CKI - Clarke Inc.

[LesPaul]

Well in fairness, only in the last 10 weeks has their share price been under $11. It appears they've been buying their ~5,400 shares since the share price hit $10 and under.

 

[Andy Dufresne]

Hi LesPaul - the data I've collected below suggests otherwise - they actually bought more when share price was higher, as in August and the first half of September Clarke traded roughly around CAD 10.50 - 11

 

The 2 figures from September were posted on their website and have now been replaced by the current figure

 

Date          Shares

6/30/2014   19,925,191

8/7/2014   19,912,791

9/16/2014    19,792,291

10/6/2014   19,738,091

10/16/2014  19,708,591

 

Still, they could not have divined the last 2-3 weeks' action in the markets ... I just hope they buy as much as they possibly can back!

[LesPaul]

Ah, I stand corrected!

 

Thanks for the data points. I don't know what the next catalyst is; I'll allow smarter minds than mine to speculate on that! I recall an idea referring to a special divy + buy-out of Clarke.

 

In the meantime, it's nice to see that share count continually lower.

 

 

[Andy Dufresne]

Next catalysts will likely be from one of the following sources:

 

1. Q3 report with updated book value, which should be higher than that of Q2;

 

2. Continued smart investments by Armoyan;

 

3. Possibly another activist campaign by Armoyan will bring more visibility to Clarke and perhaps some analyst coverage (unlikely) but we can hope.

 

4. A special dividend, enlarged NCIB or a public share tender

[EliG]

I see two possible explanations as to why they are not buying as much:

 

1. They are roughly 80% done with their 5% NCIB after only 3.5 months ... if they cannot increase it, perhaps they are spreading out their buying hoping for a larger discount; or

 

2. Armoyan has even better uses for the cash now that the market has taken a hit, and the Canadian Oilsands are being mauled.

 

Would love to get input on this from you guys ...

 

Here's another possible reason:

 

3. They made three material news releases since the end of Q2. It's very likely that each news release triggered a "black out" period where they couldn't purchase shares because of insider trading concerns.

 

I don't know how long these "black outs" typically last. I follow another company that didn't buy as much as they could. Someone asked them about that on the conference call. CFO explained that it was a combination of the low daily limits and the length of the blackouts. 

[jay21]

I can see how he could have a bad reputation outside of value investing circles:

 

"Developer George Armoyan banned from city buildings due to threatening behaviour

 

....

 

“I will sue them for every God damned thing because I’m not backing down,” he said. “They’re making our life miserable. I’ll make theirs miserable, too.”"

 

http://thechronicleherald.ca/metro/1246246-developer-george-armoyan-banned-from-city-buildings-due-to-threatening-behaviour

 

I like the fire tbh.

 

Edit:

 

"He's got a great track record of making money," Mr. Belaiche said. "I would describe him as the Carl Icahn of Canada. ... George will play to win. If he has to ruffle feathers to accomplish his goal, he will."

 

"He has a record of being a serial winner," Fairholme consultant analyst Guy Gottfried said.

 

http://www.globeadvisor.com/servlet/ArticleNews/story/gam/20070510/RCLARKE10

 

[LesPaul]

Updated share count as per Clarke Inc website:

 

Common shares (TSX: CKI) 19,697,591 11/3/2014

[writser]

The buyback pace seems to have slowed down the past few weeks. I'm curious as to what they're up to. Maybe just random noise ..

 

shares 18/8: 19,885,791

shares 16/9: 19,792,291

shares 6/10: 19,738,091

shares 16/10: 19,708,591

shares 3/11: 19,697,591

[Andy Dufresne]

We will know in a few days when Q3 report comes out. Hopefully they have found even better uses for the cash :)

[EliG]

Clarke Inc. Reports 2014 Third Quarter Results

http://web.tmxmoney.com/article.php?newsid=71431438&qm_symbol=CKI:TSX

 

$12.99 book value, up 7% from Q2

 

$40M cash balance

 

[writser]

And complete filing is out as well: http://sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00009934 . Not much news. Their portfolio is now roughly:

 

44% Holloway common and convertibles

29% Supremex

22% Terravest

5% Spyglass

 

We currently have approximately $40.0 million of cash on hand and only a minimal amount of term debt. While we believe corporate valuations in general continue to be elevated, the stock market selloff in mid-October has prompted us to consider more seriously new investment opportunities. Our focus is to acquire securities or companies that are significantly undervalued; we will remain disciplined in deploying our capital as that capital retains option value while it is in our hands.

 

We believe our shares continue to be undervalued by the public markets and we will continue to work hard to close this value gap. We repurchased shares throughout the third quarter and we intend to continue repurchasing our shares depending on market conditions, market prices and other investment opportunities.

 

Still looks decent at current levels imho (if you like the underlying businesses). ~20% discount to book, buying back shares, some dry powder left.

[Pauly]

Nice reaction to earnings today. Yesterday was a bit disappointing (-1.67%), but it looks like the last trade of the day went through at a strangely low price. A $1,000 trade turned the stock red for the day, gotta love small cap Canadian stocks!

 

 

[cheerlee]

Any opinion about the new CEO Michael Rapps? integrity and ability?

[EliG]

Any opinion about the new CEO Michael Rapps? integrity and ability?

I believe that Rapps is immaterial to the investment thesis. Armoyan is calling all the shots.

[cheerlee]

Thanks for your opinion. Interested article from recent news:

 

Armoyan said he won’t be as involved in the day-to-day operations of the company, which specializes in buying into businesses that are underperforming and increasing their value. “I’m going to be more like a sounding board or an adviser,” he said.

Armoyan, who is 53, has been involved in business for 31 years. He said he has come to a juncture in his life where he wants to spend more time with his two sons, who are 21 and 20, and perhaps groom them — “if they have the passion” — to take over his business interests.

 

 

[doc75]

Gotta love CKI trading.  Holloway up 8% and Clarke down on the day after an initial rise.

[writser]

People wishing to disprove the EMH only need to point out Clarke inc. I understand absolutely nothing about the way this stock is trading. The day after quarterly results it opens +5% even though the earnings release contains practically no news and you could've figured out their live portfolio and buybacks up to the last share from previous news releases and their website. Today it opens higher again but now is down for the day even though SXP is up 7% and Holloway had a great quarter (link) and is up 8% or so. These stocks account for > 70% of their portfolio so CKI NAV has increased by 5% or so in day.

 

Not to mention the bizarre price movement in the beginning of this year. I'm not complaining - it's just fascinating :) .  Maybe I'm missing all sorts of news living on the other side of the planet but I doubt it.

[Andy Dufresne]

EMH purists would argue that a discount to NAV is justified  due to limited liquidity with a controlling shareholder as well as a holding company discount. We CoB&F fellows, on the other hand, know that CKI is now part of the TSX Small Cap index, and that Armoyan is a very good capital allocator whose interests are more aligned with shareholders than those of management at most public companies. Nevertheless, CKI trades for the proverbial 75 cents to the liquid Loonie (or huard, in the spirit of bilingualism!)

 

I'll let the purists enjoy EMH while I enjoy my CKI holding. Now, if CKI can go back down 15% I'll be even happier to buy a bit more!

[writser]

EMH purists would argue that a discount to NAV is justified  due to limited liquidity with a controlling shareholder as well as a holding company discount.

 

I don't disagree with that, but apparently they argue every day that a different discount level is appropriate.

[Andy Dufresne]

EMH purists would argue that a discount to NAV is justified  due to limited liquidity with a controlling shareholder as well as a holding company discount.

 

I don't disagree with that, but apparently they argue every day that a different discount level is appropriate.

 

Couldn't have said it better if I tried :D

[Myth465]

Clarke and Holloway are the only stocks I am pleased with.

I bought back largely into both.

 

I like the way Clarke trades, if Holloway runs high, you can buy more Clarke because its well inefficient...

I think they will do wonders with Holloway as a platform.

 

I like Rapps - He is almost too transparent. Very nice MD&A. I wonder what they will do with Spyglass.

They dont agree with Management and are on the board. I have a feeling the company will be sold.

[cheerlee]

Do anyone figure out that Armoyan has how much ratio of asset in Clark Inc and outside Clark? thanks.

[LesPaul]

Which one of you guys picked up all those shares today...  :P

[kab60]

Hi guys,

 

I'm new to this board (and investing) but have lurked for some months. I've been positively surprised by the level of discussions here (and the nice behaviour, keep it up). Anyway, I initiated a position in Clarke earlier because I like Armoyan and espescially Clarke Inc's holdings of Supremex and Holloway Lodging. However, I'm wondering whether I wouldn't be better off investing directly in Supremex and Holloway, where I can clearly see how much cash they're generating. When I look at the balance sheet of Clarke Inc, I see $102mn of other assets, including real estate, private equity and pension surplus (corporate presentation from july), but I doubt that stuff is generating quiet as much cash as the two aforementioned businesses. Anyone have any insight? From my understanding there's not much of an operating business left inside Clarke since they sold their freight business.

 

I know there's quiet a nice discount to BV of Clarke Inc (and you get a nice manager, who might do more nice reals like Royal Host/Holloway Lodging), but the market value of the Holloway and Supremex holdings are "only" around 83 million compared to a CKI marketcap of 211 million - there's also net 40 mio. cash. Now, one risk I see with investering directly in Supremex, for an example, is that it'll be turned private. It seems like Clarke Inc tried to do that before, and while they didn't succeed the former CEO left the company and Clarke Inc installed a new guy - who seems to do a good job - but who might also be more open to taking the business private.

 

I also couldn't find much info on Michael Rapps - anyone seen some interviews with the guy?

 

Cheers, kab60

[doc75]

I've been watching Clarke buy their 5400 shares per day as of late.  I checked today because of the huge volume spike and was surprised to see a very large insider sell (174200 shares, $1.8m worth). 

 

http://www.tmxmoney.com/TMX/HttpController?GetPage=SearchInsiderTrade&Language=en&Submit=Submit&QuerySymbol=cki&x=-765&y=-447

 

I'm curious to see the nature of this transaction when it's posted on SEDI.