Fairfax India new issue

[UK]

https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/fairfax-stake-in-bengaluru-airport-not-for-sale-prem-watsa/articleshow/95647494.cms

 

"We are creating a brand-new city. We can't do too much in Bangalore because it is built up. That's why we are building an airport city," said Watsa. Watsa and BIAL chief executive Hari Marar outlined plans for the airport city, which will span 463 acres and have office parks, hotels, shopping, entertainment, medical tourism and education. "In the next eight to 10 years, our aim is to develop a smart, sustainable and vibrant airport city with business parks, IT parks, a medical district with a world-class multi-specialty hospital, academic institutions, concert arena, over 2,500 hotel rooms and a world-class retail, dining and entertainment district," said Marar.

 

Fairfax has spent Rs 12,500 crore on development of the airport, which it took control of five years ago. The new terminal is expected to be open to travellers in December. "With the success of Bangalore international airport and under Hari's leadership with Anchorage, we will be expanding on further projects of infrastructure, particularly airports," Watsa said. "It will take a bit of time, but we are focused on getting it done." Anchorage was set up as a corporate entity under Fairfax India to house the airport and infrastructure businesses of the investment giant in the country. Fairfax outlined plans for an initial public offering of Anchorage in 2019 in its annual report. The entity was floated in the same year. However, it has not initiated the share sale process. "We are not under any pressure to do an IPO in a specified time," Watsa said. He didn't elaborate.

 

"India is the number one country in the world to invest in, and India is booming," he said. "IPOs will come back again; unicorns will come back again." Marar said he expects a boom in the aviation sector over the next three years. "Passenger traffic has crossed pre-Covid levels, at least on the domestic front," he said. "International travel will also come back. It has supply side constraints because of lack of aircraft. We can expect 10-12% CAGR (compounded annual growth rate) in the next three to four years."

 

Edited November 21, 2022 by UK

[SafetyinNumbers]

IIFL sale closed. Hopefully we see a good sized SIB soon. 

[hobbit]

The IIFL wealth transaction was announced to be for INR 14.5 billion ( $190.8 M ) but closed for INR 14 billion ($ 172 M ) . Where did $19M go?

[glider3834]

34 minutes ago, hobbit said:

The IIFL wealth transaction was announced to be for INR 14.5 billion ( $190.8 M ) but closed for INR 14 billion ($ 172 M ) . Where did $19M go?

Forex depn & are divs being subtracted too maybe ?

Edited November 23, 2022 by glider3834

[hobbit]

31 minutes ago, glider3834 said:

Forex depn & are divs being subtracted too maybe ?

yah understand the forex bit but not sure 0.5 billion INR is divs

[netcash1]

Anyone have an idea what the EBITDA looks like for BIAL? 

[hobbit]

https://www.livemint.com/economy/centre-steps-in-as-airports-choke-with-record-traffic-11670866466191.html

[ICUMD]

BIAL 356 Crore Loss FY 2022

 

https://www.business-standard.com/article/companies/bial-incurs-net-loss-of-rs-356-crore-in-fy22-due-to-covid-19-impact-122122800985_1.html

[hobbit]

tidefall capital on Fairfax India. people are beginning to take notice

 

https://drive.google.com/file/d/1Hx6Xr-tM9Mx3JIMPUxYayyELiAXyniTs/view

[Viking]

It is encouraging to see the pop in Fairfax India’s stock price the past couple of months. I wonder if Fairfax India has been active on the share buyback front. We will find out when they report Q4.

 

2023 should be an interesting year. I wonder if we see an Anchorage IPO at some point. Fairfax India has been monetizing some assets the past couple of years, most recently 9.8% of IIFL Wealth. 
 

Fairfax’s ownership of Fairfax India is up to 42%. Is there a maximum it can go to? Or can Fairfax just keep increasing its stake each year?

—————

I expect Fairfax to be active in India in 2023. Fairfax India is their preferred vehicle to grow in India. The problem is how do you put a significant chunk of new money into Fairfax India? You can’t raise it in the public markets (with such a low share price). 
 

Perhaps Fairfax will begin investing directly again in new opportunities in India. Perhaps with partners like OMERS etc if the transactions are large. 
—————

June 2022: “Billionaire investor Prem Watsa proposes to have $7 billion more worth of investments in India over the next five years where he believes the country is in an "impressive" phase with the goal of 10% economic growth in front of it.” 

- https://economictimes.indiatimes.com/markets/stocks/news/watsa-plans-to-invest-7-billion-more/articleshow/92026294.cms?from=mdr

[hobbit]

Fairfax has put in a bid for IDBI bank which will be their biggest bet in India so far. Unsure regarding how it will be structured wrt FFH or FIH. There is also speculation that Fairfax may form a consortium with Emirates bank

[Saluki]

11 hours ago, Viking said:

 

—————

I expect Fairfax to be active in India in 2023. Fairfax India is their preferred vehicle to grow in India. The problem is how do you put a significant chunk of new money into Fairfax India? You can’t raise it in the public markets (with such a low share price). 
 

Perhaps Fairfax will begin investing directly again in new opportunities in India. Perhaps with partners like OMERS etc if the transactions are large. 

 

I think a fair way to do it that benefits the patient shareholders like us is to do a rights offering.  That way, you can issue ATM shares if you believe they are undervalued and it won't be newcomers who benefit from the new investments.  The only people who won't directly benefit are shareholders who don't want to participate and will get some dilution.  But I think it's better for long-term planning to have long term share holders so I think a rights offering is the way to go. 

[SafetyinNumbers]

12 hours ago, Viking said:

It is encouraging to see the pop in Fairfax India’s stock price the past couple of months. I wonder if Fairfax India has been active on the share buyback front. We will find out when they report Q4.

 

2023 should be an interesting year. I wonder if we see an Anchorage IPO at some point. Fairfax India has been monetizing some assets the past couple of years, most recently 9.8% of IIFL Wealth. 
 

Fairfax’s ownership of Fairfax India is up to 42%. Is there a maximum it can go to? Or can Fairfax just keep increasing its stake each year?

—————

I expect Fairfax to be active in India in 2023. Fairfax India is their preferred vehicle to grow in India. The problem is how do you put a significant chunk of new money into Fairfax India? You can’t raise it in the public markets (with such a low share price). 
 

Perhaps Fairfax will begin investing directly again in new opportunities in India. Perhaps with partners like OMERS etc if the transactions are large. 
—————

June 2022: “Billionaire investor Prem Watsa proposes to have $7 billion more worth of investments in India over the next five years where he believes the country is in an "impressive" phase with the goal of 10% economic growth in front of it.” 

- https://economictimes.indiatimes.com/markets/stocks/news/watsa-plans-to-invest-7-billion-more/articleshow/92026294.cms?from=mdr

Based on SEDI filings (below), FIH.U bought back 412,227 shares back in Q4.

 

My understanding is that they can keep raising their stake in Fairfax India. I doubt OMERS is a seller so the public float can keep shrinking. 

 

[SafetyinNumbers]

1 hour ago, Saluki said:

 

I think a fair way to do it that benefits the patient shareholders like us is to do a rights offering.  That way, you can issue ATM shares if you believe they are undervalued and it won't be newcomers who benefit from the new investments.  The only people who won't directly benefit are shareholders who don't want to participate and will get some dilution.  But I think it's better for long-term planning to have long term share holders so I think a rights offering is the way to go. 

A rights issue, while fair, is probably a mistake given the NAV discount has been so big for so long. Plus it favours FFH as they get their performance fee shares at year end at market price thus making that fee even more expensive. 
 

From what I have read, Fairfax is looking for a 10% stake which if my quick math is correct works out to about $700m. Maybe they can split it between FFH and FIH, with FIH adding some leverage to get it done without tapping equity markets. I would be ok with FFH buying FIH stock at book value to fund the purchase but that doesn’t seem like Prem’s style. It would be great for minority holders.

[Saluki]

Fairfax India Announces the Passing of Board Member Alan Horn

 

https://finance.yahoo.com/news/fairfax-india-announces-passing-board-220200763.html

 

Sad news.  I met several of the Fairfax India people at the Fairfax AGM prior to the pandemic.  I don't remember if he was one of them (I'm terrible with names), but they all seemed like nice people.  

 

 

[Crip1]

Is anyone seeing a reason for this? Volume does not look to be extraordinarily high.

 

 

-Crip

[Saluki]

I noticed that big price jump too, but there doesn't seem to be any news on Fairfax India today.  

 

I did see this piece on India, generally: 

 

https://www.cnn.com/2023/01/19/business/india-economy-world-economic-forum-davos/index.html

 

If people diversify their supply chains away from China, then  India is an obvious beneficiary, but they have been talking about this since 2020, so I don't know if that's it. 

 

It's not a stock with a lot of volume (my brokerage account makes me do 2 step authorization when I want to trade it), and volume looks average today, so maybe it's just a fund that was sloppy about putting a position on.  

[Hoodlum]

I am thinking that most of the sellers have dried up over the past couple months.  So volume is not needed to drive up the price which is still well book book.  The possibility of a BIAL IPO could be driving some speculation of an increase in book this year.  I just wish I had bought more when it dipped below $10.  

[Xerxes]

FIH recent rise is a catch-up proxy for those who missed out FFH’ Q4 last year rally. 

[Viking]

1 hour ago, Crip1 said:

Is anyone seeing a reason for this? Volume does not look to be extraordinarily high.

 

 

-Crip

“After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.” 
― Edwin Lefèvre, Reminiscences of a Stock Operator

—————

Fairfax India was trading at $9.50 Oct 31. Everyone KNEW it was wicked cheap. The only thing we didn’t know back then is the timing of when the stock would move higher. So here we are 10 weeks later and the stock is now trading 50% higher at $14.50. Who coulda known? Well, we all knew. Everyone on this board should have made out like a bandit with Fairfax India. It was a gift. All an investor had to do to make big money was buy (it was unambiguously crazy cheap) and SIT TIGHT. 

 

Fairfax India, at $14.50 is still cheap: trading well below BV. Prospects for India have rarely looked better.

—————

What caused the move? probably a couple of things happening at the same time:

1.) excellent executions by the management team at Fairfax India

2.) opportunistic buybacks by Fairfax India: management team at Fairfax India monetized some assets over the past 18 months,  locking in gains and raising cash

3.) investor sentiment towards India is improving. US$ weakness. Emerging market strength.

4.) halo effect from Fairfax: sentiment in Fairfax is improving and this will improve sentiment towards Fairfax India. Investors no longer hate Fairfax. Probably at neutral. Probably love in another year. 
—————

Recipe was another good example of the exact same thing when it traded around C$12 in 2022. Wicked cheap. Fairfax saw the gift and took it private at $20.73/share, which was probably a steal. Good for them. Everyone on this board KNEW Recipe was dirt cheap at under $12. What we didn’t know was the timing of the spike higher. Again, all an investor had to do to make big money was buy it and SIT TIGHT. 

—————

Fairfax is a great current example. Stock is trading at US$600. BV Dec 31, 2022, could be around $640. 1.2 x BV = stock price of $768; suggests 28% upside to stock price.

 

Looking out 1 year BV could be around $730. 1.2 x BV = stock price of $875; suggests 45% upside to stock price from where it is trading today. 12 months is not that far away.
 

At some point in time, stocks that are dirt cheap eventually move to fair value. Often they actually move from undervalued all the way to overvalued. Why? 
 

Does it matter? The important thing is to be right with your analysis. Scale your position size appropriately. And then sit tight. 
 

i have made a bunch of money trading in and out of Fairfax the past couple of years. I have been lucky. Because a big move is coming. Moving forward my plan is to try and sit tight. Because that is how the big money is made.

Edited January 19, 2023 by Viking

[modiva]

4 hours ago, Viking said:

“After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.” 
― Edwin Lefèvre, Reminiscences of a Stock Operator

Thanks for sharing @Viking.  It makes sense.  Fairfax and Fairfax India together make up about 55% of my public portfolio.  I plan to sit tight for some time.  I think Fairfax India should reach $20 and Fairfax should reach $1,000, sometime in the next 2-3 years.  I expect Fairfax India to reach $20 much sooner. 

[This2ShallPass]

7 hours ago, Viking said:

So here we are 10 weeks later and the stock is now trading 50% higher at $14.50.

True Viking. But, if you zoom out 5 years, then you're sitting at -20% loss (-55% relative performance vs. s&p). I did add a bunch during the covid lows and recently ~11 which helped, but still a losing position on what I believe is the right stock and I was willing to sit tight.

 

Without the benefit of hindsight, you would have to be very lucky to have stumbled into this 6 months back and bought big at the lows. The key challenge I have is on conviction - if you find a good oppty, but haven't spent a lot of time on, then I can never swing big. Building enough conviction takes time, then I find myself sitting on stocks like Fairfax / FF India that don't move for many years..

[ICUMD]

9 hours ago, This2ShallPass said:

True Viking. But, if you zoom out 5 years, then you're sitting at -20% loss (-55% relative performance vs. s&p). I did add a bunch during the covid lows and recently ~11 which helped, but still a losing position on what I believe is the right stock and I was willing to sit tight.

 

Without the benefit of hindsight, you would have to be very lucky to have stumbled into this 6 months back and bought big at the lows. The key challenge I have is on conviction - if you find a good oppty, but haven't spent a lot of time on, then I can never swing big. Building enough conviction takes time, then I find myself sitting on stocks like Fairfax / FF India that don't move for many years..

Interesting.   I continue to hold a large stake, at underwater prices.   My conviction remains based on the quality of the underlying holding. My error was not purchasing in more measured and tempered quantities.  Covid was an unanticipated complication.  In any case,  I think we're back on track to see a return to book value 18-20$ in the short run.  I think real value is closer to $25. 

[TwoCitiesCapital]

9 hours ago, This2ShallPass said:

True Viking. But, if you zoom out 5 years, then you're sitting at -20% loss (-55% relative performance vs. s&p). I did add a bunch during the covid lows and recently ~11 which helped, but still a losing position on what I believe is the right stock and I was willing to sit tight.

 

Without the benefit of hindsight, you would have to be very lucky to have stumbled into this 6 months back and bought big at the lows. The key challenge I have is on conviction - if you find a good oppty, but haven't spent a lot of time on, then I can never swing big. Building enough conviction takes time, then I find myself sitting on stocks like Fairfax / FF India that don't move for many years..

 

The other part is everyone who knew it was cheap at $9 also knew it was cheap at $10 and $12 and $14. 

 

I bought a few shares at $9, but I didn't go big because it was already one of my largest positions from shares that I had purchased from $10-14. It was very possible if you bought at $9 for it to have dropped to $7 and stayed there which wouldn't have looked too different from my experience in purchases at $12-14 over the last 2-3 years. 

Edited January 20, 2023 by TwoCitiesCapital

[Xerxes]

3 minutes ago, TwoCitiesCapital said:

 

The other part is everyone who knew it was cheap at $9 also knew it was cheap at $10 and $12 and $14. 

 

lol. Yeah. That is true. 
FIH own dry powder was used to buyback at $14 and $12. And I am heading less aggressively at $9.
 

You just don’t know how low it will get.