Thanks. For me it does not look that cheap on the NAV, but versus real earnings potential it is cheap. But for it to do well and rerate, it needs a few things to go right
That’s probably fair. I initiated at $6, when that probably wasn’t true, but to really fly from here it needs the Argentine economy to perform so that the NAV becomes more reflective of the earnings power. That said, it’s cheap on earnings and dividends and RdP will generate a lot of cash over the next few years, so I’m not sure there’s much downside.
I’ve a valuation update to publish in the next few weeks, which might throw some more light on the matter.
Dividend history isn’t terribly relevant given historic fx controls etc., deleverage, and sale of office portfolio. I’d classify them as an opportunistic rather than a programmatic payer. Although this suggests the dividend has been a significant return component over time: https://www.investing.com/equities/irsa-inversiones-representaciones-dividends
As for tax, that’d depend on where you are based and tax treaties etc.
I love the write up, it looks like the bear case might be too pessimistic especially since it looks like Milei's reforms hold (as current trends suggest), IRSA looks poised for asymmetric upside.
What are IRSA competitors and how are they stacking up against them?
I hope you're right about the bear case, but Argentina has had false dawns before. Competitively, I think real estate is primarily about location and management/capital allocation. I think IRSA score well on both. Certainly Ramblas del Plata is a unique asset - just look at the map and you'll see it's irreplaceable. On the malls front, they have 2/3rds share in the capital city, and some of those malls are also irreplicable - it's not easy to find big plots in dense cities. Other malls are tucked into multiuse developments, which kind of create their own demand. And because IRSA are the only scale operator of premium malls, they're in a great position to buy underperforming malls and turn them around, which they have been doing recently. If Argentina booms long term I would absolutely expect to see more competition, but also plenty more demand. Also, mall competition will only come if cap rates fall, because there's no point building an asset only to have it valued at an 11% cap rate. Falling mall cap rates would be good for the stock. Hope that helps.
Thanks. For me it does not look that cheap on the NAV, but versus real earnings potential it is cheap. But for it to do well and rerate, it needs a few things to go right
That’s probably fair. I initiated at $6, when that probably wasn’t true, but to really fly from here it needs the Argentine economy to perform so that the NAV becomes more reflective of the earnings power. That said, it’s cheap on earnings and dividends and RdP will generate a lot of cash over the next few years, so I’m not sure there’s much downside.
I’ve a valuation update to publish in the next few weeks, which might throw some more light on the matter.
Thanks for the post. What is their dividend history in USD? I assume that withholding tax is 7%?
Dividend history isn’t terribly relevant given historic fx controls etc., deleverage, and sale of office portfolio. I’d classify them as an opportunistic rather than a programmatic payer. Although this suggests the dividend has been a significant return component over time: https://www.investing.com/equities/irsa-inversiones-representaciones-dividends
As for tax, that’d depend on where you are based and tax treaties etc.
I mean for US residents - there is no tax treaty between US and Argentina
Sorry, realised I never replied to this. I am not a US tax resident so to be honest I am not sure.
I love the write up, it looks like the bear case might be too pessimistic especially since it looks like Milei's reforms hold (as current trends suggest), IRSA looks poised for asymmetric upside.
What are IRSA competitors and how are they stacking up against them?
I hope you're right about the bear case, but Argentina has had false dawns before. Competitively, I think real estate is primarily about location and management/capital allocation. I think IRSA score well on both. Certainly Ramblas del Plata is a unique asset - just look at the map and you'll see it's irreplaceable. On the malls front, they have 2/3rds share in the capital city, and some of those malls are also irreplicable - it's not easy to find big plots in dense cities. Other malls are tucked into multiuse developments, which kind of create their own demand. And because IRSA are the only scale operator of premium malls, they're in a great position to buy underperforming malls and turn them around, which they have been doing recently. If Argentina booms long term I would absolutely expect to see more competition, but also plenty more demand. Also, mall competition will only come if cap rates fall, because there's no point building an asset only to have it valued at an 11% cap rate. Falling mall cap rates would be good for the stock. Hope that helps.