Fairfax India new issue

[giulio]

I skimmed through the global outperformers (stocks that 10x in the last decade) report by jenga partners and thought others on this trend might find this interesting:

• the report has a nice section on India -> why it had such a large share of outperformed, which sectors performed best and more
• a brief case study on Airports of Thailand that has similarities with BIAL (strong passengers growth, margins improvements, not outright ownership)

G

Global Outperformers (Jenga Investment Partners Limited).pdf

[ICUMD]

4 hours ago, giulio said:

I skimmed through the global outperformers (stocks that 10x in the last decade) report by jenga partners and thought others on this trend might find this interesting:

• the report has a nice section on India -> why it had such a large share of outperformed, which sectors performed best and more
• a brief case study on Airports of Thailand that has similarities with BIAL (strong passengers growth, margins improvements, not outright ownership)

G

Global Outperformers (Jenga Investment Partners Limited).pdf 15.61 MB · 4 downloads

Thank you for sharing this outstanding report.

I skimmed it, but definitely worth a more careful read.

 

Thailand airports seem like a good comparator to BIAL.

[nwoodman]

12 hours ago, giulio said:

I skimmed through the global outperformers (stocks that 10x in the last decade) report by jenga partners and thought others on this trend might find this interesting:

• the report has a nice section on India -> why it had such a large share of outperformed, which sectors performed best and more
• a brief case study on Airports of Thailand that has similarities with BIAL (strong passengers growth, margins improvements, not outright ownership)

G

Global Outperformers (Jenga Investment Partners Limited).pdf 15.61 MB · 23 downloads

An outstanding report.  The section on distressed investing in Greece (p.112) and the case study on the Greek company Terna Energy (p.159) may be of interest to FFH investors too.  Mytilineos (Eur4.5bn)  was rumoured to be pursuing a stake in Terna (Eur2.2bn) earlier this year but later refuted.

[glider3834]

5 hours ago, nwoodman said:

An outstanding report.  The section on distressed investing in Greece (p.112) and the case study on the Greek company Terna Energy (p.159) may be of interest to FFH investors too.  Mytilineos (Eur4.5bn)  was rumoured to be pursuing a stake in Terna (Eur2.2bn) earlier this year but later refuted.

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%!

 

 

Edited July 17, 2023 by glider3834

[nwoodman]

54 minutes ago, glider3834 said:

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%!

 

 

Gut-wrenching in terms of what could have been but a testament to them fishing in the right waters.   

[dartmonkey]

12 hours ago, nwoodman said:

Gut-wrenching in terms of what could have been but a testament to them fishing in the right waters.   

Yes, every time I see a FIH report indicating how brilliantly this tiny investment is doing, I have another little wrench...

[whatstheofficerproblem]

On 7/16/2023 at 6:42 AM, giulio said:

I skimmed through the global outperformers (stocks that 10x in the last decade) report by jenga partners and thought others on this trend might find this interesting

 

Wow, thank you for this. Truly enlightening, almost feels like a 'I have seen the light!' kind of moment. I'm gonna pay a lot more attention to some markets moving forward. That said, there are many companies in India that are trading below their NCAV, and are net-nets, my net-net portfolio that I have started in December-ish is already up significantly, I'd say 15%-20%.

[LC]

What tools do you use to review the indian markets? Both at a high level (screeners) and for individual company financials/filings? 

[rohitc99]

17 minutes ago, LC said:

What tools do you use to review the indian markets? Both at a high level (screeners) and for individual company financials/filings? 

 screener

[SafetyinNumbers]

Does anyone do a mark to market model on Fairfax India?

 

Seems like a lot of holdings are making new highs but I haven’t bothered to build a model.

[Haryana]

Fairfax India is hitting its own milestone with book value reaching above $20.

 

https://www.fairfaxindia.ca/press-releases/fairfax-india-holdings-corporation-second-quarter-financial-results-2023-08-03/

 

"At June 30, 2023 common shareholders’ equity was $2,748.1 million, or book value per share of $20.10, compared to $2,642.0 million, or book value per share of $19.11, at December 31, 2022, an increase of 5.2%, ..."

 

 

[SafetyinNumbers]

I think there is a good chance we see another SIB in the next 5 months.

[Haryana]

BLR Airport ranked world #2 in (punctuality) performance after Haneda of Tokyo.

 

https://www.cirium.com/thoughtcloud/most-on-time-airlines-and-airports-of-2022-cirium/

 

The top performing global airports of 2022 were:

Airport	On time ranking	On time departure	Total flights
(HND) Haneda Airport	1	90.33%	373,264
(BLR) Kempegowda International Airport	2	84.08%	201,897
(SLC) Salt Lake City International Airport	3	83.87%	226,545

[Haryana]

https://www.thehindubusinessline.com/economy/logistics/with-akasa-airs-debut-bengaluru-airport-beats-other-metros-in-air-traffic-growth/article67158305.ece

 

According to AAI data, Bengaluru airport handled 28.1 million domestic passengers in FY2023 registering 85 per cent year-on year-growth.

 

In absolute terms, the airport is ranked third behind Delhi and Mumbai. However in percentage terms, Bengaluru’s growth was higher than that of Delhi, Mumbai, Hyderabad, Chennai and Kolkata.

 

In April-June quarter FY2024 too, Bengaluru reported higher growth than the other metros. The airport handled 8.4 million domestic passengers, a rise of 35.5 per cent over same period last year. 

[glider3834]

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

 

Edited September 14, 2023 by glider3834

[nwoodman]

 @glider3834 thanks for that.  There is a good reason why we all think it is the jewel in the crown.  19x’s EBITDA of $120m to get to a valuation of FY22 $2.3bn  is getting up there in terms valuation but not completely egregious given the growth this year and the future prospects. Cargo is another area that may surprise on the upside, it seemed to figure prominently in the recent Foxconn announcement.

 

airlines_20230906_0440.pdf

Edited September 14, 2023 by nwoodman

[SafetyinNumbers]

Ben Watsa went on BNN on Friday and while he wouldn’t give a stock pick he discussed how many airplanes India has now and where it’s going based on existing orders. It doesn’t take a lot to connect the dots that BIAL is a net beneficiary of the network effect of going from 700 planes in the country for domestic travel to multiples of that over time. 

 

He’s also tweeting @benwatsa 

 

Perhaps it’s just a coincidence that the performance fee is due at year end and closing the discount prior to that would help make it less dilutive to FIH shareholders but I doubt it. Maybe management would prefer not to have to use liquidity for buybacks as they see investment opportunities. 
 

It will be interesting if Canadians get the message and buy FIH.U while it’s on sale.

 

https://www.bnnbloomberg.ca/video/you-can-compound-at-a-good-rate-by-investing-in-india-fund-manager~2767937

[ICUMD]

31 minutes ago, SafetyinNumbers said:

Ben Watsa went on BNN on Friday and while he wouldn’t give a stock pick he discussed how many airplanes India has now and where it’s going based on existing orders. It doesn’t take a lot to connect the dots that BIAL is a net beneficiary of the network effect of going from 700 planes in the country for domestic travel to multiples of that over time. 

 

He’s also tweeting @benwatsa 

 

Perhaps it’s just a coincidence that the performance fee is due at year end and closing the discount prior to that would help make it less dilutive to FIH shareholders but I doubt it. Maybe management would prefer not to have to use liquidity for buybacks as they see investment opportunities. 
 

It will be interesting if Canadians get the message and buy FIH.U while it’s on sale.

 

https://www.bnnbloomberg.ca/video/you-can-compound-at-a-good-rate-by-investing-in-india-fund-manager~2767937

It will be interesting to see where some of these major airlines make there travel hubs.  Air India potentially making BIAL home would be transformative.  

 

Appears that many stars are aligning with improved global perception and opportunity in India, high profile and successes of indians abroad and the chance to lift 1 billion people out of poverty.

 

Let's see the development over the next year.

[SafetyinNumbers]

I’m wondering how much the discount can close in the 3 months before the VWAP period begins! Might still take an SIB to make a meaningful difference.

[cwericb]

For those who don’t follow Canadian news, you might find this interesting (concerning?).

 

There is a history of tension between Canada and India dating back to at least the Air India bombing in 1985 which killed 329 people, most of whom were Canadians.

 

Recently relations have deteriorated to a such a low point that Trudeau and Modi were barely on speaking terms at the recent G20 meetings in New Delhi.

 

The concern here is that while Prem Watsa and Prime Minister Modi supposedly have a good relationship, one might be concerned as to the impact these heightened tensions between the two countries may have on Canadian firms like Fairfax who are doing business in India.  

 

Here are a couple of news quotes from the past few days that illustrate just how bad relations between the two countries have become.

 

                                                                           ................................................

 

CTV News Toronto, September 11/23...

 

Indian Prime Minister Narendra Modi conveyed strong concerns about protests in Canada against India to Canadian Prime Minister Justin Trudeau on the sidelines of the G20 summit in New Delhi, according a statement by India.

New Delhi has been long sensitive to Sikh protesters in Canada. In June, India criticized Canada for allowing a float in a parade depicting the 1984 assassination of Indian Prime Minister Indira Gandhi by her bodyguards, perceived to be glorification of violence by Sikh separatists.

“They are promoting secessionism and inciting violence against Indian diplomats, damaging diplomatic premises and threatening the Indian community in Canada and their places of worship," the Indian statement said.

Relations between India and Canada remain tense, and Ottawa this month paused talks on a proposed trade treaty with India, just three months after the two nations said they aimed to seal an initial agreement this year. Modi, who held bilateral meetings with many world leaders during the G20 summit, did not hold one with Trudeau.

Indira Gandhi was assassinated in 1984 by two Sikh bodyguards after she allowed the storming of the holiest Sikh temple in northern India, aiming to flush out Sikh separatists who demanded an independent homeland to be known as Khalistan.

Canada has the highest population of Sikhs outside their home state of Punjab in India, and the country has been the site of many protests that have irked India.

Canada will always defend "freedom of expression, freedom of conscience and peaceful protest," Trudeau said at a press conference in New Delhi.

"At the same time as we are always there to prevent violence, to push back against hatred," he said, adding that the actions of the few "do not represent the entire community or Canada."

 

Then, a few days ago...

 

“OTTAWA, Sept 18 (Reuters) - Canada said on Monday that it was "actively pursuing credible allegations" linking Indian government agents to the murder of a Sikh separatist leader in British Columbia in June, dealing a further blow to diplomatic ties between the countries.

 

Prime Minister Justin Trudeau said in an emergency statement to the House of Commons that any involvement of a foreign government in the killing of a Canadian citizen was "an unacceptable violation of our sovereignty".

 

And now in this morning’s headlines...

 

India suspends visas for Canadian nationals as diplomatic spat deepens.

 

Edited September 21, 2023 by cwericb

[wondering]

Damn.  I was in the process for applying for a visa to go to India.  I guess it will have to wait.  I was going to go to Bangalore.

[dartmonkey]

Despite my general dislike of Trudeau and his inept woke government, I was prepared to give them the benefit of the doubt regarding this spat with India - you can’t just stand by when a Canadian citizen is murdered in Canada by a foreign government. But I may have been wrong to presume we had good evidence for this serious allegation : https://nationalpost.com/opinion/canadas-remarkably-slapdash-assassination-accusation

Edited September 21, 2023 by dartmonkey

[Munger_Disciple]

Seems like the relations between Canada & India have gone to hell pretty fast. At a minimum Trudeau seemed to have handled it very poorly with Modi. You don't make such allegations against an important country like India w/o offering significant evidence. I find it interesting that the western allies of India US, UK & Australia have stayed very quiet. 

Edited September 21, 2023 by Munger_Disciple

[gfp]

Certainly not ideal if you are a Canadian company patiently waiting for multiple government approvals in India.

[Munger_Disciple]

17 minutes ago, gfp said:

Certainly not ideal if you are a Canadian company patiently waiting for multiple government approvals in India.