Fairfax stock positions

[petec]

On 4/25/2024 at 12:26 AM, Viking said:

 

@nwoodman What Sokol said at Fairfax's AGM was, IMHO, one of the most important pieces of new information to come out of the entire event. 

 

Poseidon is Fairfax's third largest equity holding (with a value of +$2 billion), after Eurobank and FFH-TRS. Poseidon's performance in 2023 was disappointing (share of profit of associates of $150 million), compared to the guidance Atlas provided in their investor day back in March of 2022. However, it appears performance should improve markedly in 2024 and the coming years.

 

"So the ships we're delivering this year, if you wanted to duplicate them, a, it would take you 2 years, but also you'd pay a 30% premium. So we have a build-in margin that is purely good fortune from our perspective, but nonetheless, you take it when it comes along. So that's where we are. Now that's going to show some pretty dramatic improvement in economics this year. We'll probably see revenues up around 25%, EBITDA north of 35% and net income above 20% growth from '23 through '24, but that's just a function of these ships coming on." David Sokol

 

"...your investment should go up about 50% this year just based on the increased cash flow of the business" David Sokol

 

This is big news. And something to monitor moving forward as Fairfax reports quarterly results.

----------

Below is the guidance Atlas provided in March of 2022. 

 

 

 

Why is the investment up 50% on net income growth of 20%, which would still put them way behind the guidance in that table? Did I miss something?

[nwoodman]

15 hours ago, petec said:

 

Why is the investment up 50% on net income growth of 20%, which would still put them way behind the guidance in that table? Did I miss something?

I figured he was basing the statement on on the 35% increase in “bullshit earnings” i.e EBITDA.  Unfortunately not at the AGM so missed the tone.  
 

As inferred above, I will be happy if this thing can be accretive and not some capital sink hole. Flipping APR sounds good.  Given Sokol’s background if he can’t make it work (scale it) then ditch it.  I get the impression it was forced upon them anyway.

 

Edit: clarification

Edited May 2 by nwoodman

[Parsad]

54 minutes ago, nwoodman said:

I figured he was basing it on “bullshit earnings” i.e EBITDA.  Unfortunately not there so missed the tone.  
 

As inferred above, I will be happy if this thing can be accretive and not some capital sink hole. Flipping APR sounds good.  Given Sokol’s background if he can’t make it work (scale it) then ditch it.  I get the impression it was forced upon them anyway.

 

If you look at Maersk's results for Q1, their guidance has jumped leaps and bounds from $1B-$6B in EBITDA to $4B-$6B.  That's one hell of a jump on the low side!  I would imagine that Poseidon will hit the targets Sokol has talked about.  Cheers!

 

https://finance.yahoo.com/news/maersk-posts-q1-profits-above-060706435.html

[Haryana]

 

Quess stock is up > 20% since end of March.

 

(Q4FY24 Proft After Tax) "PAT at ₹98 cr up by 226% YoY and 54% QoQ"

 

Press-Release-Q4FY24.pdf Investor-Presentation-Q4FY24.pdf

[gfp]

Here is the Atlas Q1 report -

https://app.quotemedia.com/data/downloadFiling?webmasterId=101533&ref=318311121&type=HTML&symbol=ATCO&cdn=724594abd25878a3690de8060552477c&companyName=Atlas+Corp.&formType=6-K&dateFiled=2024-05-10

[nwoodman]

2 hours ago, gfp said:

Here is the Atlas Q1 report -

https://app.quotemedia.com/data/downloadFiling?webmasterId=101533&ref=318311121&type=HTML&symbol=ATCO&cdn=724594abd25878a3690de8060552477c&companyName=Atlas+Corp.&formType=6-K&dateFiled=2024-05-10

Thanks for this.  Summary in the ATCO thread

https://thecobf.com/forum/topic/1691-atco-atlas-corp/?do=findComment&comment=563864

 

Edited May 11 by nwoodman

[SafetyinNumbers]

4 hours ago, nwoodman said:

Thanks for this.  Summary in the ATCO thread

https://thecobf.com/forum/topic/1691-atco-atlas-corp/?do=findComment&comment=563864

 

I guess we can assume FFH reports ATCO earnings on a one quarter delay? That should be a big help to Associates income in Q2.

[nwoodman]

3 hours ago, SafetyinNumbers said:

I guess we can assume FFH reports ATCO earnings on a one quarter delay? That should be a big help to Associates income in Q2.

I actually thought it was on the current quarter.  Hadn’t got as far as reconciling the numbers across to Fairfax to check.  

[SafetyinNumbers]

4 hours ago, nwoodman said:

I actually thought it was on the current quarter.  Hadn’t got as far as reconciling the numbers across to Fairfax to check.  

Q124 showed only $34.8m of income from Poseidon and that’s much closer to 43% of Q423 reported income (just eyeballing the difference between 2023FS and Q323 reported income).
 

I assume the same is true for Eurobank which doesn’t report Q1 until next week and Helios which also hasn’t reported Q1 yet.

 

Edited Saturday at 12:52 PM by SafetyinNumbers

[Viking]

Change in value of Fairfax’s equity portfolio in Q1 - 2024

 

Fairfax’s equity portfolio (that I track) had a total value of about $20.4 billion at May 10, 2024. So far in Q2 it is up about $700 million (pre-tax) or 3.5%, which is a solid start to Q2-2024.

 

As per usual, please let me know if you see any errors  FYI, I include the warrant and debentures in the total. The Excel file is attached at the bottom of the post.

 

 

I include the FFH-TRS position in the mark to market bucket and at its notional value. I also include warrants and debentures that Fairfax holds in the mark to market bucket.

 

My tracker portfolio is not an exact match to Fairfax’s actual holdings. My summary has been updated to include information from Fairfax’s Q1-2024 earnings report.

 

My tracker portfolio is useful only as a tool to perhaps understand the rough change in Fairfax’s equity portfolio (and not the precise change).

 

Split of total holdings by accounting treatment

 

About 49% of Fairfax’s equity holdings are mark to market - and will fluctuate each quarter with changes in equity markets. The other 51% are Associate and Consolidated holdings.

 

Over the past couple of years, the share of the mark to market portfolio has been shrinking. This means Fairfax's quarterly results will be less impacted by volatility in equity markets.

 

 

Split of total gains by accounting treatment

• The total change is an increase of about $700 million = $30.64/share
• The mark to market change is an increase of $184 million = $8.08/share. The change in this bucket of holdings will show up in ‘net gains (losses) on investments’ (along with changes in the value of the fixed income portfolio) when Fairfax reports results each quarter.

 

What were the big movers in the equity portfolio Q1-YTD?

• Eurobank is up $399 million and it is Fairfax’s largest equity holding at $2.84 billion.
• The FFH-TRS is up $139 million and is Fairfax’s second largest holding at $2.26 billion. 
• Thomas Cook India is up $108 million. TCIC continues its strong performance. 
• Quess is up $73 million. Market value is $393 million (carrying value is $432 million).

 

Excess of fair value over carrying value (not captured in book value)

 

For Associate and Consolidated holdings, the excess of fair value to carrying value is about $1.676 billion or $73/share (pre-tax). Book value at Fairfax is understated by about this amount.

• Associates:       $1,052 million = $46/share
• Consolidated:      $624 million = $27/share

Equity Tracker Spreadsheet explained:

 

We have separated holdings by accounting treatment: mark to market, associates – equity accounted, consolidated, other Holdings – total return swaps.

 

We come up with the value of each holding by multiplying the share price by the number of shares. Are holdings are tracked in US$, so non-US holdings have their values adjusted for currency. 

 

This spreadsheet contains errors. It is updates as new and better information becomes available.

 

 

 

 

Fairfax May 10 2024.xlsx

Edited Saturday at 04:47 PM by Viking

[nwoodman]

8 hours ago, SafetyinNumbers said:

Q124 showed only $34.8m of income from Poseidon and that’s much closer to 43% of Q423 reported income (just eyeballing the difference between 2023FS and Q323 reported income).
 

I assume the same is true for Eurobank which doesn’t report Q1 until next week and Helios which also hasn’t reported Q1 yet.

 

Thanks that seems to work.  I might try some further back testing when I have a spare moment.  Now that these entities are making decent money it's a bit more important to understand any timing differences  

[nwoodman]

On 5/12/2024 at 2:43 AM, Viking said:

Eurobank is up $399 million and it is Fairfax’s largest equity holding at $2.84 billion.

Thanks @Viking.  There seems an inevitability that Eurobank pushes beyond the $3bn mark.  It feels like yesterday that the whole of FFH could be bought for $10 bn.  Unreal. 
 

A reminder Eurobank reports Thursday 16th May

 

https://www.eurobankholdings.gr/en/grafeio-tupou/etairiki-anakoinosi-29-04-24

Edited Monday at 07:31 AM by nwoodman

[nwoodman]

Eurobank reported some impressive results.  MS report on earnings attached.  Key take aways:

• Eurobank beat MSe and consensus by 22% and 19%, respectively, when adjusting for one-offs (VES costs). Reported net income was 17% ahead of MSe.
• The beat was largely driven by better non-interest income and provisions.
• Provisions were 8% lower than MSe and consensus, with a CoR of 68bps (down 20bps QoQ), driven by an improvement in Greece provisioning.
• Eurobank has sent an official application to the SSM with a proposed payout of 30%, corresponding to a dividend higher than EUR9 cents per share.
• This implies a dividend yield of 4.3%. Eurobank expects a (potential) approval to come in June, and dividend distribution in late July.

 

EUROBANK_20240516_1722.PDF

Edited 11 hours ago by nwoodman

[nwoodman]

A brief summary of the Q&A section of the Eurobank CC.  Transcript attached

 

1. Loan growth: Eurobank delivered loan growth in Q1 driven by corporate loans in Greece and retail in Bulgaria. The pipeline looks good and the bank is confident it will reach its full year targets.

 

Quote: "Overall, we are quite confident that will reach our target for the year that it is a net credit growth of EUR 1.3 billion in Greece and EUR 1 billion in Southeastern Europe, overall EUR 2.3 billion for the group..."

2. Net interest income: NII was strong in Q1, flat q/q but up 13.7% y/y, driven by loan and bond growth offsetting higher deposit costs. Q1 NII points to potentially beating full year guidance but it's too early to revise targets.

 

Quote: "Overall, the big picture for NII is that Q1 was better than our expectation... Q1 actually points to a better than budget performance. However, it is quite early in the year and at the moment we are not revising our forecast."

 

3. Asset quality: NPE ratio is expected to remain around 3% for 2024 with potential for cost of risk to come in lower than the <80bps guidance. 

 

Quote: "Overall, we expect that the NPE ratio for the full year 2024 to remain at the current levels. So circa 3%... As you can see on Page 32, the first quarter, cost of risk decrease to 68 basis points from 85 basis points in 2023... We may move lower than this initial guidance, but as Harris mentioned, we will provide you a full update."

 

4. Hellenic Bank: Eurobank expects to get regulatory approvals and close the increase to a 55% stake in Hellenic in the coming weeks. Hellenic's results will be consolidated from Q3.

Quote: "Over the next few weeks, we should receive the pending approvals and we should be able to close the outstanding transactions driving our percentage at 55%... subject to the regulatory approvals in the second quarter, we should also record any negative goodwill that we may have from the pending transactions."

5. Capital return: The proposed dividend payout ratio for 2023 profits is 30% all in cash, targeting 40% in 2024 potentially via a mix of cash dividends and buybacks.

 

Quote: "For the shareholder reward of this year out of 2023 financial results, as I mentioned in my introduction, we have proposed 30% payout ratio all in cash dividend... for next year, we envisage a higher payout ratio towards 40%. And in 2026, this may reach towards 50%... for next year and the following, we may consider a mix of cash dividend and share buyback."

EUROB - Transcripts.pdf

[Viking]

8 hours ago, nwoodman said:

A brief summary of the Q&A section of the Eurobank CC.  Transcript attached

 

1. Loan growth: Eurobank delivered loan growth in Q1 driven by corporate loans in Greece and retail in Bulgaria. The pipeline looks good and the bank is confident it will reach its full year targets.

 

Quote: "Overall, we are quite confident that will reach our target for the year that it is a net credit growth of EUR 1.3 billion in Greece and EUR 1 billion in Southeastern Europe, overall EUR 2.3 billion for the group..."

2. Net interest income: NII was strong in Q1, flat q/q but up 13.7% y/y, driven by loan and bond growth offsetting higher deposit costs. Q1 NII points to potentially beating full year guidance but it's too early to revise targets.

 

Quote: "Overall, the big picture for NII is that Q1 was better than our expectation... Q1 actually points to a better than budget performance. However, it is quite early in the year and at the moment we are not revising our forecast."

 

3. Asset quality: NPE ratio is expected to remain around 3% for 2024 with potential for cost of risk to come in lower than the <80bps guidance. 

 

Quote: "Overall, we expect that the NPE ratio for the full year 2024 to remain at the current levels. So circa 3%... As you can see on Page 32, the first quarter, cost of risk decrease to 68 basis points from 85 basis points in 2023... We may move lower than this initial guidance, but as Harris mentioned, we will provide you a full update."

 

4. Hellenic Bank: Eurobank expects to get regulatory approvals and close the increase to a 55% stake in Hellenic in the coming weeks. Hellenic's results will be consolidated from Q3.

Quote: "Over the next few weeks, we should receive the pending approvals and we should be able to close the outstanding transactions driving our percentage at 55%... subject to the regulatory approvals in the second quarter, we should also record any negative goodwill that we may have from the pending transactions."

5. Capital return: The proposed dividend payout ratio for 2023 profits is 30% all in cash, targeting 40% in 2024 potentially via a mix of cash dividends and buybacks.

 

Quote: "For the shareholder reward of this year out of 2023 financial results, as I mentioned in my introduction, we have proposed 30% payout ratio all in cash dividend... for next year, we envisage a higher payout ratio towards 40%. And in 2026, this may reach towards 50%... for next year and the following, we may consider a mix of cash dividend and share buyback."

EUROB - Transcripts.pdf 99.78 kB · 7 downloads

@nwoodman thanks for the updates. Much appreciated. I am liking this company more and more (and i already liked it a lot). Underpromise and overdeliver. Very well run. Continie to execute exceptionally well. 

Edited 2 hours ago by Viking