CKI - Clarke Inc.

[racemize]

How is everyone considering the hold vs sell choice here? This was a 10% allocation for me when I bought at $7.XX, so it has become a material portion of my portfolio at the same time as its become less obviously very cheap. There's still a bit of room before you're paying full price for everything, maybe another $1 or so, but then this becomes a bet on the holdings and the management. I've taken a bit off the table here now that we're over $12, but am interested in what others are doing.

 

Personally, I'll probably be waiting for long term gains, and hoping they keep increasing intrinsic value.  If it gets overvalued, I'll drop out.

[yader]

Depends on your goals.  I'm building wealth so I took the gains and parked it in something with more appreciation possibilities.  30% in 2-months is not shabby.

[Patmo]

How is everyone considering the hold vs sell choice here? This was a 10% allocation for me when I bought at $7.XX, so it has become a material portion of my portfolio at the same time as its become less obviously very cheap. There's still a bit of room before you're paying full price for everything, maybe another $1 or so, but then this becomes a bet on the holdings and the management. I've taken a bit off the table here now that we're over $12, but am interested in what others are doing.

 

Personally, I'll probably be waiting for long term gains, and hoping they keep increasing intrinsic value.  If it gets overvalued, I'll drop out.

 

You should be in good hands. There seems to be concern over hard ball tactics being employed by Clarke/Armoyan, but as far as results go they appear like solid operators. And you get a value book with its own built in activist catalyst, pretty neat.

[bizaro86]

You should be in good hands. There seems to be concern over hard ball tactics being employed by Clarke/Armoyan, but as far as results go they appear like solid operators. And you get a value book with its own built in activist catalyst, pretty neat.

 

Haha. I like hardball tactics when they're being employed by Clarke in my favour. I did lighten up a bit yesterday at $12.10 CAD. I have it in an RRSP so no tax considerations for me.

[Guest 50centdollars]

http://seekingalpha.com/article/2315455-clarke-trading-at-a-discount-to-newly-liquid-value

[jm25]

Why is the stock off so much the last 2 days? Am I missing something?

[cwericb]

Was wondering the same myself. Can't find any news, negative or positive.

[jm25]

It dropped off a cliff mid-day yesterday...

[Guest 50centdollars]

I dont know either... Supremex reported decent Q2 results and increased the dividend 12.5%

[gary17]

finally, an easier question I can contribute -

 

the Dow dropped 300 points yesterday!

 

Next.

[cwericb]

You might want to guess again. The DOW has dropped less than 2% while CKI has dropped 12% so back to the original question.

[gary17]

If the market was rational then what are we all doing here.

[jm25]

I added more today.

[Guest 50centdollars]

http://online.wsj.com/article/PR-CO-20140801-913313.html

[writser]

I missed the first runup but this starts to look compelling again so I did some reading on it over the weekend. One thing that I could not find: what exactly is the private debt they are investing in? Between this June presentation and this July presentation they invested another $14m there. I might very well have overlooked some information about these investments in this thread - if so, feel free to berate me.

 

My estimate for current book value is around $13 - ignoring loss carry forwards and depending a bit on how I value the pension asset. I'm not sure about the right approach to do so. If I understand correctly a previous post from sbalsam Clarke has to pay taxes when they sell the excess pension assets. But is it even possible for a company to 'wind down' the assets in a pension plan and use the money for, for example, a stock buyback? And why are they forced to mark down the pension plan on the balance sheet with a $21m asset ceiling in the first place?

 

Sorry for all the questions :) . Quite impressive that they managed to buy back ~3% of shares outstanding between the end of May and the start of July, even though Dazel will probably say it's not enough.

[mcliu]

I think the private debt is from Terravest.

[bizaro86]

I missed the first runup but this starts to look compelling again so I did some reading on it over the weekend. One thing that I could not find: what exactly is the private debt they are investing in? Between this June presentation and this July presentation they invested another $14m there. I might very well have overlooked some information about these investments in this thread - if so, feel free to berate me.

 

My estimate for current book value is around $13 - ignoring loss carry forwards and depending a bit on how I value the pension asset. I'm not sure about the right approach to do so. If I understand correctly a previous post from sbalsam Clarke has to pay taxes when they sell the excess pension assets. But is it even possible for a company to 'wind down' the assets in a pension plan and use the money for, for example, a stock buyback? And why are they forced to mark down the pension plan on the balance sheet with a $21m asset ceiling in the first place?

 

Sorry for all the questions :) . Quite impressive that they managed to buy back ~3% of shares outstanding between the end of May and the start of July, even though Dazel will probably say it's not enough.

 

Pension surplus can be accessed by annuitizing the obligations and winding down the plan. There are a bunch of regulatory steps, and the cost of annuities is currently high due to low interest rates, but it can be done. For now having Clarke invest the money with tax free compounding works for me.

 

More info here: http://business.financialpost.com/2014/03/20/creative-de-risking-solutions-can-help-pension-sponsors-avoid-buyers-remorse-down-the-line/

[writser]

Thanks for the link. I figured it wouldn't be trivial. Interestingly it looks like they invest with the pension fund in similar assets as Clarke itself does. At least, both Clarke and the pension fund own ~5% of Holloway. Given that and the conservative discount rate the pension surplus could grow even higher.

 

I initiated a smallish position today. Thanks everybody for layout out the thesis in this thread. Curious what will happen in a few days.

[EliG]

Geosam Capital Inc. increases its investment in Clarke Inc.

http://www.newswire.ca/en/story/1394558/geosam-capital-inc-increases-its-investment-in-clarke-inc

 

TORONTO, Aug. 5, 2014 /CNW/ - On August 1, 2014, Geosam Capital Inc. ("Geosam") acquired 2,500,000 common shares of Clarke Inc. ("Clarke") at a price of $10.93 per common share, representing 12.5% of the outstanding common shares of Clarke. Immediately after the transaction, Geosam owns 2,513,800 common shares, representing 12.6% of the outstanding common shares of Clarke.

[Guest 50centdollars]

Clarke Inc. Reports 2014 Second Quarter Results and Quarterly Dividend

Declaration

 

Canada NewsWire

 

HALIFAX, Aug. 7, 2014

 

HALIFAX, Aug. 7, 2014 /CNW/ - Clarke Inc. ("Clarke" or the "Company") (TSX: CKI)

today announced its results for the three and six months ended June 30, 2014.

 

For the three and six months ended June 30, 2014, Clarke generated net income

attributable to equity holders of $19.9 million or $1.00 per share and $92.9

million or $4.87 per share, respectively. This compared to net income

attributable to equity holders of $7.1 million or $0.43per share and $10.3

million or $0.62 per share for the same periods in the prior year. This

represents the highest net income generated in a six month period in the

Company's history.

 

The following were certain key events during the second quarter:

 

* The Company's Investment segment had significant increases in the market value

of its marketable securities resulting in total gains of $16.5 million for the

three months ended June 30, 2014.

* Clarke concluded its proxy contest with Sherritt International Corporation

("Sherritt"). Clarke commenced a proxy contest against Sherritt in early 2014

with the goal of replacing three directors with nominees of Clarke and promoting

positive change at Sherritt. Although we were not successful in obtaining board

seats, our investment in Sherritt was a financial success. We sold a portion of

our shares of Sherritt in the second quarter resulting in a realized gain on

marketable securities of $8.1 million. The remainder of our position in Sherritt

was sold subsequent to the end of the second quarter. In total, Clarke generated

a profit of $17.5 million and an IRR of 68% on its investment in Sherritt.

* The Company redeemed all of its remaining 2018 convertible debentures. The

Company no longer has any debentures outstanding.

* The Company sold a real estate holding in Kitchener, Ontario for net proceeds

of $2.1 million, resulting in a gain on sale of $1.5 million.

 

Clarke's book value at the end of the second quarter was $12.19 per share. The

Company grew book value per share by $3.87 in the first half of the year while

also returning $0.30 per share to shareholders in the form of dividends.  In

addition, the Company spent $8.0 million during the first half of the year

repurchasing shares, all at a discount to book value.

 

Clarke's Board of Directors also announced the 2014 third quarter dividend of

$0.10 per Common Share payable on October 10, 2014 to shareholders of record at

the end of business on September 30, 2014.

 

Michael Rapps, Clarke's President and CEO, stated: "Clarke's results in the

first half of 2014 have been great. We look forward to building on this momentum

in coming quarters." Mr. Rapps added "As a result of selling various investments

in recent months we currently have approximately $77 million of cash on hand.

This cash has significant option value for us as we can act quickly when an

investment opportunity arises. We are currently focused on assisting our

portfolio companies with growing their businesses and identifying new

opportunities to invest in undervalued businesses."

 

Further information about Clarke, including Clarke's Interim Condensed

Consolidated Financial Statements and Management's Discussion & Analysis for the

three and six months ended June 30, 2014, is available at www.sedar.com and

www.clarkeinc.com.

 

 

[Guest Quebec]

Sherritt shares have all been sold post-Q. It's nice of them to tell us.

 

It's still somewhat a mystery who bought the large Holloway stake from Midland, but it's not Clarke. We know that since the July 3 presentation and that fits with the recent PR where we get confirmation that Clarke has about 5% of the HLC shares and Clarke's pension fund also about 5%. Maybe its Letko, Brosseau . They are a large Clarke shareholder and seems to have increased their HLC shareholding as of June 30. Or maybe one of the personal Armoyan entities?

 

Like others, I noticed and am curious about the increase in Private Loans between the last 2 presos. From memory it jumped by about 25M$. The Terravest was accounted in there prior so that's not it. In fact, Terravest did a share issuance and was supposed to partially reimbursed the loan early.

 

I sold 1/6 of my position near 12 and put the proceed in HLC, so personnaly I really increased my investement in Holloway ;-)

[phil_Buffett]

is the buyback still in place?

 

share falling after earnings. dont understand why. buying back under bv would be great  :)

[Guest Quebec]

Clarke Q2 financials are now on Sedar. Clarke lent 16M$ to Holloway @6.50% hence the increase in Private Loans investment. So we lent to Terravest to buy our tank business and to Holloway to buy our hotel. Excerpts:

 

"Subsequent to June 30, 2014, the Company sold its remaining shares of Sherritt International Corporation for proceeds of $34,621."

 

 

"During the six months ended June 30, 2014, the Company entered into a term loan agreement with Holloway Lodging Corporation (“Holloway”), a company of which a company owned by the Company’s Executive Chairman has an approximately 32% ownership interest. The agreement consists of a $17,000 term loan that bears interest at 6.50%. The term loan may be drawn up to three times on or prior to December 31, 2014, and does not require any principal payments until the maturity on March 31, 2016, or March 31, 2017 if the borrower requests an extension. The borrower may prepay all or part of the term loan at any time following the six month anniversary of the first loan draw. During the three months ended June 30, 2014, the borrower made its first loan draw in the amount of $16,000 on the term loan and is included in ‘Notes receivable’ on the interim consolidated statements of financial position. Interest on this note is included in ‘Other income’ for the three months ended June 30, 2014 in the amount of $11 (2013 – nil)."

 

 

[Guest Quebec]

is the buyback still in place?

 

share falling after earnings. dont understand why. buying back under bv would be great  :)

 

I believe the buyback is still in place. They haven't been buying back from july 1st to july 31 when the price was in the 11.xx . Share count was last updated on July 31 and remains 19,925,191 . Maybe they wait for the price to settle down before they resume

[phil_Buffett]

is the buyback still in place?

 

share falling after earnings. dont understand why. buying back under bv would be great  :)

 

I believe the buyback is still in place. They haven't been buying back from july 1st to july 31 when the price was in the 11.xx . Share count was last updated on July 31 and remains 19,925,191 . Maybe they wait for the price to settle down before they resume

 

thanks for your answer quebec. yeah hopefully they are buying back now more Shares with the Shares under 11$