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WHAT'S ON TAP
HOT OFF THE PRESS
Fairfax wins IDBI Bank process with $5.6B bid
Fairfax Financial (FFH) was declared the strategic buyer for a 61% stake in IDBI Bank for $5.6B, contributing its interest in Go Digit Insurance and IIFL Capital (~$3B total) to help fund the deal…
… and create value for all parties, as the two entities get access to IDBI’s distribution. At its core, the transaction is a bet on India - which has seen growth in GDP per capita accelerate in recent decades…
… with plenty of upside as the economy develops (5% of Canada’s GDP per capita today). Moreover, IDBI can also benefit from credit market expansion…
… with India’s credit-to-GDP ratio sitting at half of Canada’s today (arguably too high). In combination with its recent $9B Boots deal, we expect these tailwinds will result in increased contribution from associates…
… which supports Fairfax’s $1B+ outlook…
… we can see a strong base of operating income now running at 5 billion on a consolidated basis and we continue to see that for the next three years to four years… This consists of interest in dividend income of CAD 2.5 billion plus. Underwriting profit of a CAD 1.5 billion and share of profits of associates of CAD 1 billion plus as well.
… and could represent long-term valuation upside, if the company’s successful track record of bank deals is any indication of what’s to come.
Building permits hit $14B
Building permits rose 9% to $14B, ahead of expectations for a 3% lift…
… driven by strength in multi-family construction, which was led by Ontario (+$0.7B), BC (+$0.2B) and Alberta (+$0.1B) and offset a small single-family decline…
… continuing what’s been a long-term trend, with multi-family and single-family unit creation up 71% and down 31% since 2018, respectively.
Non-residential permitting edged down slightly, as the decline in commercial intentions (mostly Quebec) was largely offset by gains in industrial and institutional.
Manufacturing sales climb to $80B
Manufacturing sales of $80B in August rose 1.5% sequentially, led by primary metals (up 14%) and chemicals (up 4%)…
… which offset weakness in transportation equipment (down 3%) and drove a rebound after last month’s decline. The trend continues in inventory, which moved higher for the eighth consecutive print…
… on a 3% bump in fabricated metals reserves that should dissipate, given unfilled orders in the category rose 4%.
ON OUR RADAR
GAINERS & LOSERS
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Fiera (FSZ) fell 13% today on the back of its preliminary Q3 AUM release, which showed assets declining 7% Q/Q…
… with rising rates causing $4B of negative market impact and $8B of outflows doing the rest. With private market AUM holding steady, the $12B drawdown was largely driven by public markets…
… with $5B attributable to sub-advised AUM. At more than 60% of company revenue…
… the 8% decline in public market assets should put pressure on fee income, which has already slowed over the past year…
… despite strong market performance (outflows have been meaningful), causing significant multiple compression as investors await signs of stabilization.
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