the money.

 

 

SJ

 

 

I would say "Amen", if I were religious. Why do people mess with an inferior vehicle like FF India when they can perfectly align themselves with an operator and just buy FFH?

[Xerxes]

6 hours ago, dartmonkey said:

I'm not following this logic. If I wanted to invest in FIH's holdings, wouldn't I be better off getting them through FIH at 60c on the dollar? A 40% discount pays for a lot of years of Fairfax management fees, and the discount is not likely to get even larger.

 

I meant a large institutional buyer buying FIH through a private placement from FFH, at a price that is largely above the $10 carry and perhaps also the market value, given that the large buyer would need liquidity and spot price wont do it. That new "mark" will help lift the rest of FFH holding as its BV re-adjust. FFH owners will benefit with some of that intrinsic now in the books. FIH holder will benefit as the ownership will broaden out, albeit not a FIH BV. 

 

That means no new equity issued for FIH below book value. Just shares exchanging hands directly between FFH and that buyer. The same way Softbank sold a big portion of Alibaba to 3-party buyer (Singapore sovereign fund if i recall) without disrupting the float as a significant owner of the equity.

 

Of course if FIH traded at a premium, there would be direct issuance of shares, and broadening will happen like that.

 

-----------------------------

bottom line:

(1) persistent FIH BV means more FIH buyback; more performance fee to FFH; net results: more % FFH ownership (this was SJ's initial point)

 

(2) broadening the FIH investor base, thus less % FFH ownership:

     (i) issue new FIH shares for new investors. Net result: more cash coming into FIH for investment.  [out of the question given the deep discount]

 

     (ii) direct placement to an interested third-party. Net result: Cash going to FFH but no cash going to FIH. The BV of FFH adjusted upward from its current carry of $10 (circa 2016). <=this is my point

 

 

 

 

 

[StubbleJumper]

3 hours ago, Viking said:

At end of Q2 BV for Fairfax India was $19.26. At the end of the dutch auction the reduction in share count increased Q2 BV to $20. So my guess is Q3 BV for Fairfax India will be north of $21/share. With shares trading at $13.10 today my guess is P/BV is approaching 0.60

 

So BV on Dec 31, 2020 was $16.37.  FFH's hurdle to earn a performance fee on Dec 31, 2023 is BV growth of 5% per year, not compounded, which would be $18.83 by Dec 31, 2023.   And your rough math is that we are already at $21 today?  Looks to me like FFH is going to earn a healthy fee and will receive a healthy slug of Fairfax India shares 27 months from now....

 

 

SJ

[hobbit]

On 9/28/2021 at 4:38 PM, petec said:

I don’t know it well. Can you walk me through the summary valuation to get to 2x? Thanks!

 i will try to do a detailed post later but essentially this 

https://www.indiainfoline.com/article/news-top-story/chemplast-sanmar-hits-record-high-after-crisil-assigns-‘a-positive-a1-’-ratings-to-its-bank-facilities-121100400216_1.html

 

and

 

mark up in egypt business

[Viking]

49 minutes ago, hobbit said:

 i will try to do a detailed post later but essentially this 

https://www.indiainfoline.com/article/news-top-story/chemplast-sanmar-hits-record-high-after-crisil-assigns-‘a-positive-a1-’-ratings-to-its-bank-facilities-121100400216_1.html

 

and

 

mark up in egypt business

Hobbit, thanks for posting. I saw the 10% move in Chemplast Sanmar shares overnight and was wondering what was up. The stock is now up more than 25% since its recent IPO. After BIAL this is Fairfax India’s largest holding so the move in the stock price is material. chug, chug, chug…

[rohitc99]

1 hour ago, Viking said:

Hobbit, thanks for posting. I saw the 10% move in Chemplast Sanmar shares overnight and was wondering what was up. The stock is now up more than 25% since its recent IPO. After BIAL this is Fairfax India’s largest holding so the move in the stock price is material. chug, chug, chug…

Overall chemical/petrochem space is in a multi-year bull run in the Indian markets. Yesterday most of the stocks in this space were up 3-10%. Other PVC manufacturers also up, possibly due to the supply shortages from china

 

hopefully the management will sell some to take advantage of these prices

[hobbit]

23 hours ago, Viking said:

Hobbit, thanks for posting. I saw the 10% move in Chemplast Sanmar shares overnight and was wondering what was up. The stock is now up more than 25% since its recent IPO. After BIAL this is Fairfax India’s largest holding so the move in the stock price is material. chug, chug, chug…

https://archives.nseindia.com/corporate/CHEMPLASTS_05102021193005_Business_Update_05102021.pdf

 

Chemplast shared this update today

[hobbit]

Fairfax India has NSE shares valued at INR 1400 approximately

 

NSE update

 

https://economictimes.indiatimes.com/markets/ipos/fpos/bourse-depository-stocks-rally-amid-talk-of-nod-for-nses-ipo/articleshow/86572837.cms

 

"

 

Unlisted shares of NSE are currently trading at Rs 3,300-3,500 per share, valuing the exchange at nearly Rs 1.75 lakh crore. The shares traded at Rs 1,750 apiece in March as against Rs 900-1,000 in September last year.
 

"

 

 

[netcash1]

What is NSE worth in USD?  They have a 1% stake correct?  

[glider3834]

3 hours ago, hobbit said:

Fairfax India has NSE shares valued at INR 1400 approximately

 

NSE update

 

https://economictimes.indiatimes.com/markets/ipos/fpos/bourse-depository-stocks-rally-amid-talk-of-nod-for-nses-ipo/articleshow/86572837.cms

 

"

 

Unlisted shares of NSE are currently trading at Rs 3,300-3,500 per share, valuing the exchange at nearly Rs 1.75 lakh crore. The shares traded at Rs 1,750 apiece in March as against Rs 900-1,000 in September last year.
 

"

 

 

so I think that would put FIH's stake of 1% on implied valuation of around US$234 mil versus carrying value of US$99 mil at 30 Jun-21

 

Calc

total implied valuation 1.75 lakh crore = 1.75 tril INR 

USD/INR 74.77

USD 23.4 bil (FIH has 1% share)

 

Looks like when they marked in June they might have applied a discount for lack of liquidity as unlisted - so so if the unlisted price has nearly doubled from 1750in March to around 3300INR-3500 they might mark up by around 80-100mil from 30 Jun-21 valuation - thats my guesstimate assuming they think that unlisted price is reasonable Cheers.

 

 

Edited October 6, 2021 by glider3834

[Viking]

The 1% position in NSE cost Fairfax India US$27 million. If we see an IPO for NSE this could increase the value of their position to +$200 million. Pretty crazy return on this investment. It is on the books today (fair value estimate) for $99 million. 

It is looking like many of the investments the Fairfax India team made over the past 5-6-7 years are really starting to deliver which is resulting in another jump in BV in 2021.
 

Privi was monetized for a significant gain. Fairchem stock has skyrocketed this year (up 3X). Chemplast is now up 35% in 2 months post IPO. Pretty much every publicly traded holding of Fairfax India is up well over 50% so far in 2021 (with some up more than 100%). 
 

And more is coming. Seven Islands IPO is in process. An Anchorage IPO is coming (i think).
 

Hopefully the run in Indian stocks continues. Fairfax India has been a big winner. 

Edited October 7, 2021 by Viking

[petec]

16 hours ago, Viking said:

The 1% position in NSE cost Fairfax India US$27 million. If we see an IPO for NSE this could increase the value of their position to +$200 million. Pretty crazy return on this investment. It is on the books today (fair value estimate) for $99 million. 

It is looking like many of the investments the Fairfax India team made over the past 5-6-7 years are really starting to deliver which is resulting in another jump in BV in 2021.
 

Privi was monetized for a significant gain. Fairchem stock has skyrocketed this year (up 3X). Chemplast is now up 35% in 2 months post IPO. Pretty much every publicly traded holding of Fairfax India is up well over 50% so far in 2021 (with some up more than 100%). 
 

And more is coming. Seven Islands IPO is in process. An Anchorage IPO is coming (i think).
 

Hopefully the run in Indian stocks continues. Fairfax India has been a big winner. 

It’s almost as though Fairfax are good at this

[ICUMD]

16 hours ago, Viking said:

The 1% position in NSE cost Fairfax India US$27 million. If we see an IPO for NSE this could increase the value of their position to +$200 million. Pretty crazy return on this investment. It is on the books today (fair value estimate) for $99 million. 

It is looking like many of the investments the Fairfax India team made over the past 5-6-7 years are really starting to deliver which is resulting in another jump in BV in 2021.
 

Privi was monetized for a significant gain. Fairchem stock has skyrocketed this year (up 3X). Chemplast is now up 35% in 2 months post IPO. Pretty much every publicly traded holding of Fairfax India is up well over 50% so far in 2021 (with some up more than 100%). 
 

And more is coming. Seven Islands IPO is in process. An Anchorage IPO is coming (i think).
 

Hopefully the run in Indian stocks continues. Fairfax India has been a big winner. 

This is all wonderful.  However, Fairfax needs to figure out how to share the spoils with the shareholders. To attract new investment, who's going to be interested when they can simply buy the highly performing publicly traded companies.  

 

I think with recent gains, we are trading 0.5 BV and maybe much less once BIAL goes IPO.

 

[Xerxes]

Putting my SJ's hat on:  great news for Fairfax India's majority owner: Fairfax Financial.

I am learning.

[Viking]

2 hours ago, ICUMD said:

This is all wonderful.  However, Fairfax needs to figure out how to share the spoils with the shareholders. To attract new investment, who's going to be interested when they can simply buy the highly performing publicly traded companies.  

 

I think with recent gains, we are trading 0.5 BV and maybe much less once BIAL goes IPO.

 

The problem Fairfax India (and Fairfax) have right now is both management teams are delivering significant earnings. BV is jumping. And both companies are positioned to continue to post strong results moving forward. They have been executing well for years and we are just now starting to see the results (improving profitability and jump in BV). 
 

And the big ‘problem’ for investors is Mr Market is not paying attention. So the stock prices of both companies are trading at an ever decreasing multiple to BV. It is getting comical. 
 

The good news is Mr Market will eventually come to understand how crazy cheap the shares are. The move higher will be fast and furious. Greed will replace fear. The narrative will reverse. Prem will add a new chapter to his book (like an overage boxer who stages a comeback and wins another title - ‘surprising’ everyone in the process). This is just how the stock market works  

 

PS: and to be honest, i am really enjoying the whole ‘they are making money hand over fist and it is not being priced into the stock yet’ problem. That is called a first class problem. 

Edited October 7, 2021 by Viking

[glider3834]

https://www.livemint.com/companies/start-ups/acko-turns-unicorn-after-255-million-fundraising-round-11635360200201.html

 

Digit's rival Acko valued at $1.1 billion in recent fundraising round. Acko is growing GWP faster than Digit but off a smaller premium base.

 

Acko targeting 1200 crore GWP for year end Mar-22 (FY22). Digit has written 2,200 crore in GWP in 1H FY22 https://indianewsrepublic.com/digit-insurance-is-targeting-premium-sales-of-sek-6500-by-october-2022/507088/ & assuming similar growth in 2H FY22,  Digit will write 4x more premium than Acko.

 

I think this provides a decent insurtech comparable & IMO further supports Digit's recent valuation.

 

 

 

 

 

 

Edited October 28, 2021 by glider3834

[nwoodman]

46 minutes ago, glider3834 said:

I think this provides a decent insurtech comparable & IMO further supports Digit's recent valuation.

 

Excellent, thanks Glider.  A useful data point and with Amazon behind them may ultimately prove some stiff competition.  Both companies should be able to grow nicely for the foreseeable future though.

[glider3834]

https://www.livemint.com/companies/news/warren-buffett-goldman-sachs-win-from-fintech-gold-rush-in-india-11635823280259.html

 

[hobbit]

good results from Chemplast...for me the most exciting business in portfolio right now

 

 

https://archives.nseindia.com/corporate/CHEMPLASTS_31102021222444_CSL_Investor_Presentation_Q2_FY22.pdf

 

https://economictimes.indiatimes.com/markets/stocks/recos/buy-chemplast-sanmar-target-price-rs-940-icici-securities/articleshow/87479994.cms

[Viking]

On 11/2/2021 at 1:17 PM, hobbit said:

good results from Chemplast...for me the most exciting business in portfolio right now

 

 

https://archives.nseindia.com/corporate/CHEMPLASTS_31102021222444_CSL_Investor_Presentation_Q2_FY22.pdf

 

https://economictimes.indiatimes.com/markets/stocks/recos/buy-chemplast-sanmar-target-price-rs-940-icici-securities/articleshow/87479994.cms

@hobbit, thanks for posting. Chemplast is printing crazy money like Stelco right now. The PVC market is red hot and it looks like prices will stay elevated for longer (like steel prices in the US). 
 

i must admit i have had a hard time understanding the Chemplast Sanmar IPO from Sanmar. I am looking forward to reading the Fairfax India Q3 report to better understand how all the pieces look post IPO. 

[Viking]

Fairfax India has had an outstanding 2021 with lots of good things happening in Q3. And the stock? Closed June 30 at $13.50 and closed today (Nov 3) at $13.05. I hope they do another big buyback  
 

My math says BV should come in at north of $21/share (was $19.26/share June 30). BV was $16.37 on Dec 31. BV is up 28% in 9 months. And the increase has been driven primarily by the publicly traded stocks which are up +50% over the past 9 months. Impressive.
 

What happened in Q3:

1.) completion of stock buyback in Aug = 4.7% of shares outstanding

2.) 11.5% of Anchorage sold for $129 million
3.) Chemplast Sanmar IPO completed - stock up +20% post IPO
4.) new purchase Maxop - $30 million for 51% - to support growth plans

- Maxop is a precision aluminum die casting and machining solution provider for aluminum die casting components used by the automotive and industrial sectors, with customers in India, Asia, North America and Europe.

 

Any updates on:

1.) Seven Islands IPO - still on?

2.) Anchorage IPO and growth plans?

3.) NSE IPO - coming in 2022?

4.) another big buyback coming?

 

Sanmar’s businesses are in a really interesting position today… 

Edited November 4, 2021 by Viking

[ICUMD]

1 hour ago, Viking said:

Fairfax India has had an outstanding 2021 with lots of good things happening in Q3. And the stock? Closed June 30 at $13.50 and closed today (Nov 3) at $13.05. I hope they do another big buyback  
 

My math says BV should come in at north of $21/share (was $19.26/share June 30). BV was $16.37 on Dec 31. BV is up 28% in 9 months. And the increase has been driven primarily by the publicly traded stocks which are up +50% over the past 9 months. Impressive.
 

What happened in Q3:

1.) completion of stock buyback in Aug = 4.7% of shares outstanding

2.) 11.5% of Anchorage sold for $129 million
3.) Chemplast Sanmar IPO completed - stock up +20% post IPO
4.) new purchase Maxop - $30 million for 51% - to support growth plans

- Maxop is a precision aluminum die casting and machining solution provider for aluminum die casting components used by the automotive and industrial sectors, with customers in India, Asia, North America and Europe.

 

Any updates on:

1.) Seven Islands IPO - still on?

2.) Anchorage IPO and growth plans?

3.) NSE IPO - coming in 2022?

4.) another big buyback coming?

 

Sanmar’s businesses are in a really interesting position today… 

Out of curiosity Viking, would you sell to a buyback at say $18? Or hold shares waiting for return to parity with BV?