CKI - Clarke Inc.

[Myth465]

Very nice surprise.

All good, I would prefer Clarke buy more stock in Holloway vs. own debt at 6%.

 

I dont like Clarke holding debt securities though the cash flow is nice.

Ideally they will continue to buy stock. O&G has been decimated. So I would prefer them investing.

 

Also I never liked this franchise business.

They were not focused on growing it and it always seemed like an odd bit.

I would like all debt bought back, and a simple line of credit used for debt as well. Keep simplifying the structure.

[LesPaul]

Nicely done. Looks like $10.00 was the right number.

 

HALIFAX, April 8, 2015 /CNW/ - Clarke Inc. ("Clarke" or the "Company") (TSX: CKI) today announced the results of its substantial issuer bid dated March 2, 2015 (the "Offer") to purchase for cancellation up to 2,000,000 of its outstanding common shares (the "Shares") at a purchase price of $10.00 per Share.

 

The Offer expired at 5:00 p.m. (Atlantic Standard Time) on April 7, 2015. Based on the final report provided by the depositary for the Offer, a total of 2,379,042 Shares have been deposited at the expiration of the Offer, representing approximately 12.6% of the Shares outstanding. Clarke intends to take up all of the Shares deposited pursuant to the Offer in accordance with applicable securities laws and as set forth in the Offer documents. The total purchase price for the Shares deposited under the Offer will be approximately $23.8 million and will be funded with cash on hand. Payment for the Shares deposited and accepted for purchase will be made as soon as practicable in accordance with the Offer.

 

Following the purchase and cancellation of the 2,379,042 Shares deposited under the Offer, Clarke will have 16,448,605 Shares outstanding. The Offer was an accretive transaction for Clarke as the Shares acquired under the Offer were purchased at a substantial discount to the Company's book value per Share. Adjusting the Company's $12.57 book value per share at December 31, 2014 solely for the effects of the Offer and the Company's previous substantial issuer bid that was completed on January 26, 2015, Clarke's pro forma book value per share at December 31, 2014 was $13.06.

 

Edit: Removed unnecessary link.

[bbarberayr]

Book value including current prices on investments and the stock buyback is now $13.50 per share.  $14.39 if you assume the overfunding of the pension above the pension ceiling gets released at 31% tax rate.

 

At $10.10, stock is trading at p/b of 75%.  This is right around the lowest p/b it ever hits.

 

I am surprised the stock didn't move up today as you've got the low valuation, management focused on creating shareholder value, a good dividend and a simplifying company.  It also is a good position for buys with the strong discount to book limiting downside.  In the near term, I suspect when Q1 results are out with the new numbers, the stock has a good chance of bouncing.

 

I bought more today, even though it is a large position for me.

[bbarberayr]

One other point.  If you look at the growth in book value as an indicator or management effectiveness, book value has increased by 13% a year since going public in 2000 and by 29% a year since 2009, so while they had a bad time in 2007 - 2009, I see that as an exception that hit many successful investors and that management is doing a good job of creating good value over time.

 

 

[Pauly]

Wow, so they just soaked up 12.6% of the outstanding shares? Not bad at all.  The fact that Clarke flies under the radar of most investors must be a major reason that it barely moves on news like this, no?

[Myth465]

All very good news.

Will be interesting to see where they go next.

 

They need an operating business to make the most out of the tax losses.

[LesPaul]

Some insider transactions as per sedi / canadianinsider.com for the month of April:

 

Dustin Haw purchased 4,800 shares at ~10.19

Michael Rapps purchased 2,000 shares at ~10.18

Sime Armoyan tendered 785,142 shares at $10.00 (my guess is that these shares were tendered so that Armoyan ownership would not surpass 49% of CKI as a result of the SIB)

 

EDIT: The management information circular released on April 13th/2015 outlines Armoyan ownership at 7 277 665 common shares - 44.2% of outstanding shares

 

Edited the word 'understanding' to 'guess' - I did not want to infer that some sort of 'understanding' had been explained to me from some other source!

[mikazo]

I have nothing useful to add but I just wanted to say thank you for all the good information in this thread! I read through the whole thing today. I plan to do some more research and may initiate a position in CKI soon. If I find anything useful, I'll be sure to add it here.

[wachtwoord]

Has anyone been able to buy CLKFF (the OTC counterpart to CKI.TO)? This doesn't seem to be available in IB (ATUSF the counterpart of ALS.TO is for example) and I was looking to avoid needing CAD in my portfolio.

 

Edit:

 

I got a reply. Apparently CLKFF is not available due to "clearing reasons". Guess I'm going to have to change my trading permissions to be able to trade on Toronto as well.

[writser]

I don't understand what you want to achieve. you can buy CKI.TO, hedge CAD short position back to USD and you end up with exactly the same position ..

[wachtwoord]

I want to avoid having many separate foreign currency positions in my portfolio to avoid fees (which are high on forex, I've been a couple of hundred Euros short for a few years for this very reason, it's not cost effective to close the position I'd rather just pay interest). After purchasing CKI.TO I will need to buy CAD to remove the short CAD position and from then on they will be paying dividends in CAD which is not liquid for me (converting the smallish dividend payments is not cost effective).

 

This is why I bought ATUSF instead of ALS.TO even though that's the biggest position in my portfolio.

[Hielko]

High forex fees at IB??? I pay 2 USD/forex transaction with a spread that is less than one pip.

[wachtwoord]

High forex fees at IB??? I pay 2 USD/forex transaction with a spread that is less than one pip.

 

I remember paying 2-3 euros versus ~$1 for a stock purchase. Maybe I'm being a bit too frugal (OTC stock fees are also higher than $1 and there is a spread).

[writser]

The time you spent trying to figure out how to trade the US listing should be worth more than the 3 euro you are trying to save. Not to mention that the US listing is far more illiquid so you will probably end up buying shares at a worse price anyway. I'd say this is a case of penny-wise / pound-foolish :) .

[Jurgis]

CKI is thinly traded in Canada as it is. USA volume - or actually lack thereof - is pathetic. Be forewarned.

[wachtwoord]

CKI is thinly traded in Canada as it is. USA volume - or actually lack thereof - is pathetic. Be forewarned.

 

May be that's why IB doesn't offer it.

 

The time you spent trying to figure out how to trade the US listing should be worth more than the 3 euro you are trying to save. Not to mention that the US listing is far more illiquid so you will probably end up buying shares at a worse price anyway. I'd say this is a case of penny-wise / pound-foolish :) .

 

Yeah, when I'm allowed to trade on the Canadian market I'll see what the price is and if it's still a good price.

[writser]

Clarke 1Q results out. They initiated a position in Keck Seng - a name that has been covered on this forum: http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/keck-seng-investments-0184/ .

[Andy Dufresne]

Thought the quarter was good:

 

1. Cash position increased significantly with debt repayments;

2. Divestment of ancillary activities such as the MV Shamrock - I do hope the other ship business and the PE stuff get realized this year;

3. Pleased that O&G related assets were purchased at was is very likely a depressed price;

4. Loved the share repurchasing!

 

Now let's hope that with a BVPS that should be more than CAD 13.3 by now (13.28 according to Clarke's report and this was as of March 31st) and a very large amount of cash on hand, there will be another large share repurchase and/or special dividend. However, I wouldn't mind the purchasing of good equities either. The new Keck Seng position is still small, but I will watch with interest how things unfold.

 

 

[wachtwoord]

My MoS is diminishing. Still no access to Canadian markets.

[bizaro86]

I'd love to see them do a deal where they buy a tax paying operating company with a big pension deficit (and hence a lower purchase price) monetize the NOLs and the pension surplus in one fell swoop, and the stock probably re-rates.

[Andy Dufresne]

bizaro, that is indeed the hope! however, you would need to find a very very specific company and it would need to be rather large to accommodate 50 million of pension surplus and I am not sure that having such a large operating company is something they want, given all of their actions in the past couple of years. However, perhaps they can find a way to spin or sell off the NOLs and pension surplus - not sure  how they would do this however, and am not clear on tax treatment of NOLs in Canada in an M&A scenario ... if anyone can enlighten me, I'd love to hear!

[LesPaul]

Clarke Announces Renewal of Normal Course Issuer Bid

 

HALIFAX, May 25, 2015 /CNW/ - Clarke Inc. ("Clarke" or the "Company") (TSX: CKI) announced today that it has filed a notice with the Toronto Stock Exchange and received its approval to purchase, through the facilities of the Toronto Stock Exchange, up to 822,430 common shares, representing 5% of the issued and outstanding common shares (the "Share Issuer Bid"). As at May 19, 2015 there are 16,448,605 issued and outstanding common shares. From November 1, 2014 to April 30, 2015, the average daily trading volume ("ADTV") of Clarke common shares was 18,432 common shares. Under TSX Rules, the Company is entitled to purchase up to 25% of the ADTV of the respective class of shares which is 4,608 common shares, on any trading day. Any common shares purchased by Clarke pursuant to the Share Issuer Bid will be cancelled.

 

Purchases under the plan may commence on May 27, 2015 and will terminate on May 26, 2016.

 

In connection with the program, the Company has established an automatic securities purchase plan (the "Plan") for the Issuer Bid.  The Plan was established to provide standard instructions regarding how Clarke shares are to be repurchased under the Issuer Bid.  Accordingly, Clarke may repurchase its shares under the Plan on any trading day during the Issuer Bid including during self-imposed trading blackout periods.  The Plan will commence immediately and terminate with the Issuer Bid.  The company may otherwise vary, suspend or terminate the Plan only if it does not have material non-public information and the decision to vary, suspend or terminate the Plan is not taken during a self-imposed trading blackout period.  The Plan constitutes an "automatic plan" for purposes of applicable Canadian securities legislation and has been pre-cleared by the Toronto Stock Exchange.

 

The Directors and Senior Management of Clarke are of the opinion that from time to time the purchase of Clarke common shares at the prevailing market price would be a worthwhile use of available funds and in the best interests of the company and its shareholders. Clarke acquired 1,025,946 common shares by means of open market transactions pursuant to the normal course issuer bid that expires May 26, 2015, at a weighted average price of $10.39 per share.

[EliG]

Insider bought 31,800 shares @ $11.37

 

Posted today on the TMX site.

[LesPaul]

Insider bought 31,800 shares @ $11.37

 

Posted today on the TMX site.

 

Interested to see who it was. I will also be interested to see whether they start the NCIB buybacks at this level (high $11s) or perhaps at a lower price.

 

What do you guys think about your CKI investment today?

 

I enjoy the dividend yield and appreciate CKI as a vehicle for me to be in on HLC, TVK and now Keck Seng - however, at BV or 95% of BV, I do believe I would trim my ownership down a little bit (as I am admittedly overweight here.)

[Hielko]

Insider bought 31,800 shares @ $11.37

 

Posted today on the TMX site.

 

Interested to see who it was. I will also be interested to see whether they start the NCIB buybacks at this level (high $11s) or perhaps at a lower price.

 

What do you guys think about your CKI investment today?

 

I enjoy the dividend yield and appreciate CKI as a vehicle for me to be in on HLC, TVK and now Keck Seng - however, at BV or 95% of BV, I do believe I would trim my ownership down a little bit (as I am admittedly overweight here.)

They have an automatic securities purchase plan, so I would expect that they will buy at the current price and continue whatever direction the price moves.

 

Fwiw: I have sold a decent chunk of my position. Discount obviously a lot smaller than earlier this year.