Fairfax stock positions

[nwoodman]

On 3/25/2024 at 6:56 PM, nwoodman said:

@This2ShallPass  I am hoping there a few questions asked about Atlas at the AGM. As referred to in an earlier post Graham Talbot the CFO departed after the last Fairfax AGM. It would be great to get some color around his leaving along with an overall update on their thinking in regard to this very large position.

 

https://www.linkedin.com/in/grahamstuarttalbot?utm_source=share&utm_campaign=share_via&utm_content=profile&utm_medium=ios_app

Just working my way thru the AGM transcript

 

I found it interesting that Sokol introduced Will Kostlivy as the CFO.  I wonder if that was news to Will.  Probably reading too much into it as I guess a lack of an acting CFO means automatically the gig is his until told otherwise

 

https://www.linkedin.com/in/william-kostlivy?utm_source=share&utm_campaign=share_via&utm_content=profile&utm_medium=ios_app

 

A good summary by Sokol, that has been well summarised by others

 

 

David Sokol

Thank you, Prem. It's a pleasure to be here. And as the other folks have commented, Fairfax is a phenomenal partner, and our whole team appreciates the relationship. Even when you have to work through difficult issues, they work through them professionally and you move on. Seaspan, essentially a shipping company, in '20 and '21, our management team, led by Bing Chen -- by the way, our CFO, Will Kostlivy, is here with me here today.

 

We recognized and particularly led by Bing and his development team that our customers needed refreshing of their vessels. And it was an interesting time because the market wasn't in great shape in '18 and '19, but with the new requirements for reduction of CO2, the age of the fleet that was out there, it became apparent that there was real opportunity, so working with the customers, we're building 70 new ships today. We've delivered 42. What I think is impressive about that for our team is that we designed these ships in cooperation with our customers, $8 billion construction program that we initiated in '20 and '21; simultaneously financed all the vessels to be coterminous with the long-term charters averaging 12 to 18 years. So we've delivered 42 of those ships.

 

Every one of them has been delivered early or on time, under budget. The management of the shipyards has been really something fun to watch. We'll deliver another 26 yet this year. And then 2 of that, the final 70, will be delivered in January of 2025, so the team has done a remarkable job. One of the really remarkable things that we didn't see coming is that those same ships today, because we locked in fixed pricing in 2020 and 2021, will be 30% more expensive.

 

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.

 

They go on to charter immediately when they're delivered. We operate the ships. We do not take any fuel risk in the vessels. We just manage and operate the ships. And then we'll have another significant growth step in 2026 because the rest of those ships will be on for the full year entirely.

 

So we'll be at 196 ships operating for that we have in a partnership. And then we have 6 extremely large car-carrying vessels that we're under contract to build. They'll go into construction later this year, delivered in '26 and '27. And each of those will carry about 10,000 vehicles, so they're actually the largest car carriers ever constructed. So that's the business.

 

It will be a step function type of business. It's not one that our revenues -- we don't take short-term risk. Or we don't get the reward in the short-term markets. We do everything on a long-term basis, tie our financings to those charters, but it's a great business. And Prem, I'm pleased to say you're -- on the same basis that we went private, your investment should go up about 50% this year just based on the increased cash flow of the business, so it's been a pleasure.

 

And we -- hopefully, the market will keep providing us opportunity in the future. I would suggest that, the next 2 or 3 years, we're going to see fewer opportunities because the amount of newbuilding, including our own, of the last 2 years is adding 30% to the existing market. The market only grows about 2% a year in the container shipping business. And so there's going to be a huge amount of scrapping of older vessels, predominantly driven by fuel choice, but it's going to -- there's going to be a couple of years of digestion of that much; unfortunately, all of our contracts. And I should mention one of our things we focus on is contracted backlog.

 

And we have -- last year, we used up about $1.5 billion of our contracted backlog. We've already replaced it, so far, this year, so we have about $18 billion, a little over $18 billion of contracted backlog of operational revenue. So basically trying to keep 5 or 7 years constantly ahead of ourselves before we need to recontract anything.

 

Prem Watsa

 

David, thank you very much. $18 billion of contracted revenue, David said, and fixed-price financing. They make the spread. Ships have gone up by 30% from when they bought it. This is the type and very, very risk conscious, unbelievably risk conscious.

[bluedevil]

@nwoodman I have not seen any links or postings with the AGM transcript.  Is that something you could share?  Thanks!

[nwoodman]

7 hours ago, bluedevil said:

@nwoodman I have not seen any links or postings with the AGM transcript.  Is that something you could share?  Thanks!

I found it via transcripts in Koyfin.  I only seem to be able to copy a paragraph at a time in the app.  Will try via the website later today for you

[hasilp89]

8 hours ago, bluedevil said:

@nwoodman I have not seen any links or postings with the AGM transcript.  Is that something you could share?  Thanks!

https://docs.google.com/document/d/1rW-8uDJFJzlu0jzAaPWXX_P1XdvvOeKTABhEV6ouSKk/edit?usp=sharing

 

it is available on tikr also. in a google doc here.

[UK]

5 hours ago, hasilp89 said:

https://docs.google.com/document/d/1rW-8uDJFJzlu0jzAaPWXX_P1XdvvOeKTABhEV6ouSKk/edit?usp=sharing

 

it is available on tikr also. in a google doc here.

 

Thank you very much!

[bluedevil]

11 hours ago, hasilp89 said:

https://docs.google.com/document/d/1rW-8uDJFJzlu0jzAaPWXX_P1XdvvOeKTABhEV6ouSKk/edit?usp=sharing

 

it is available on tikr also. in a google doc here.

Thank you!

[SafetyinNumbers]

11 hours ago, hasilp89 said:

https://docs.google.com/document/d/1rW-8uDJFJzlu0jzAaPWXX_P1XdvvOeKTABhEV6ouSKk/edit?usp=sharing

 

it is available on tikr also. in a google doc here.

Thanks for sharing. Do they have the FIH.U transcript as well?

[nwoodman]

22 minutes ago, SafetyinNumbers said:

Thanks for sharing. Do they have the FIH.U transcript as well?

Try this 

FIHU - Transcripts.pdf

[SafetyinNumbers]

17 minutes ago, nwoodman said:

Try this 

FIHU - Transcripts.pdf 220.18 kB · 5 downloads

Thanks! 

[gfp]

1 hour ago, nwoodman said:

Try this 

FIHU - Transcripts.pdf 220.18 kB · 8 downloads

Thanks - these transcripts are getting pretty good.  How do they get a name like Gobinath's perfectly transcribed?  Must not be AI?

[hasilp89]

lol no clue how they get the names right.

in general i find the tikr transcripts to be pretty good.

would also recommend the Quatr app - most EC/AGM/Investor Days/industry conferences can be streamed live or on replay. (although FFH AGM isn't on there!)

[yesman182]

43 minutes ago, hasilp89 said:

lol no clue how they get the names right.

in general i find the tikr transcripts to be pretty good.

would also recommend the Quatr app - most EC/AGM/Investor Days/industry conferences can be streamed live or on replay. (although FFH AGM isn't on there!)

Quatr is terrific for listening to calls, reading transcripts or earning releases. 

[Haryana]

this from your transcript on Fairfax India

 

Prem:

"India is going to have that same opportunity. As someone was saying here that the
financial system grows at a multiple of nominal growth. So the nominal growth is 10%,
12%, this will grow at 2, 2.5x, maybe even more. And that's just the industry. And then on
top of that, if you're good and our guys are very good, they'll grow faster than that."

 

What this translates to is a potential of 30% CAGR over 30 years.

 

[Xerxes]

Speaking of past AGM transcript on FIH, it is worth going back to couple year when they made an analogy to “Ford company stock that was chronologically undervalued trading in a foreign market. (I think Canada?)”
 

That comment was made as an answer to FIH trading at a discount. And that is the case study that they have been looking at. Along those lines. 
 

[nwoodman]

I'm playing catch-up on some reading and came across this piece by Nida Iqbal at MS. Given last night's action in Eurobank, it looks like it might have caught up—some. Still, it makes for an interesting comparison of the Greek banks to their peers. 

 

EEMEA_20240408_2301.PDF

[nwoodman]

Early this month Jefferies upgraded Eurobank with a PT of €2.60 on the basis that the Hellenic “synergies” are being lowballed.  Eurobank management have rightly been downplaying the opportunity.

 

Does anyone have the Jefferies note? Please post or PM.  I have asked around but no joy.

 

The note is referred to here:

 

https://m.au.investing.com/news/stock-market-news/jefferies-upbeat-on-eurobank-shares-cites-growth-and-diversification-93CH-3188588?ampMode=1

 

 

 

 

 

[MMM20]

11 hours ago, nwoodman said:

Early this month Jefferies upgraded Eurobank with a PT of €2.60 on the basis that the Hellenic “synergies” are being lowballed.  Eurobank management have rightly been downplaying the opportunity.

 

Does anyone have the Jefferies note? Please post or PM.  I have asked around but no joy.

 

The note is referred to here:

 

https://m.au.investing.com/news/stock-market-news/jefferies-upbeat-on-eurobank-shares-cites-growth-and-diversification-93CH-3188588?ampMode=1

 

 

 

 

 

that pretty much covers it...

[nwoodman]

41 minutes ago, MMM20 said:

 

 

that pretty much covers it...

Sure does.  Many thanks @MMM20

[Viking]

On 4/21/2024 at 4:25 AM, nwoodman said:

Just working my way thru the AGM transcript

 

I found it interesting that Sokol introduced Will Kostlivy as the CFO.  I wonder if that was news to Will.  Probably reading too much into it as I guess a lack of an acting CFO means automatically the gig is his until told otherwise

 

https://www.linkedin.com/in/william-kostlivy?utm_source=share&utm_campaign=share_via&utm_content=profile&utm_medium=ios_app

 

A good summary by Sokol, that has been well summarised by others

 

 

David Sokol

Thank you, Prem. It's a pleasure to be here. And as the other folks have commented, Fairfax is a phenomenal partner, and our whole team appreciates the relationship. Even when you have to work through difficult issues, they work through them professionally and you move on. Seaspan, essentially a shipping company, in '20 and '21, our management team, led by Bing Chen -- by the way, our CFO, Will Kostlivy, is here with me here today.

 

We recognized and particularly led by Bing and his development team that our customers needed refreshing of their vessels. And it was an interesting time because the market wasn't in great shape in '18 and '19, but with the new requirements for reduction of CO2, the age of the fleet that was out there, it became apparent that there was real opportunity, so working with the customers, we're building 70 new ships today. We've delivered 42. What I think is impressive about that for our team is that we designed these ships in cooperation with our customers, $8 billion construction program that we initiated in '20 and '21; simultaneously financed all the vessels to be coterminous with the long-term charters averaging 12 to 18 years. So we've delivered 42 of those ships.

 

Every one of them has been delivered early or on time, under budget. The management of the shipyards has been really something fun to watch. We'll deliver another 26 yet this year. And then 2 of that, the final 70, will be delivered in January of 2025, so the team has done a remarkable job. One of the really remarkable things that we didn't see coming is that those same ships today, because we locked in fixed pricing in 2020 and 2021, will be 30% more expensive.

 

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.

 

They go on to charter immediately when they're delivered. We operate the ships. We do not take any fuel risk in the vessels. We just manage and operate the ships. And then we'll have another significant growth step in 2026 because the rest of those ships will be on for the full year entirely.

 

So we'll be at 196 ships operating for that we have in a partnership. And then we have 6 extremely large car-carrying vessels that we're under contract to build. They'll go into construction later this year, delivered in '26 and '27. And each of those will carry about 10,000 vehicles, so they're actually the largest car carriers ever constructed. So that's the business.

 

It will be a step function type of business. It's not one that our revenues -- we don't take short-term risk. Or we don't get the reward in the short-term markets. We do everything on a long-term basis, tie our financings to those charters, but it's a great business. And Prem, I'm pleased to say you're -- on the same basis that we went private, your investment should go up about 50% this year just based on the increased cash flow of the business, so it's been a pleasure.

 

And we -- hopefully, the market will keep providing us opportunity in the future. I would suggest that, the next 2 or 3 years, we're going to see fewer opportunities because the amount of newbuilding, including our own, of the last 2 years is adding 30% to the existing market. The market only grows about 2% a year in the container shipping business. And so there's going to be a huge amount of scrapping of older vessels, predominantly driven by fuel choice, but it's going to -- there's going to be a couple of years of digestion of that much; unfortunately, all of our contracts. And I should mention one of our things we focus on is contracted backlog.

 

And we have -- last year, we used up about $1.5 billion of our contracted backlog. We've already replaced it, so far, this year, so we have about $18 billion, a little over $18 billion of contracted backlog of operational revenue. So basically trying to keep 5 or 7 years constantly ahead of ourselves before we need to recontract anything.

 

Prem Watsa

 

David, thank you very much. $18 billion of contracted revenue, David said, and fixed-price financing. They make the spread. Ships have gone up by 30% from when they bought it. This is the type and very, very risk conscious, unbelievably risk conscious.

 

@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. 

 

 

Edited 1 hour ago by Viking