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Holly LaFon
Holly LaFon
Articles (8062) 

Prem Watsa's New Stock Pick in Greece, the First Nation Demoted to Emerging Status

June 28, 2013 | About:

In the wake of news that Greece became the first developed nation to be downgraded to emerging-market status by investment research firm MSCI, Prem Watsa has announced heightened investment in the country, telling the Financial Post June 19, “We think that perhaps a bottom has been reached.”

Watsa recently invested in another beleaguered eurozone country, Ireland. In 2011 he and a group of investors purchased a $1.6 billion stake in Bank of Ireland (IRE), and have since gained approximately 50% on the deal.

The founder of the Canadian insurance conglomerate, Fairfax Financial Holdings Ltd. (TSE:FFH), which has $25 billion of assets under management, has an eye for value in troubled companies as well. He made a bold purchase of a stake in telephone maker Research In Motion (BBRY), which he bought after the company had lost around 90% of its market cap in five years.

The specific Greek company Watsa told the Financial Post he is investing in is Eurobank Properties Real Estate Investment Co. (ATH:EUPRO).

Founded in 1952, Eurobank Properties’ sole objective today is to acquire and manage real estate and money market instruments. The real estate fund has a portfolio of investment properties in Greece and Southeastern Europe that it leases out.

The company has a €418.96 million market cap and a share price Friday of 7.05, up from a historic low of under €3 per share hit in June 2012.

Though just now being reported to the press, Watsa actually purchased a 14.78% stake in the company in August 2012, increasing his ownership to 19.1%. Wade Burton, vice president at Fairfax’s Hamblin Watsa, also joined the company’s Board of Directors and Investment Committee in September.

“It is obvious that the realization of this transaction is occurred during a crucial period for the Greek economy and shows the investor’s optimism for its future,” Eurobank Properties said in the press release.

At a purchase price of €4.75 per share in August, Watsa already has a gain of approximately 48% on the purchase.

He told the Financial Post this week that he plans to invest another $217 million into the bank to bring his ownership from 19% to 42%.

Eurobank Properties is a classic Watsa investment in that he typically likes companies selling at discounts to their book value. When he discussed his Bank of Ireland investment with GuruFocus, he noted that it had a book value of €0.30, which with then -share price of €12 per ADR meant it traded at about 25% of its book value.

Eurobank is currently trading at a discount to its €10.63 first quarter book value. See its price and P/B ratio share below:


In the first quarter ended May 30, Eurobank reported a year over year net profit decline to €9.21 million from €9.98 million, citing “escalating macroeconomic problems in the market and consequently in real estate.” It mentioned lower results in rental income, interest income and interest expense, while management cut costs for the sixth consecutive year.

Compared to the previous year, the company reduced its debt to total assets to 10% from 15% and its loans to value to 13% from 15%. Its current ratio increased to 14.4x from 8.0x due to a reduction in short-term liabilities.

Eurobank Properties has cash and short term deposits of €160 million compared to €161 million the previous year.

The results were improved from the outcome of 2012, when it ended the year with losses of €28.06 million, due to the decrease in property prices and fewer rentals.

See Prem Watsa’s portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Prem Watsa.

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Rating: 4.1/5 (8 votes)


Vgm - 4 years ago    Report SPAM
"When he discussed his Bank of Ireland investment with GuruFocus, he noted that it had a book value of €0.30, which with then -share price of €12 per ADR meant it traded at about 25% of its book value."

A more correct and direct way of saying this is that when Watsa and Wilbur Ross et al bought the stake in BoI, they paid 10 Euro cents/share and the book value was around 26-30 Euro cents/share.
Vgm - 4 years ago    Report SPAM
"Wilbur Ross was spot on when he grabbed up billions of dollars of IRE stock."

Pete -- you may want to recheck your figures. Wilbur and Prem each invested around 300M Euros in IRE.

Long IRE

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