I actually see this as a net positive with one caveat.

Positives

Adds to the cash buffer by the A$8.5 not paid in earn outs.

This adds 50% to their recent $17.1m pile up to $25.6m by my calcs.

This is a nice buffer to my thinking as they were Op CF and FCF positive in the last Quarter (just) and likely to hover around there for a while I expect.

Adds to the skin in the game from LATAM Management - these guys are key to LT value growth from FDV as a whole, so good to know they are believers, at least @ $0.40...

Negative

Dilutive as it's effectively raising at $0.40 (29% discount to recent Placement at $0.56 and 11% discount to recent SPP @ $0.45).

Caveat

Without knowing what goes on behind the scenes, it's more likely that CEO Shaun approached LATAM Mgmt with this offer (at least approved it) rather than the other way around.

So Shaun taking an addition $8.5m @ $0.40 above the extra $2.1m raised ($4.1m from a $2m SPP) @ $0.45 does not speak to Mgmt thinking FDV is overvalued - at least relative to them needing the cash in case the rain today turns into a downpour tomorrow.

So FDV have effectively raised at $13m @ $0.56, $4.1m @ $0.45 and now $8.5m @ $0.40.

This is a weighted average Issue price for $25.6m of $$0.48 per share. A 27% premium to current price of $0.375.

Disc: Held

@Slomo @Bushmanpat I tend to agree with slomo on this. also the LATAM guys attracted by liquidity in head stock so can exit more easily at soem point was the only extra i could think of. it has been a tough period for this one. but although the raising was badly timed and dilutive it is positive that they are now well funded. it actually hit my buy price now and i have initiated a spec position around these levels for full disc.

@Bushmanpat not an expert, but am wathcing this one closely, with view to buy at some stage. one issue is what is happening in Pakistan, has it settled down? the currency was crashing, keep an eye on that, it is one of their largest (biggest?) assets. i havent been watching it. their businesses are long dated so my thinking it is a bull market stock and its time will come again.

thats all i have

+1. The price is reflecting that largely though - it is up more than 40% from its lows of just a few weeks ago.

Yes I don’t worry too much about the (presumably temporary) currency headwinds either. I suppose if they’re paying a lot of staff in AUD that would be an issue… (in case it’s not obvious not the more learned opinion you were after)

FDV don't have any staff in Australia, they're based out of Malaysia.

The business is performing exceptionally well, but the main risk is actually outside of their control.

There's currently a serious risk for us Australian investors that may see our value impaired, even if the business continues to fire on all cylinders. Zameen is FDV's most valuable business, as least today, but given the current state of the Pakistan economy it's looking increasingly likely an IMF bailout will be needed. This will almost certainly result in a substantial currency devaluation. We've been seeing this play out over the last two weeks or so.

I've been looking at similar historical situations to help gauge what a reasonable estimate would be for the magnitude of devaluation of the Rupee, and from what I've seen it ranges anywhere from +50% upwards of >90%.

FDV remains one of my highest conviction positions, but I have recently sold some to mitigate the damage from a Pakistan tail-event until the situation has more clarity.

Agree @MattD.

Current price suggests that Mr Market is valuing Zameen at zero.

I'm not selling, but if a bailout happens, I will most likely add more as the FDV share price will almost certainly be punished.

Still LT hold.

A bit of a dumb question, but in cases where a currency in a smaller economy is devalued substantially, is there an impact of that upon housing market prices in that country generally? My hunch would be that they would increase in local currency, but then the economy would likely be in poor shape, so maybe not.

@nerdag i would be careful with that assumption, Z contributed 79% of ebitda, if zero $ puts FDV of a ebitda multiple of

mkt cap less cash $276m/$1.2m ebitda = 230X

IMO this is a risk-on stock, so its time will come

Thanks @Solvetheriddle.

Perhaps I should have been more careful with my language and suggested 'near zero', although that back of envelope calculation you have given doesn't assume further growth across Latam, rest of Asia and Africa.

Zameen (and Pakistan) matters, but not as much as the RoW for future growth in revenues.

Agree it's risk-on. Its one of my biggest holdings and I am happy with current allocation if fears over Pakistan do not come to pass.

@Chagsy, the vast majority of FDV's investment in Pakistan is in Zameen, which being the gorilla in the property space, is more than likely to survive in the event of a failed nation state, and emerge stronger, sovereign risk notwithstanding. Pakwheels is a small fraction of that, and there is no imminent risk of state failure in the remainder for LATAM or Asia and those businesses remain the leaders in their markets, which is 2/3 of revenue.

I'm comfortable holding and will top up if there is panic about a failed subcontinent. The panic will more than likely overshoot.

Fact of the day: $30bn, the estimated cost of Pakistan’s floods, equivalent to 9% of GDP. A terrible humanitarian tragedy - the flood maps are quite unbelievably large.

Not sure how this alters the thesis for FDV but can’t be a positive. might be hard to sell houses and cars that no longer exist, and between people who have lost nearly everything.

I agree @Chagsy that it is a terrible humanitarian tradegy buy I don't think it will have much impact on FDV to be honest. I have lived through a couple of major floods and what I have observed is that people are pretty traumatised by them initially but have surprisingly short memories. Initially no one wants to buy in the areas affected, and houses sell at a big discount. Some people just want to get out as they dont want to live there anymore, and they will take whatever they can get. Likewise some people may have to sell the car/house to raise some short term cash. Then after 2 years, give or take, when the houses have been renovated and flood damage fixed up the discount seems to disappear as people forget and see that they can get a 'better quality' house relative to the unaffected areas for the same cost.

As long as houses and cars are changing hands FDV will benefit and I don't see this flood really impacting that. I think I read somewhere that one of the drivers for Zameen was wealthy Pakistani expats buying property through it from afar.