Fairfax stock positions

[SafetyinNumbers]

2 hours ago, Thrifty3000 said:

 

I just back-of-the enveloped the potential per-FFH-share impact of Eurobank’s projections between now and 2026. Am I missing something? These numbers almost seem too good to be true.

Looks to me like FFH currently owns $2.8 billion worth of Eurobank. 
 

If the stock price simply follows Eurobank’s projected TBV per share then FFH’s ownership will be worth $3.7 billion in 2026.

 

If the stock price grows to 12x projected 2026 earnings then FFH’s ownership will be worth $5.7 billion.

 

Following the above logic FFH’s per share pre-tax gains from Eurobank will be somewhere between $45 and $136 per share between now and 2026. (That’s pretty material since FFH doesn’t include investment gains in projected earnings estimates.)

 

*On top of the capital gains, in 2026 Eurobank anticipates paying dividends of $.19 per share. For FFH’s 1,266,000,000 shares, the dividends will equate to approx $240 million! Or, approx $11 per FFH share!

All good points but it’s the EPS per share of $5+/quarter and growing that I really appreciate. Analysts for the most part expect Associates income to be flat or down. This increases the carrying value so effectively are the only gains FFH gets to include in book value. 

[glider3834]

https://cyprus-mail.com/2024/05/24/hellenic-bank-posts-e93-3-million-profit-in-first-quarter-new-lending-hits-e208-million/

[nwoodman]

8 hours ago, glider3834 said:

https://cyprus-mail.com/2024/05/24/hellenic-bank-posts-e93-3-million-profit-in-first-quarter-new-lending-hits-e208-million/

Thanks @glider3834 this is “getting better all the time” (sung to the Beatles tune).  

 

A quick recap via Perplexity with some extra notes

 

Intro

 

Eurobank, a major Greek bank, is in the process of acquiring a majority stake in Hellenic Bank, the second-largest bank in Cyprus. Here are the key details about this takeover, including economic aspects and share prices:

Eurobank's Stake in Hellenic Bank

• Initial Stake: Eurobank initially acquired a 29.2% stake in Hellenic Bank in June 2021 by buying shares from a fund manager (€1.80?).
• Recent Acquisitions: In August 2023, Eurobank signed agreements to acquire an additional 26.1% stake from major shareholders like Pimco, Senvest, and Wargaming Group (€2.35). This would increase Eurobank's total stake to 55.3%.
• Regulatory Approvals: The Cyprus Competition Commission has approved this 26.1% stake acquisition, concluding it does not harm market competition. Further approvals are pending from the Central Bank of Cyprus, European Central Bank, and the insurance supervisor.

Mandatory Public Offer

• Legal Requirement: After acquiring the 55.3% stake, Eurobank is required by Cypriot law to make a mandatory public offer to purchase the remaining shares of Hellenic Bank from minority shareholders .
• Investment Estimate: The total investment by Eurobank could reach up to €800 million (and the rest) if all remaining shareholders tender their shares in the public offer.

Economic Rationale and Benefits

• Strategic Alignment: The acquisition aligns with Eurobank's strategy to strengthen its presence in core markets like Cyprus and increase profits from international operations.
• Economic Confidence: It is seen as a vote of confidence in the Cypriot economy's prospects after recovering from the 2012-13 financial crisis.
• Synergies: Combining Eurobank Cyprus and Hellenic Bank would create the largest banking group in Cyprus with expected synergies in costs and revenues. Usually hate this term but it could be material as management remains mum on this.
• Utilization of Liquidity: Eurobank aims to utilize Hellenic Bank's excess liquidity to support lending and projects in Cyprus and the broader region.

Share Prices and Financial Performance

• Hellenic Bank Share Price:  See share price graph below, its up around 14% with a  current market cap €1.11bn
• Eurobank's Purchase Price: Eurobank agreed to acquire shares at €2.35 each in its recent transactions.
• Hellenic Bank's Financial Health: Hellenic Bank reported a net profit margin of 31.54% and a debt/equity ratio of 31.7%. The bank's earnings for the trailing twelve months (TTM) were €176.14 million, with a revenue of €558.47 million.  For reference they just did €93.3m for the quarter! Mainly due to NII
• https://www.hellenicbank.com/en/group/results-and-reporting

Next Steps and Challenges

• Regulatory Approvals: After regulatory approvals, Eurobank will launch the mandatory public offer, likely in Q2 2024.
• Merger Plans: Eurobank's ultimate goal is to fully merge the two banks in Cyprus, but this requires agreement from Hellenic's remaining major shareholders like Demetra Holdings.
• Shareholder Challenges: One shareholder, Demetra Holdings, has challenged the competition approval, potentially delaying the merger process.
• Future Synergies: The timing and structure of the merger, as well as potential synergies, will be clarified after the public offer and new Hellenic Bank management.

 

Can’t wait to see what this looks like when fully integrated

 

 

 

Edited May 25 by nwoodman

[Thrifty3000]

Thanks to this great forum and our worldly friends at FFH, I now know where Cyprus is (here I was thinking it was in Texas). Investing is the gift that keeps on giving.

Edited May 25 by Thrifty3000

[dartmonkey]

On 5/24/2024 at 9:54 AM, petec said:

I also own Ensign. Phenomenal levered exposure to the slow tightening of the north American land driller market (driven by wear and tear and rigs going overseas), trading at a 50% free cash flow yield.

Interesting. Do you care to expound, or say where one could read more anlaysis about this company?

[nwoodman]

Foran Mining released the results of their Winter drilling program on the Tesla deposit. As the mine is already feasible, Tesla is the icing on the cake. The close proximity to Macilvenna Bay sweetens the deal and in all probability it is likely to be an extension of the main deposit.   Foran Mining is a ~250m position for Fairfax.

 

https://foranmining.com/wp-content/uploads/2024/05/News-Release-Foran-Announces-Additional-Winter-Expansion-Drill-Results-at-the-Tesla-Zone.pdf

 

"Our bold strategy to define the potential scale of Tesla during the winter ice-drilling campaign has effectively doubled the size of the mineralized footprint as our outstanding exploration results continue. The major down-dip step-out holes released today have provided some of the thickest and highest-grade results at Tesla to date, while once again affirming the consistent presence of the mineralized zone across significant strike and dip extents. The expanding scale of Tesla and its potential to continue beyond the currently drilled dimensions represents significant upside for Foran as we progress our flagship development project at the adjacent McIlvenna Bay Deposit

 

High-grade drill results:

• Hole TS-24-20: 26.9m grading 1.23% Cu, 7.55% Zn, 38.4 g/t Ag and 0.20 g/t Au (3.67% CuEq)
• Hole TS-24-15: 11.8m grading 0.75% Cu, 8.22% Zn, 41.8 g/t Ag and 0.12 g/t Au (3.41% CuEq)

 

McIlvenna Bay Project

1. Probable Mineral Reserves:

   • Total: 25.7 million tonnes
   • Grades: 2.51% copper equivalent (CuEq), containing approximately 697 million pounds of copper and 1.4 billion pounds of zinc

2. Indicated Resources:

   • Total: 39 million tonnes
   • Grades: 1.20% copper, 2.16% zinc, 0.41 g/t gold, and 14 g/t silver

3. Inferred Resources:

   • Total: 5 million tonnes
   • Grades: 1.8% copper equivalent

Bigstone Project

1. Indicated Resources:

   • Total: 1.98 million tonnes
   • Grades: 2.22% copper equivalent, including 1.88% copper, 0.92% zinc, 0.25 g/t gold, and 9.5 g/t silver[1].

2. Inferred Resources:

   • Total: 1.88 million tonnes
   • Grades: 2.14% copper equivalent, including 1.35% copper, 2.75% zinc, 0.32 g/t gold, and 12.0 g/t silver.

Tesla Zone (Part of McIlvenna Bay Project)

1. Dimensions:
   • Strike Length: 1,050 meters
   • Dip Extent: 500 meters
   • The zone remains open in all directions, indicating potential for further expansion

[glider3834]

https://www.tradewindsnews.com/containers/seaspan-to-splash-1-6bn-on-container-ship-newbuilding-comeback-sources-say/2-1-1651499

[nwoodman]

1 hour ago, glider3834 said:

https://www.tradewindsnews.com/containers/seaspan-to-splash-1-6bn-on-container-ship-newbuilding-comeback-sources-say/2-1-1651499

Thanks @glider3834.  Paywalled for me but available here https://archive.is/wOcd6

 

Key points

 

- Seaspan is reportedly returning to ordering container ship newbuildings after nearly a 3 year pause. The orders are said to be worth $1.58 billion in total.

- Seaspan has allegedly ordered 6 LNG dual-fueled 13,000 TEU ships from Chinese state-owned shipyard Hudong-Zhonghua, likely against charters to Ocean Network Express (ONE). The price is said to be at least $180 million per ship.

 

- Seaspan has also reportedly ordered 4 methanol dual-fueled 9,000 TEU ships from private Chinese yard Yangzijiang Shipbuilding for about $125 million each, likely against charters to AP Moller-Maersk. The design is said to be the same as 6 Maersk methanol-fueled ships ordered from the same yard last year.

 

- Deliveries of the 13,000 TEU ships are expected between early 2027-2028, while the 9,000 TEU vessels are due between late 2027-2028. 

 

- Seaspan did not order any container ships in 2022-2023 as liner companies were ordering ships directly themselves during that period. 

 

- In 2023, Seaspan made its first orders for 8 LNG-fueled car carriers from Chinese yards against 20-year charters to Hyundai Glovis, marking Seaspan's entry into the car carrier sector.

 

- Seaspan has a current fleet of 176 container ships with more newbuilds delivering soon, many against charters to major liners like MSC, ONE and ZIM.

 

It would be interesting to know the terms for the associated debt but good to see them locking in future growth.  

[Haryana]

Looks like MidAmerican playbook in play.

 

[glider3834]

1 hour ago, nwoodman said:

Thanks @glider3834.  Paywalled for me but available here https://archive.is/wOcd6

 

Key points

 

- Seaspan is reportedly returning to ordering container ship newbuildings after nearly a 3 year pause. The orders are said to be worth $1.58 billion in total.

- Seaspan has allegedly ordered 6 LNG dual-fueled 13,000 TEU ships from Chinese state-owned shipyard Hudong-Zhonghua, likely against charters to Ocean Network Express (ONE). The price is said to be at least $180 million per ship.

 

- Seaspan has also reportedly ordered 4 methanol dual-fueled 9,000 TEU ships from private Chinese yard Yangzijiang Shipbuilding for about $125 million each, likely against charters to AP Moller-Maersk. The design is said to be the same as 6 Maersk methanol-fueled ships ordered from the same yard last year.

 

- Deliveries of the 13,000 TEU ships are expected between early 2027-2028, while the 9,000 TEU vessels are due between late 2027-2028. 

 

- Seaspan did not order any container ships in 2022-2023 as liner companies were ordering ships directly themselves during that period. 

 

- In 2023, Seaspan made its first orders for 8 LNG-fueled car carriers from Chinese yards against 20-year charters to Hyundai Glovis, marking Seaspan's entry into the car carrier sector.

 

- Seaspan has a current fleet of 176 container ships with more newbuilds delivering soon, many against charters to major liners like MSC, ONE and ZIM.

 

It would be interesting to know the terms for the associated debt but good to see them locking in future growth.  

cheers @nwoodman

 

here is their their weighted avg interest rate at Mar-24 

 

'The weighted average interest rate for March 31, 2024 was 6.83% compared to 6.19% at March 31, 2023.'

 

noticed they declared a 52M div on common shares in Q1, a 38.1M div paid Mar & 13.9M div paid in Apr - not sure if 13.9M was a special div ie a once-off or whether they have lifted their dividend rate from 37M per qtr in 2023 to 52M per qtr - we will have to wait & see over next few qtrs

 

 

 

 

 

 

[nwoodman]

22 minutes ago, glider3834 said:

cheers @nwoodman

 

here is their their weighted avg interest rate at Mar-24 

 

'The weighted average interest rate for March 31, 2024 was 6.83% compared to 6.19% at March 31, 2023.'

 

noticed they declared a 52M div on common shares in Q1, a 38.1M div paid Mar & 13.9M div paid in Apr - not sure if 13.9M was a special div ie a once-off or whether they have lifted their dividend rate from 37M per qtr in 2023 to 52M per qtr - we will have to wait & see over next few qtrs

 

 

 

 

 

 

Thanks,  have you seen anything with respect to them gaining investment grade?  I recall unencumbered vessels is part of the criteria.  The summary I provided to the ATCO thread had this quote “Growing the Company's base of unencumbered assets is a fundamental objective in order to achieve an investment grade credit rating, as well as a potential source of liquidity through secured financing or asset sales”.  
 

I guess at this stage there would only be a deposit due to secure the build slot, so hopefully they gain an upgrade or two before having to finance another 1bn+
 

This game is economies of scale so once their borrowing cost is competitive coupled with their operational expertise, it gets very interesting. 

[petec]

On 5/30/2024 at 1:46 AM, nwoodman said:

It would be interesting to know the terms for the associated debt but good to see them locking in future growth.  

 

The debt may not be arranged yet - in the last newbuild binge it was quite often finalised after the deals were announced.

[glider3834]

On 5/30/2024 at 4:13 PM, nwoodman said:

Thanks,  have you seen anything with respect to them gaining investment grade?  I recall unencumbered vessels is part of the criteria.  The summary I provided to the ATCO thread had this quote “Growing the Company's base of unencumbered assets is a fundamental objective in order to achieve an investment grade credit rating, as well as a potential source of liquidity through secured financing or asset sales”.  
 

I guess at this stage there would only be a deposit due to secure the build slot, so hopefully they gain an upgrade or two before having to finance another 1bn+
 

This game is economies of scale so once their borrowing cost is competitive coupled with their operational expertise, it gets very interesting. 

no - most recent KBRA report below - but I do notice their secured vessel financing program has BBB rating

 

'On August 23, 2023, KBRA affirmed the BB+ issuer rating of Atlas Corp. (Atlas), a global asset management company based in Vancouver, BC with focuses on assets in the maritime sector, energy sector and other infrastructure verticals. KBRA also affirmed Atlas' wholly-owned subsidiary Seaspan Corporation’s (Seaspan) BB+ issuer rating, the BB+ rating on Seaspan’s $750 million senior unsecured notes due August 2029, as well as the BBB ratings of Seaspan’s $1.1 billion Term Loan due March 2028, $410 million Term Loan due March 2029, and $400 million Revolving Credit Facility due March 2028 comprising the secured Vessel Portfolio Financing Program. The ratings Outlook is Stable.'

 

https://www.kbra.com/publications/rrpFtbKq/kbra-releases-surveillance-report-for-atlas-corporation-and-seaspan-corporation

[glider3834]

Eurobank S.A. has now secured 55.3% (~228M shares) of Hellenic and submitted mandatory takeover bid for remaining shares 44.7% (~184M) at  €2.56  per share 

 

https://cyprus-mail.com/2024/06/04/eurobank-now-holds-55-3-per-cent-stake-in-hellenic-bank/

https://www.eurobank.gr/en/group/grafeio-tupou/etairiki-anakoinosi-04-06-24

Edited June 4 by glider3834

[SafetyinNumbers]

40 minutes ago, glider3834 said:

Eurobank S.A. has now secured 55.3% (~228M shares) of Hellenic and submitted mandatory takeover bid for remaining shares 44.7% (~184M) at  €2.56  per share 

 

https://cyprus-mail.com/2024/06/04/eurobank-now-holds-55-3-per-cent-stake-in-hellenic-bank/

https://www.eurobank.gr/en/group/grafeio-tupou/etairiki-anakoinosi-04-06-24

Terrific news, thanks for sharing. The stock seems to be trading above the tender price so I assume there will be a bump at some point. Did you see an expiry date on the offer?

[nwoodman]

@glider3834 that is good news.  Importantly is there any provision to shake out Demetra Holdings  and Logicom (25% between them)? I am reading between the lines but it almost appears to be an ideological reticence to sell.  I guess everyone has their price but hopefully €2.56 is getting close.

Edited June 5 by nwoodman

[SafetyinNumbers]

3 minutes ago, nwoodman said:

@glider3834 that is good news.  Importantly is there any provision to shake out Demetria Holdings  and Logicom (25% between them)? I am reading between the lines but it almost appears to be an ideological reticence to sell.  I guess everyone has their price but hopefully €2.56 is getting close.

I got the impression at the AGM that the resistance is a negotiating tactic. I’m not sure how much is necessary to close the deal or if they have to make whole the previous sellers on a bump.

[glider3834]

6 hours ago, nwoodman said:

@glider3834 that is good news.  Importantly is there any provision to shake out Demetra Holdings  and Logicom (25% between them)? I am reading between the lines but it almost appears to be an ideological reticence to sell.  I guess everyone has their price but hopefully €2.56 is getting close.

I believe they can't do a minority  'squeeze out' as they would need to reach a 90% shareholding first & issue is as you point out Demetra is sitting on over 20% 

 

They originally offered EUR 2.35 to Poppy S.a.r.l & others and that was raised to EUR 2.56 in line with mandatory bid - hopefully they can reach agreement but if not,  this article tables some different scenarios if Demetra/Dimitra & ETYK don't participate in public offer

https://www.philenews.com/oikonomia/kypros/article/1476226/theli-100-tis-ellinikis-trapezas-i-eurobank/ (might need google translate)

 

one takeaway from article - Eurobank I believe would need around 75% of votes to approve merger of Hellenic with Eurobank Cyprus - so 75% would be key initial target with their public offer.

 

Edited June 5 by glider3834

[glider3834]

6 hours ago, SafetyinNumbers said:

Terrific news, thanks for sharing. The stock seems to be trading above the tender price so I assume there will be a bump at some point. Did you see an expiry date on the offer?

not sure but should be in public offer document - I did find this also

 

'the acceptance period starts (between 30 and 55 days, although it can be extended to 75 days) and “within 3 months of the end of the time allowed for acceptance of the bid”, the offeror has the right to “squeeze-out” (section 36(2) of the Takeover Bids Law).'

https://www.globallegalinsights.com/practice-areas/mergers-and-acquisitions-laws-and-regulations/cyprus/

 

[Viking]

1 hour ago, glider3834 said:

I believe they can't do a minority  'squeeze out' as they would need to reach a 90% shareholding first & issue is as you point out Demetra is sitting on over 20% 

 

They originally offered EUR 2.35 to Poppy S.a.r.l & others and that was raised to EUR 2.56 in line with mandatory bid - hopefully they can reach agreement but if not,  this article tables some different scenarios if Demetra/Dimitra & ETYK don't participate in public offer

https://www.philenews.com/oikonomia/kypros/article/1476226/theli-100-tis-ellinikis-trapezas-i-eurobank/ (might need google translate)

 

one takeaway from article - Eurobank I believe would need around 75% of votes to approve merger of Hellenic with Eurobank Cyprus - so 75% would be key initial target with their public offer.

 

@glider3834 thanks for bringing this forward and for providing so much detail. 

 

The first step was getting approval from regulators. Getting that done and this quickly is a big deal. The Hellenic Bank acquisition is shaping up to be a significant near-term catalyst for Eurobank’s business and earnings. Hellenic Bank’s pending big move into insurance adds another really interesting layer to this story.
 

Step 2 is proceeding with a mandatory offer and that is where we are today. The article you linked to says this process should be completed by the end of July. It will be interesting to see what quantity of shares get tendered at EUR 2.56. 
 

I have no idea how this plays out. I am confident Eurobank has a plan. Their Q2 earnings call should be interesting. Perhaps a few of the research houses (like Morgan Stanley) shed some light on how things might unfold.

Edited June 5 by Viking

[Xerxes]

On 5/25/2024 at 12:43 PM, Thrifty3000 said:

Thanks to this great forum and our worldly friends at FFH, I now know where Cyprus is (here I was thinking it was in Texas). Investing is the gift that keeps on giving.

 

name me an African country whose name starts with a “D” but it is silent when pronounced. 
 

it is also the only country in the world that simultaneously hosts a Chinese, a French, an Italian, Japanese and American military base. Which in case of Japan is its ONLY foreign military base. 

[Alekbaylee]

Djibouti

[Xerxes]

45 minutes ago, Alekbaylee said:

Djibouti

100% 

[glider3834]

17 hours ago, Viking said:

@glider3834 thanks for bringing this forward and for providing so much detail. 

 

The first step was getting approval from regulators. Getting that done and this quickly is a big deal. The Hellenic Bank acquisition is shaping up to be a significant near-term catalyst for Eurobank’s business and earnings. Hellenic Bank’s pending big move into insurance adds another really interesting layer to this story.
 

Step 2 is proceeding with a mandatory offer and that is where we are today. The article you linked to says this process should be completed by the end of July. It will be interesting to see what quantity of shares get tendered at EUR 2.56. 
 

I have no idea how this plays out. I am confident Eurobank has a plan. Their Q2 earnings call should be interesting. Perhaps a few of the research houses (like Morgan Stanley) shed some light on how things might unfold.

no worries @Viking- definitely lot of moving parts with this deal

[glider3834]

Fairfax's dividend from Eurobank should be close to EUR 116M based on 34% reported stake

 

https://www.bloomberg.com/news/articles/2024-06-06/greek-banks-get-ecb-approval-for-first-payouts-since-2008-crisis?utm_source=google&utm_medium=bd&cmpId=google