Fairfax stock positions

[SafetyinNumbers]

5 hours ago, TwoCitiesCapital said:

 

Correct. The carrying value is increased for their proportional earnings and decreased for any dividends paid. 

 

It's a bit of a crude mechanism assuming the purchase price plus retained earnings is the value, but it's grounded in reason. 

The mechanics are interesting and help explain why consensus estimates are way too low on any FTM period. Eurobank for example trades at ~6x earnings but our carrying value is lower than the market value so the earnings yield boosts returns of the non-fixed income portfolio disproportionately especially given its size. 

Edited August 28 by SafetyinNumbers

[nwoodman]

Reuters article summarising the state of play in India.  I hadn’t realised Emirates NDB were also in the running for Yes Bank.  

 

Foreign lenders lured by rare stake sales in India banks, but tighter rules weigh

 

Summary:

1. Stake sales:
   - Yes Bank: 51% stake
   - IDBI Bank: 60.72% stake

2. Interested foreign entities:
   - SMBC (Japan), Emirates NBD, Fairfax Group (Canada)

3. Indian market attractiveness:
   - Economic growth forecast: 7.2%
   - Bank credit growth: ~14.4% (2x economic growth)
   - Gross bad loans: 2.8% of total assets

4. Foreign lenders' market share:
   - March 2000: 8.4%
   - March 2024: 3.4%

5. State-owned banks' dominance:
   - 52% of bank credit

6. Valuations:
   - Yes Bank: ~$10 billion, 1.58x 12-month forward P/B
   - IDBI Bank: $10.4 billion, 1.97x 12-month trailing P/B
   - Sector median P/B: 1.45x

7. Regulatory requirement:
   - Reduce shareholding to 26% over 15 years  refer

• Reserve Bank of India(Acquisition and Holding of Shares or Voting Rights in Banking Companies) Directions, 2023
• Guidelines on Acquisition and Holding of Shares or Voting Rights in Banking Companies

8. Timeline:
   - IDBI Bank financial bids expected by end of current fiscal year

Edited August 29 by nwoodman

[This2ShallPass]

On 8/28/2024 at 12:48 AM, adventurer said:

Ah ok, so due to the equity accounting method profits over the years increased the value of the investment even though the company`s market cap never reached that amount.

The company has a market cap of approx. $200 million. Does anyone know when FFH invested in Exco for the first time? Because over $218 million in profits seems like a lot. 

I bought Exco (following Chou) when it was ~$0.7. Then in a moment of dumbness sold it for a good % gain ~$5.5 (but $ wise less as I had a small position). Should have just let it ride, now we cannot buy Exco, brokers only allow closing.

 

Here's what Francis Chou had to say about Exco in his semi annual report. Might give you another perspective on value.

 

"In early July 2019, the company emerged from bankruptcy and the 1.75 lien term loans were converted to 28.38 equity shares for every US$1,000 in par value, after netting out certain adjustments. The equivalent price was US$9.51 per share of EXCO. Since it is a private company, I am not at liberty to divulge the latest financial statements, but what I can tell you is that my calculation of its PV-10 value was more than US$1.8 billion (roughly US$38 per share) based on the New York Mercantile Exchange (NYMEX) forward pricing as of December 31, 2023, and the net proved reserves were 2.9 trillion cubic feet equivalent. Its number of outstanding shares as of December 31, 2023 was 47,386,708. We estimate its EBITDA for the year ending 2024 will be between US$200 million and US$250 million. As a comparison, in 2018, the PV-10 value was US$750 million. As of June 30, 2024, the share of EXCO was valued at $21.05 by Kroll, an independent third-party valuator."