Fairfax India Holdings: Trading Close To Book Value

2025-03-05 12:44:09 ET

Summary

• Fairfax India Holdings Corporation trades at a 15% discount on its book value, which is quite typical for holding companies.
• The valuation of BIAL is said to be conservative by management, trading at 9.5x free cash flows, lower than other airport operators in the West.
• Though some discount is required for the Indian market on BIAL.
• Nonetheless, the FFXDF valuation doesn't look that bad after all, especially with costs of capital having peaked now for some time in India. Though, we don't see an overwhelming buy case.

Fairfax India Holdings Corporation ( FFXDF ) has closed in on its book value of around $20 , trading at around a 15% discount to that book value, which is quite normal for a holding company. After the quarter, they are looking to close another 10% stake investment in the Bangalore airport, “BIAL,” expecting to cost them $255 million in aggregate over three installments . This means they are paying above their fair value as per their latest valuation declarations in their Q2 , but this is just incidental. In our previous coverage of Fairfax India, we evaluated the valuation model used for BIAL. We had concerns that a DCF approach may be overstating the situation a bit. This is particularly where despite higher discounts, horizon values might be dominating the picture and where there weren't real revisions in cost of capital assumptions despite 2022-2023 being a period of enhanced inflation. But we question now our previous conclusions, as at the $1.6 billion fair value, the valuation is only 9.5x free cash flows, which is less than what other airport operators trade for. The cash flows have also been under a reasonable ongoing pressure to expand the airport, whose terminal size could be very large with possibly 3 terminals, and T2 seeing a major expansion with works starting soon....

Read the full article on Seeking Alpha

For further details see: