Clarke Inc (TSX:CKI) is an investment company whose objective is to maximize shareholder value. The company believes that book value per share, together with the dividends paid to shareholders, is an appropriate measure of success in maximizing shareholder value over time.
The company attempts to maximize shareholder value by allocating capital to investments expected to generate high returns and reallocating capital over time as needed.
In doing so, Clarke’s goal is to identify investments that are either undervalued or are underperforming and may be in need of positive change.
These investments may be companies, securities or other assets such as real estate, and they may be public entities or private entities. Clarke seeks active involvement in the governance and management of the company in which it invests.
Clarke acquires the security with a view of changes that could be made to improve the underlying company’s performance and maximizing value.
When Clarke believes that an investee company has implemented appropriate changes and/or the value of the investee company has reached or exceeded its intrinsic value, Clarke could sell its investment.
Clarke generally invests in industries with hard assets, including manufacturing, industrial, energy and real estate businesses.
The company has a price to earnings ratio of 4.8, a price to book ratio of 0.84 and market capitalization of 206 million. Debt is very sparingly used at Clarke, as is evidenced by a debt to equity ratio of 0.67. The company has excellent performance metrics with an operating margin of 21.52% and a return on equity of 17.11%.
Clarke recently acquired 49% of Holloway Lodging Corporation and issued 4,799,455 Common Shares at a price of $12.50 per share, the closing price of the company’s stock that day.
In the third quarter, Holloway sold seven hotels for gross proceeds of $41.3 million and net proceeds of $37.9 million after closing costs and the provision of vendor take-back mortgages.
Substantially all of the net proceeds were used to repay debt. At the end of the quarter, Holloway owned 18 hotels with 2,229 rooms and had third party debt of $56.8 million.
Clarke also owns three vacant office buildings in Houston, covering 435,000 square feet. The company acquired these properties far below the cost at which they can be replaced and are actively working to redeveloping and leasing the properties.
Clarke also own a vacant parcel of land in Moncton, Canada. The company’s common shares currently trade below their book value and Clarke doesn’t believe this discount should persist.
The company strives to increase book value per share buy buying back shares and looks to close the gap between share price and book value per share by having the share price increase.
Owning approximately 53% of the outstanding shares, Clarke’s board and management are significant shareholders of the company, are aligned with shareholders and are committed to generating attractive returns and compounding our capital.
The company currently has $72 million of debt at the Clarke corporate level and $132 million of debt on a consolidated basis.
Clarke also has availability under several credit lines of $62 million. Clarke has noted that it’s evaluating multiple investment opportunities that fit the company’s disciplined investment criteria.
