Chit Chat Stocks - Fairfax India: The Best Asian Stock You Can Buy Today? (Hidden Value)

Episode Date: October 22, 2025

On this episode of Chit Chat Stocks, we speak with Michael Fritzell of Asian Century Stocks. We discuss why investors should consider investing in Asia, and then go through a case study of a cheap stock he has covered on the newsletter. (00:00) Introduction (03:41) Investing in Asia: Opportunities and Risks (07:16) Stock case study (17:09) Investing in airports (31:28) Managing the macro (34:30) India's Manufacturing Challenges and Growth Prospects (43:23) Investing in Asia: Common Mistakes and Insights (48:25) Opportunities in the Philippines (53:11) Capital Returns and Investment Strategies (56:50) Currency Risks in Asian Markets (01:00:25) Changes in Japanese Corporate Governance ASIAN CENTURY STOCKS: https://www.asiancenturystocks.com/ ***************************************************** JOIN OUR EMAIL NEWSLETTER AND CHAT COMMUNITY: https://chitchatstocks.substack.com/  ********************************************************************* Chit Chat Stocks is presented by Interactive Brokers. Get professional pricing, global access, and premier technology with the best brokerage for investors today:  https://www.interactivebrokers.com/  Interactive Brokers is a member of SIPC.  ********************************************************************* Fiscal.ai is building the future of financial data. With custom charts, AI-generated research reports, and endless analytical tools, you can get up to speed on any stock around the globe. All for a reasonable price.  Use our LINK and get 15% off any premium plan: ⁠https://fiscal.ai/chitchat  ********************************************************************* Portseido is your best portfolio tracking & reporting solution that helps you track all investments in one place. We personally use the software to track our portfolio returns across brokerage accounts. Try it for free today: https://portseido.com/?fpr=ryan63  ********************************************************************* Disclosure: Chit Chat Stocks hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Stocks. On this show, hosts Ryan Henderson and Brett Schaefer analyze businesses and riff on the world of investing. As a quick reminder, Chit Chat Stocks is a CCM Media Group podcast. Anything discussed on Chit Chat Stocks by Ryan, Brett, or any other podcast guest is not formal advice or recommendation. Now, please enjoy this episode. Welcome into Chit Chat Stocks, the podcast to help you find your next great investment. Today we have a first-time guest, someone we should have had a long time ago. We've interacted online, we've known each other on Twitter, Substack. It's Michael Fritzell, the author of Asian Century Stocks, a newsletter focused on investing in the Asian markets.

Today we're going to be talking a little bit about investing in Asia broadly, But we're going to spend a lot of time talking about an interesting stock in the region, Fairfax, India. But first, we want to lay the groundwork. Michael, what is Asian Century Stocks? Why did you start this newsletter? What do you cover? And who is it for? Well, thank you so much for the invitation.

I write a newsletter about Asian equities. And I think it's a little bit unique because the market is still quite niche. Foreigners, Europeans, Americans, they like to invest in Chinese tech, perhaps. But the rest of the region is kind of untouched so far. So I felt there was an opportunity to cover some of these lesser known names, specifically with regards to value stocks. And that's really the approach that I take. Solid blue chips with reasonably low valuations. Um, so I've been doing that for about four years now, four and a half years.

Um, I was one of the earlier, I guess, finance sub stacks, um, back back in 2021. I think I started on this exact same day as Alex Morris, uh, of the science of hitting a TSOH. Um, so I've been there quite some time. I just moved over to another platform called ghost, but the newsletter is exactly the same and I do exactly the same kind of research. So that's shortly on the newsletter. I'm originally from Sweden.

Well, I was born in Switzerland, and I grew up in Sweden up north. And I worked in the UK for a number of years. I worked for Macquarie Bank, which is an Australian bank focusing on infrastructure. And I had colleagues doing airports. And I also did airport deals as a financial analyst on these corporate finance transactions. And that was in the 2000s. I also lived in India.

And then 2009, I moved to Asia for good. First working in China for four years as an analyst for Emerging Market Fund. and and then i i got hired by this family office who had half of their wealth in in asia and i cannot took over that portfolio in back in in 2014 and stayed behind after that uh worked for hedge fund mutual fund and then the sub stack now in last four and a half years uh based out of Singapore. So that's a brief background of what I do. That's quite the broad experience and diversity of markets that you've lived in. You mentioned working on some airport deals. That's actually quite timely. And it's a bit of a tease for the topic we're going to talk about

later as it pertains to Fairfax, India. But I'm going to ask you just a broad question. and maybe you can kind of take this whichever direction you want to go but why should someone invest in asia generally i think it's an opportunity set just like any other like in terms of stock picking it's just another market and i think it's very helpful to invest somewhere where no what nobody else is looking at least nobody internationally why because there's there's the valuations are typically lower and the downside risks if if people get nervous they wouldn't sell down stocks because there's there are very few active investors in these companies that i cover

so i think low competition is really a key point here there's a 20 000 stocks in asia most of them are very small of course and many of them might be inaccessible in india and china but uh there there are many many thousands of stocks and like the average company that i cover has no coverage whatsoever so there's there's literally like zero competition and for most of the stocks that i write about people tell me oh this is i've never heard about this company before I'm surprised that this exists. And typically, they're also very surprised that the PE ratio is as low as it is. So I think this is the key point.

And in terms of exposure, you don't necessarily have to have exposure to the whole world. But I do think diversification can be helpful. like for example if there is a a down cycle in the u.s dollar you probably want to have some international exposure and whether that's um europe or or asia or latin america i'm not sure um but i i think we've been through this period where u.s stocks just perform year after year after year almost 15 years now uh but eventually the cycle will turn and at that point I think you want to own something

overseas so I also want to add to that I've seen these numbers for long term performance and it is a fact that the best markets globally I mean I think the US is really up

there among the top countries in the past 120 years and the other markets that perform quite well are western europe and so uk scandinavia uh you know holland and so on and also australia new zealand israel so those are the countries that over the really long run have performed well and i think that has to do with corporate governance typically emerging markets don't have as good corporate governance so you have to be a lot more careful i would not just buy

indices, I would try to go after specific companies that are run very well, including the stock that we'll talk about today. Yeah, that brings us to Fairfax, India. Unless, Ryan, do you have any follow-ups on Asia in general before we hit the specific case study? I know you wrote down a few here. No, let's save the general Asia investing discussion for after we talk Fairfax, India specifically. Okay. And to set the groundwork here, if anyone's wondering about how to invest in international stocks, I'd say it's a perfect time to mention our sponsor, Interactive Brokers. They make it very easy to invest in like 30, 40, 50, maybe even more markets. Check our, listen to our advertisement. We have the exact

number on there. So any markets that Michael mentions today, such as India, they have the best availability out there. If you're worried about like, oh, hey, my old broker, I can just invest in these us stocks versus, Oh, I have this ADR that is not liquid whatsoever. You know, he might want to consider switching to another broker, at least for investing in these situations, but we're going to talk Fairfax, India. You mentioned, um, rule of law. I was going through their 2024 annual letter. They talked a ton, at least even on the first page, uh, about the rule of law in that country and how it changed, uh, for business, for business friendliness. Uh, when Modi came into became an office in 2014 we're going to talk about that as well and you know maybe

it can be an example of investing in the Indian market but I'm going along here the company is Fairfax India people may know Fairfax Financial so let's give them the context who runs this company who owns it and what is the relation to Fairfax Financial in Canada yeah so I thought that this is a company that's both connected to the region, Asia, and also is easily accessible and perhaps relatable as well to some of your listeners, because it's listed in Toronto. It's an investment vehicle run by Fairfax Financial, or rather a company related to it. And Fairfax Financial was founded by this Indian native who moved to Canada called Prem

Watsa, and his track record is simply excellent. I think he's somewhat of a genius. At least that's my personal view. And that's obviously an

insurance company, and this is not quite that. This is an investment vehicle structured almost like a fund. So it has a manager connected to Fairfax Financial, and they charge 1.5% management fee

and also a performance fee of 20% over a 5% hurdle with a high watermark. So it really is a fund and it's listed on a stock exchange structured as a permanent capital vehicle. So it has a price that's different from the net asset value and it owns both private and also public companies in India. so this is the

and I can also talk about the genesis Prem Watsa the reason he created this fund let's say or this investment vehicle is that he travelled to India in 2014 and he met with new Prime Minister Narendra Modi

who I guess took over 2014 and Watsa came back from that trip being incredibly bullish about the changes that were to take place and i think a lot has happened since then i think modi is is exactly the right person for india in terms of the reforms that are taking place and it it also enabled a bit and enabled the fund to exist in the first place because modi he liberalized foreign investments he also uh i guess removed corruption to some extent

In the past, especially during the License Raj era, lending used to go to these specific X number of tycoons. And I think lending now is a lot more rational based on creditworthiness. There's a lot less corruption because now they have this identification scheme, for example, in India that makes subsidies much more straightforward. and we're seeing improvements in all sorts of sectors in terms of corruption and tender processes that enable investments to be profitable. So this is really the backdrop. Some might say, some might have been even more bullish

and India is still, I think, very much a developing market. But in terms of the companies that are listed there, there is kind of a rule of law. You do have some protection, more so than many other emerging markets, I think. And the return on equity on Indian companies have actually been excellent overall compared to many other markets. well i was kind of thinking of you know we're going to go through the valuation of fairfax financial and just as a reference here as an investment vehicle they're trading at they have a book value per share of 21 the stock price is 17 so clearly it's even undervalued to their net asset value but when you look at the indian stock market i'm not an expert on it but

it has traded phenomenally over the last 10 years or so and valuations have gotten quite stretched So is part of the thesis here, one, I trust this management team because I trust what Prem Watts has done over the last few decades. And then two, this is a discounted way to invest in the Indian growth story, 6%, 7%, 8% GDP growth. I really think so. I mean, honestly, it is astounding to me that you have this incredibly highly valued stock market in India. It's CAPE ratio, I don't know, 35 or something like that. But if you look at these hot companies like consumer stocks, they're all trading 40 times P.E., incredibly highly valued. And I felt it was overvalued already 10 years ago, like when most companies were trading at 20 times P.E.

So the market is extreme that way. But my whole point is this company is trading in Toronto. No Indians are investing in it. And I think foreigners aren't really thinking about the existence of this company in the first place. So it's really a perfect opportunity because they're going to IPO their main core asset, Bangalore International Airport in India, into a fairly hot stock market. And God knows exactly what price they could get there. So they are a seller into that market. and and meanwhile they're really benefiting from the growth in in uh in in air travel at the very

least but also incomes perhaps so i i want to talk specifically about the airports here in a second but just back to the fairfax parent relationship what is left there in terms of the relationship between fairfax financial and fairfax india does fairfax financial have any sort of a stake in fairfax india is there any or are they just completely two separate organizations now or is it just is it just the performance fee or or what no they they do have a stake uh i forget how big it is but they do have a stake and i think prem watts has also by been buying shares i think it's 15 16 dollars a share um so there is significant involvement there and in terms of the performance fee uh they have the option to take the performance fee in shares

luckily they've taken it in cash despite the undervaluation of the stock so I think they've been they behave respectfully

to minorities but yeah I mean anytime I mention Fairfax India on Twitter or to other investors they always focus on the fees and I get that like it's not ideal how much they're taking, like 20%

over 5%. At the same time, these people are smart. These are intelligent, serious individuals. And the fact is, they want to grow the net

asset value per share over the long term. And to me, that's fantastic. That's exactly what I want to see. We have these immense incentives to realize the value of these assets. And I can't say the same thing for many other companies in Asia. So I can see this structure as a positive as well.

Okay, let's talk about the Bangalore Airport. Brett and I have both talked about airports on this podcast a number of times, specifically the Mexican airports and then the primary one in Argentina as well. And there are some really nice qualitative business characteristics about airports. So maybe you could go through – if you could go through just the overall business aspects specific to the Bangalore Airport and then are they – have they filed to go public? I saw that – I saw news from 2024 that they were planning to go public. So I'm curious. Is there like a date on this?

What kind of value do you think could be realized with an offering on the – in the Indian markets? Sure. Okay, so Bangalore International Airport is the monopoly airport for Bangalore, which is a city in Karnataka, India, in the south of India. I used to live there in the mid-2000s for a half a year. It's an amazing city. It's known as a tech hub, the Silicon Valley of India. I guess there are at least one of the tech hubs.

And great companies like Infosys are based there. and i think also underrated is that the climate is quite good here in singapore for example we have 32 degrees and humid all the time bangalore is up in the mountains it's like i think it's 1000 meters up uh altitude so it's a bit cooler perhaps 25 25 degrees celsius like around here and uh that's part of the reason and and why the city is growing it is really i think the most attractive city in india to live in uh much more so than mumbai or the other cities so and it's significantly wealthier the the southern part significantly wealthier than the northern part it's it's wealthier uh yes it is on average especially relatively uh in india you have

these huge disparities between people who who have education and who are able to you know export their knowledge, were able to work for export companies. So if you're a software engineer in India, you can make quite a decent amount of money. And then outside, you might have people living in shanty towns on $1 a day. So there's some of that in Bangalore as well. But it's a massive city that's, I think, highly attractive,

keeps growing. And the fact of the matter is they have this airport with, I think, 68 years concession. And sorry, it was concession lasts until 2068, I think. Sorry. So that's another 40, 45 years, not 43 years. So very long concession length. And there might be another airport at some point, maybe 2035.

But right now, it's a monopoly airport. They're also part of the process of planning the second airport that might come, you know, in the late 2030s. So that's the airport. It's the, I think it was built in late 2000s, and they built the first phase of the Terminal 2. It was completed 2023. And it's a beautiful, beautiful asset.

Like, much more beautiful than anything in Europe, where I'm from. Like, it's so beautiful that Modi, he went there for like a photo shoot walking through the airport and showing the success of India kind of a demonstrating

how far India had come in terms of the quality of its infrastructure so it is a top notch asset both in terms of the terminal we got I think two runways and about 43 million people

passengers per year right now of course we had COVID so it's you know we'll see whether they you know longer term what the normalized rate is but 43 million passengers per year and the government itself is is seeing 110 million passengers by 2035 so going from 43 to 110 that's like a 150 increase over the next 10 years um so secular growth in in volumes um this is it's very simple like it's a monopoly airport uh it's going to grow both the the um the number of people in bangalore but also the number of planes on order there's like 1100 planes on order in india as a whole and they only have 700 planes

in total in the entire country so you're going to go from 700 to 1800 as airbus works through these orders in the next 10 years or so before we move on we want to talk about our friends at interactive brokers interactive brokers is our favorite brokerage platform they make it easy to buy stocks etfs options futures currencies bonds and more all from a single unified platform and interactive brokers allows you to maximize your returns by minimizing your costs they offer zero commissions on U.S. stocks and low commissions on international securities. They aren't cutting corners either. Interactive Brokers' one-of-a-kind smart routing technology gets you the lowest price possible in 36 countries and 28 different currencies. Interactive Brokers is our home

for stock trading, and we wouldn't go anywhere else. If you're getting serious about investing, it's time to upgrade to a broker that you can trust. Head on over to IBKR.com. Restrictions apply, Interactive Brokers is a member of SIPC. So you have that projection for volume. What exactly does that correlate to with their revenue? Do they renegotiate their concession rate for each stop or each passenger, such as the Mexican airports do every five years, or is it kind of perpetual one? Is it tied to inflation? How does the business model for the Bangalore airport operator, which Fairfax India owns, I think, roughly 70% of. How does that work?

Yeah. So airports, they typically have two sources of revenues. One is that they get aeronautical revenues. That's what they're called. These are regulated incomes, including passenger service charges, but also landing charges. and those are paid for you know for every ticket you pay part of it uh to the airport and um this the this type of revenue is typically regulated uh in in their case in in kanataka they have to pay um i think it's it's 60 it's the the fees are set in such a way

that allows for a 60% return on equity on that part of the business. So that's regulated, and it's based on this regulated asset base, just like utilities. So that's fairly uninteresting. 16% return on equity is not bad. I mean, so I think it's a decent return on equity by itself. But that's not the best part of it. The best part is the non-aeronautical revenues, which includes retail.

it includes parking it includes advertising and so i used to work for macquarie bank right and guy sitting next to me was managing copenhagen airport which was one of the most successful investments of macquarie bank back back in the 2000s and what they did so well with that airport was that they maximized the retail area. Like, not many seats, but there's tons of retail, tons of shops and restaurants and so on, all focused on getting more money out of the passengers waiting there, captive passengers.

So this is the beauty of it. And being able to charge money for duty-free shops, rents, right, or you take typically a commission as well as as a rent um so in in in bangalore international airports case they have this hybrid till regulatory framework which allows them to capture some of the upside of retail but not completely dual till will be like you're completely unconstrained with regards to the retail operation you can charge however much you want they have some constraints but i think they're going to return on equity much above 20%.

And that, to me, makes it just a very attractive asset. How much do they hold the asset on their balance sheet for? What do they claim the value is at? And then what do you think an IPO could potentially price it at? So it's valued in the balance sheet at $2.6 billion, I think. and um they they recently acquired another 10 so they had a i think 59 effective interest and then they took it up to 69 and um that was done at a valuation of 2.55 billion us dollars so they acquired that from a if i think kind of a for seller or uneconomic seller in siemens siemens

from from germany um what's interesting is that 2022 they tried to ipo the company uh in in india and they spoke about a four billion valuation for the airport uh so i don't know how they managed to get uh get the valuation down to 2.6 again but um um so you can you can look at the at the passage numbers right now and say, you can apply a multiple to it. I think they make about half a billion US dollars in revenues, 60% EBITDA margins. So that's about 300 million USD in EBITDA. And with the company, with this kind of growth potential, I think you can probably We see a multiple of 15 times EBITDA, which will be maybe 20 times, over 20 times PE. And that will give you maybe, I mean, four and a half billion.

They have net debt, I think, of about 900 million. So about 3.6, a little bit less than 4 billion in valuation. So it's in the NAV, just to clarify. It's in the books for 2.6 billion. I think it's worth more than four. But if you think longer term, like really longer term, it could be worth so much more. Like airports of Thailand, I think the market cap is like $20 billion.

This is, they can talk about 110 million people per year. Like this is a massively large airport, actually, if they get there. and most airports, they tend to trade above $100 per passenger in enterprise value and if you just do the math

like 110 times 100 you get to $10 billion so I don't think in this excessively hyped Indian stock market this is not crazy like this is

$4 billion is conservative I think you can get to five or six. And on 4 billion, if you assume that, by the way, which I think is conservative, current share price is 17, and I think NAV is 21. If you get to 4 billion, and once the IPO, it's going to reprice. The NAV is going to reprice on a periodic basis with the share price. So the NAV is going to move up directly. So if it trades at $4 billion, you're going to get to $32 per share in terms of net assets value versus 21 today and 17 share price.

Right. And just for the listener to make sure everyone can catch up with us, this is Fairfax, India, NAV that Michael is mentioning in there. But the Bangalore airport itself is going to be IPO in which they own 70% of them. And maybe just to put it in a different context or no, no, no, no worries. That was very good detail. But just just to make sure everyone is, you know, we want all the listeners to understand to use a different comparison or just to show how much of Fairfax, India is the Bangalore airport. I'm looking on just Google Finance here right now. Is Fairfax, India's market cap just two point three billion dollars right now? Yeah, I think so. I would guess so, right? So, and in terms of the proportion of the airport for the total value, it should be something like 60% on NAV. The value is much higher. So the actual value to the Fairfax India might be more like 70 to 80%.

So it's all about this airport in my mind. They also have some finance companies and a bank and so on. But none of that, in my view, really matters. The key point here is this, the value of the airport and the IPO. Gotcha. To ask you a question on the IPO, they tried to IPO in 2002, but it wasn't the right time during COVID. and they also haven't got an approval yet from the government.

So I think the government needs to go through some kind of review for national security, and that just hasn't happened yet. So we'll see. They tried to do it before September 2025, but now it's been delayed a little bit. Even if there is no IPO, as far as I'm concerned, they're just going to keep growing you know

for the foreseeable future but if you want if you want the stock to perform yeah net asset value has to come up to you know this $32 level

or something like that at that point I think the stock will finally perform but yeah happy to wait you said there are

a couple other businesses under the hood as well but it's just like ultimately all the all the value is tied up in bangalore right so like let's say they got all the value for their bangalore stake although it doesn't sound like they're planning on selling it even if they list on the public markets they're probably going to hold the stake i imagine what else is left in there is there any value worth talking about or is that pretty much it

well they own a non-bank financial company called ifl finance and it's funded by a person who i think understands capital location the return on equity about 20 percent that's okay they have this carola bank which has re of of 18 percent um i guess it's it it might be less boring than it used to be but uh i suppose these will will provide some value for the long term just a compounding uh the other assets there's a shipping company there's some manufacturing companies uh none of which really interests me all that much to be honest yeah i mean if you look at some some of the stuff with financials that that they're that they're talking about in their letter i thought it was quite interesting

that um i think the number was 60 percent of indian household savings is in gold and physical assets so they're trying to get that kind of the economy more uh get that back out into the economy to help people uh you know modern credit markets so that so it seems like within consumer finance there's a huge opportunity to keep growing within that but even with regards to the airports you're almost, that's kind of the tough part about airports is you're almost making a macro bet on that country in a way, even though they're high quality assets and your downside can be protected because of the fees that just come in and the business models that we talked about earlier in the show. You mentioned again, the 110 million projection, what stops the Indian

economy? I mean, the GDP per capita is still quite low. There's the huge investments from people transitioning from their chinese manufacturing you have modi still there so what's what stop what are you worried about to prevent the bangalore airport in the bangalore economy or the indian economy in general from just getting off of this growth trajectory i think a lot of the growth that we've seen over the past 10 years it's really from uh decrease in corruption and um an improved resource allocation with hundreds of millions of people came into this this banking system and and their money is now being funneled into into productive assets uh and i think there's there's tons of entrepreneurship that's that's um uh

to me very encouraging i think that's what really creates growth and productivity uh that said what i'm worried about is is um like in terms of the manufactured goods export most countries in asia that developed like japan south korea taiwan china they got wealthy through the export of light goods manufacturing and export and india hasn't had that at all uh i've you know when i speak to indian entrepreneurs they tell me like yeah i can start a service business but i would never start a factory because there are so many people you have to bribe infrastructure sucks and just all these these uh these like labor laws maybe to some extent also are hurdles kind of like the opposite uh concerns people have in china not to

be like not just the labor stuff but like it's easy to start but then you're worried about getting your assets out of the country exactly right that's exactly right uh so um that growth journey um hasn't happened and and i don't know if it will happen i think that apple is now trying to produce iphones and and that's encouraging a certain part of the of india uh but overall all like look at export growth india versus vietnam like vietnam is this immense success story the currencies you know is being bid up and people's incomes are rising this is like a broad middle class whereas in india those those four or five hundred million people along the gangas they they have no jobs like there are no manufacturing jobs uh so it is it is a poor

region like northern part of india and to really get growth going and for this technological spillover to happen i think they need to have manufacturing and that still hasn't happened so i fear that this growth spurt that we've seen over the past 10 years thanks to yeah the factors that i spoke about perhaps that will kind of um go away at some point as someone who's not living with someone who's not living in that country what like metrics or what are you tracking to kind of say oh am i are things going better or worse with what you were just talking about it's it's so macro that i i um honestly like i've done macro calls before they're typically not great like i i don't really know what actually matters uh

I can talk about macro, and I can make a good case for, for example, export growth leading to higher productivity and that leading to higher incomes, blah, blah, blah. But for that to actually matter for Fairfax India, I'm not so sure. I feel like what matters more in this case is the number of planes in the air, number of passengers. So I don't know. I would think that, like, just a very broad picture,

The Asian region has tons of people. They study hard, like in India. They are typically well-read, intelligent, hardworking individuals. They have seen the success that China has had in terms of foreign direct investments and so on. You would think that over the long run, it's going to develop. I think like 100 years from now, cities like Bangalore is going to be a lot more like Singapore than it is today. This episode is presented by our brand new partner, Port Sido. Do you know what your actual investment returns are? Well, if you're like me, then the answer is probably

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The link will be in our show notes. That's a good way to put it. Now, the last question on Fairfax, India, before we have some questions about investing in Asia in general. Most of the value is from the Bangalore airport, but how are you doing valuation work for Fairfax, India? Stock price is $17 today. Are you doing some of the parts? What is it? How do you look at the stock on a quarter-by-quarter basis?

I look at NAV a lot, and it is – I know the concerns about some of the part stories, what discounts should be there. And currently it trades at about 20% discount to NAV. I think there should be a discount because they charge a 1.5% management fee. and there might be corporate government concerns in this kind of structure that they will just keep this vehicle

living as long as they can extract fees from it. So there is that risk and most permanent capital vehicles, they're typically trading at a discount to NAV. So I personally

use some of the parts valuation and um i think that's that's accurate i just think that you should apply 20 discount to that nav that's my view i think i think people shouldn't be too scared of some of the partial valuations it's just the fact that if you're buying a company that isn't growing that isn't paying out dividends yeah you can get stuck there for for a long time but in this case you have this immense growth tailwinds in terms of the Indian economy and also passenger growth.

So I'm very happy to sit on it and if it trades at 20% discount forever, completely fine. I think I'm going to, it's going to grow, the value is going to grow 10% per year if you apply multiple.

You know? So yeah, that's really how I'm valuing it. Some of the parts, I spoke about some of the figures um i think right now it's about 2 billion usd in value from the non airport assets so they have a some debt in in fairfax india too uh limited amount but some debt um and also the bangalore airport itself whether it's worth four or five or seven so yeah compared to 2.3 it's definitely a lot more right and you potentially have the catalyst

here with the ipo do you think or care about prem watts's relationship with modi is that important in this situation um or do they even have a relationship that's a good point i think you I think they probably do. I mean, they met before. That was part of the reason why I started this investment vehicle in the first place. So perhaps that could help in the approval process. I don't know what was taking so long.

I presume that there's a huge backlog of IPOs. so yeah I mean I would like to see it happen sooner than later and perhaps that will help I should also mention by the way that Prem Watsa he stepped down from Fairfax India and now it's his son called Ben Watsa

and not sure how I feel about that I would probably prefer to have Prem Watsa in charge because they've done I mean, really well, I think, investing in a very highly valued stock market. So I would love to see him continue to be involved in the business. All right.

Let's shift gears a little bit. I want to talk investing in Asia generally. I kind of have a ton of questions for you because I think – I imagine that a lot of our listeners, like myself, see companies come across. their screens, see people talk about them on Twitter, see people write about them and they say, oh, you know, that looks attractive, but I don't invest in Asia or I don't invest. I'm worried to invest in China or whatever it is. They don't feel comfortable doing it.

So I want to talk through some of that. You have as much experience as anyone I know investing and researching companies in those markets. What are some mistakes that people make when trying to invest in Asia? Well, the biggest mistake that people do is that they look at a stock and say, oh, it trades at a P ratio of, let's say, eight. And then they say, oh, compared to this other asset, this P ratio is lower.

So therefore, it's going to trade up. But the fact of the matter is, earnings, they don't necessarily come your way. Just because you're a minority shareholder doesn't mean you'll actually see some value from those earnings. So I think emerging markets are very treacherous. You can never quite know how much you will benefit from a particular business.

So you can spend all your time analyzing the business itself and the growth rate and everything, all like that. But if you lose the other part, which is corporate governance, I think you still got to underperform. And that has, I mean, there are all sorts of issues that can arise with regard to corporate governance. I think in East Asia, like Japan or South Korea, what typically happens is that the owner will just accumulate cash on the balance sheet. And perhaps that's for a rainy day. If they have to fire people, they will keep them employed. and minorities won't see the cash.

So valuing the cash 100% is just not rational. That's typically the issue in East Asia, Hong Kong, Korea, Japan, less recent Taiwan. In Southeast Asia, the issue is more related part of transactions or in fact it's the same

in China and Vietnam as well you frequently have a listed company and then the owner has another business so this corporate structure where there's a parent and then a listed company and then suddenly there's some kind of transaction between them

where value is being extracted that is very risky, you want to have a simple corporate structure and make sure that you're kind of aligned. So I think that's corporate governance. It's really something you should pay attention to and really look at the track record of how people have behaved in the past

because behaviors repeat. If they've done anything bad towards minority shareholders in the past, you can bet they're going to do it again. so look at that and also think about what you actually own I think Americans I mean I hear that part of your

audience is American there's this temptation that you want to buy these US listed Chinese ADRs for example because they're easy to buy they're not Nasdaq or New York Stock Exchange but

personally I'm a little bit skeptical about those because you don't actually own the shares. You own a profit sharing agreement with a mainland company and then they have their board onshore and then

they have this communist party committee as well which is like a shadow board and then this Cayman structure and then they will have this differential voting rights as well. I think this is not ideal the best thing you can do is to invest in companies that have where you're a co-shareholder

you have equal voting rights in actual equity in a company that doesn't have a capital controls where you can you know you can participate and even go to court to um to kind of claim your rights as a minority that will lead to greater success in my view than um being like subordinates subordinate subordinate in some kind of complex structure okay follow-up here guess this is more on the less so on the what to avoid and more so what you like side of the side of the equation what are there any markets in particular or geographies countries i should say that you are really optimistic about other than bangalore i guess because that's yeah i love the philippines i think this is a great market um and part of the reason is we have this now 12-year bear market

and p ratios have compressed compressed compressed to very low levels and it's I think the P ratio now is below 10 on average for the whole market so that means a lot of companies traded below 10 like 5 times, 7 times great balance sheet and growing you can find such companies easily

and they're high quality businesses like Ayala Land for example they own half of Manila central business district they actually own the land like in the in like the Manhattan of of manila um that trades at like nine times p.e uh just an example i i'm not saying that's a spy

but just many stocks like that and um it's um it's just so much beaten down and what happened in mid 2025 is that they reduced the stock transaction taxes from 60 basis points to 10 uh so suddenly it's gone from this super high transaction cost uh markets to becoming very cheap to trade um of course still very niche but i think it's great people are like businessmen you meet there are are top-notch like very savvy the people i met at least and um i think this is I remember when I started looking at Asia I guess 20

Southeast Asia, sorry I went to the CLSA conference in London I think it was 2013 or 14 and it was a conference just for Philippine companies. They flew over people from the Philippines to Europe

to London and it was packed like people were coming from all over Europe to meet these companies companies. Today, nobody, like there is almost nobody caring about the Philippine market. So I feel like it's under-owned, it's completely overlooked right now. And God knows when people will pay attention to it again, but I'm finding very good companies growing nicely, low valuations, And it's also like a U.S. ally safe jurisdiction as far as I'm concerned. All right, folks, before we move on, we need to tell you where we get our financial data.

Fiscal.ai. Fiscal.ai is the complete stock research platform for fundamental investors. I use the platform pretty much every single day. You'll see the charts on our podcast and you'll see it in our newsletter. This is our one stop shop for stock research. They've got up to 20 years of financial data on all companies globally, including company-specific segment and KPI data. That means Amazon AWS revenue, SoFi's total members, Google's paid clicks growth, and literally millions of more data points. They've also got earnings call transcripts, ownership data, company-specific research reports, and much more. If you want complete financial data at your fingertips, then you need to check out Fiscal.ai. And if you use our link, fiscal.ai slash chitchat, you will get 15% off any paid plan.

Again, that is fiscal.ai slash chitchat. The link will be in the show notes. So could I sum up the Asian Century Stock Strategy or your investing strategy for Asia? Is finding, you know, countries that people don't care about anymore, valuations are depressed. uh kind of a contrarian look at all right no one likes the philippines anymore and then going into that market sifting through all the companies finding what you think are high quality businesses and then you know making sure that as a minority shareholder you're not going to get screwed over beautiful i couldn't have said it better myself that's exactly

uh ryan do you have any other follow-ups or sorry michael any no no anything that's all good Yeah. Sorry. likelihood that the stock's really going to re-rate yeah absolutely i think you're absolutely right like you're going to make money in some way it's either through a higher multiple or a dividend or a share buyback um i mean there's something in that equation that's got to work out somehow and so i like to have a minimum of like dividend let's say there's a dividend of of eight nine percent that for me feels like a floor that makes me more willing to hold it for the long term so um i own this like hvac company in the philippines and i think

they give like seven percent and i know they're growing maybe like eight ten percent per year as well so that makes me more willing to hold it for the long term because i know that if flows take a while to come back and and it still trades like seven times p perhaps it will take five years but at least i'm getting this dividend yield and at least i'm getting this earnings growth so that's kind of how i'm thinking uh it is true like you you can't really know when people will pay attention to it again uh two years ago china was really out of favor uninvestable and and now it's really come back thanks to southbound flows like people from china buying shares in hong kong uh and now these days it's southeast asia is really the where stocks are cheap like really

really cheap so the risk is really that i'm stuck with these stocks for for five ten years and they just give me 10 per year yeah but if they're if they're cutting you a check it's it's not too bad if they're giving you money every quarter or you're getting your dividend and share buybacks or whatever yeah and i think i think they're pretty pretty safe like to talk about for example conception uh the the ceo is is amazing and i think that if i were to invest in the u.s i i feel quite nervous about that because there are so many intelligent people competing so if i find a cheap stock like crocs or something like that i would feel like i'm missing something that maybe there's something wrong with it.

Whereas if you go to Thailand right now or the Philippines, you can buy the best blue chips for 12 times P, the best ones, or like amazing companies for 16 times P. And you know you're not going to have – there's nothing wrong with them. It's just the fact that people don't like the market. So to me, that's much, much, much safer from a stock point of view than trying to compete in AI stocks. So what about currency risk? How much do you have to worry about that? I imagine that's probably kind of top of mind for some of our listeners when they think about investing in some of these markets is, okay, eventually I'm going to have to move it back to US dollars or whatever. How much do you think about that?

um i do think about that and i like to own undervalued currencies and you can think about that through the real effective exchange rates which is like a you you deflate the exchange by the the interest the uh inflation differential uh so that's one way to look at it look at the exchange rates historically it's cheap compared to the inflation that's been experienced um you can also look at the current accounts like if there's if a country has a positive current account for example indonesia after the crisis 98 to 2000 the currency came down a lot and suddenly their export costs so much like nominal uh income that that they had a positive flows into the country from the from the trade surplus from the trade balance uh so that's good to see like

in Kazakhstan after the 2015 Tengah depreciation, I think the same thing happened. Suddenly eventually it hits the bottom because you know that exports will lead to this constant buying of the

currency. In terms of Asia, I'm a little bit nervous about the Indonesian rupiah because I know that the budget deficit is going to go up now under the new administration. Whereas, for example, the yen, longer term, kind of bullish on the yen because it is just so cheap compared to the U.S. dollar.

As a Nintendo shareholder, if you're referencing the Japanese yen, that makes me optimistic. I hope you're correct. No, I think so. I mean, it is. I'm living here in Singapore. Every time I go over to Japan, I'm shocked how cheap things are. You can get this amazing meal for like $8. us dollars it's it's um i would i would tell like listeners

for example i i listened to this podcast with uh with andrew walker and he's great by the way but he mentioned that international stocks had carried greater risks and uh i'm personally not so sure about that i mean you can also have this cycle with the us dollar weekends it could well happened right we saw it before uh and in that case i don't feel like yam is is is more risky in fact i feel very comfortable owning companies that are on yam because it will they will appreciate at some point against the usd in my view and it's a nice diversification if you're if you're a united states citizen i think so like now now may be the time to to invest a little bit more internationally whether europe or somewhere else while we're on the topic of japan that is

one of those countries that you mentioned that management teams companies tend to hold a lot of cash if i'm not mistaken and i've read it seems maybe it's just our circle a lot more interest from U.S. investors in Japanese companies. Maybe that's spurred on by Buffett's recent investments in those holding companies. Is that changing at all? Do you feel like management teams are being a little more aggressive

with capital returns or is that maybe just the narrative but not that much is really changing? No, I think there is real change in terms of reduced cross-share holdings. There's a lot more buybacks than before. And I think there's also a lot of takeovers. I haven't seen that before.

I mean, the charts look really beautiful in terms of the progress that we've made on those three fronts. That said, is the underlying issue still solved completely? I don't think so. I feel like a lot of companies, they get shamed into having these return on equity targets. You know, it has to be more than 8% to 10%. And even companies that have no business having like an 8% ROE, like, for example, Seiko Corporation. Seiko is, they make watches, right? I forget what their return on equity target is, but maybe it's like 8% to 10%.

I'm like, why stop there, you know? It's like, yeah, they're being shamed into doing it. but do they actually care? If they actually care, they will put a 15% RE target because they can reach it for sure. So I think there should be discounts for Japanese equities.

And I think a lot of these stocks have had earnings growth because of the weak yen. So God knows what happens when the yen appreciates. That's why I only own the one that has all of their revenue outside the US, right?

Or outside of Japan, Nintendo, right? I love Nintendo. I mean, yeah, but that's another question. All right, Mike, go ahead. Yeah. Just to mention that, I mean, in terms of yen, my bullishness is very long-term in nature because right now, U.S. interest rates are so high

that I totally understand why the yen should be weak. So I don't expect it to go up tomorrow, just like 10 years from now. Gotcha, gotcha, yeah. Thank you for the clarification. and thank you for taking all our questions, spending the time to go through all this stuff today as long with our follow-ups.

For any of the listeners that want to learn more about Asian Century Stocks and what you do there, give a quick elevator pitch and where they can find more information. Sure. Okay, so AsianCenturyStocks.com, that's the URL.

And I do 20 deep dives per year, stocks that I find interesting in Asia, mostly in interactive brokers markets Japan, Singapore, Hong Kong Australia, Malaysia and parts of Taiwan so that's really my focus

I also do like portfolio reviews every month or so you can see what I own so yeah, that's a short pitch beautiful, and if I could chime in real quick he's been doing it for four years now, four and a half if I'm not mistaken so there's a massive repository

of deep dives in there as well and research reports. Yeah, huge. I think 120 deep dives, roughly. All right, yeah. I think any listener will find something that they can be interested in. Go check it out.

The link will be directly in the show notes. I hope the listeners will do that. As a disclosure, we are not financial advisors. Anything we say on this show is not formal advice or recommendation. Ryan, I, or any podcast guests may hold securities discussed in this podcast,

may have held them in the past, and may buy, sell, or hold them in the future. Thank you, Michael, once again. And thank you to the listeners for listening to this episode. And we'll see you next time.