This is a pure asset play. They do no operations. There is some real value in the 2% income stream but the up side is pure asset value play. What would these properties sell for? My only clue to that is that insiders continue to buy.
I believe that CKX's market-cap is pretty close to what their land assets are worth at fair market value... I believe that the potential up-side is more closely tied to the Mineral assets associated with CKX's lands. In the last filing, CKX's royalty revenue was down due to natural declines associated with traditional (straight-hole) exploration & production... However, the last filing also mentioned that revenue from the signing bonus associated with new mineral leases has increased over the last 6 months... The uptick in mineral leasing is the first indication of future royalties...
I have some information that leads me to believe that the Wilcox #1 & #2 sands can & will be developed in SW Louisiana as a resource play (horizontal drilling & hydraulic fracture completion techniques)... When, not if but When, this new play gains more publicity & more industry interest, we will begin to see CKX's share price grow. As previously mentioned, the recent uptick in mineral leasing on CKX's properties suggest that the early players for the Wilcox Resource Play are already positioning themselves...
I believe that CKX has a bright future ahead of it, hence the insider buying... I have researched similar land holding companies from the Utica Resource Play, and it is very possible that CKX could trade above $80/share or even $100/share in the next 5 years... It is also possible that industry looses interest in the play & CKX goes nowhere...
I'm buying CKX & plan on Holding CKX for the next 3-5 years... I found CKX while looking for ways to profit from the upcoming Wilcox Play... Halcon & El Paso & the E&P's developing the play, but these companies do not offer the upside potential that CKX does, in my opinion. Perhaps more investment oppertunities will develop as more E&Ps enter the play... I think the Wilcox Play will be superior to the TMS Play taking place in SE Louisiana.
Not sure I accept that CKX's market-cap is "pretty close to what their land assets are worth at fair market value."
I think they are worth more.
I looked at all the parishes where we own land. Our 12,525 net acres are in Allen, Beauregard, Calcasieu, Cameron,Jefferson Davis, LaFourche, Sabine, St. Landry and Vermilion parishes. (info per the 10K).
I then determined the relative income levels of these parishes, to find the lowest income parish in the list.
Since local real estate values tend to reflect local income levels, I assumed the lowest income parish should have the lowest property values....this could be a wrong assumption in Louisiana, but that was my logic.
The lowest income parish, Lafourche, was ranked #35 out of all 64 parishes in the state. So how much is an acre in Lafourche? I went on Zillow to see what various acreages of raw land in Lafourche would cost me. I noted that one acre lots in Lafourche parish, which I assumed to be worst case, or close to it, seemed to run from $32-$47k per acre.
In Cameron, which I assume to be a more costly area, I did find one parcel of cheap land. It was a massive $9.9M tract of 8029 acres of marsh land =) or $1,233 an acre.
Just for fun, let's say none of our acreage is worth more than $1200 an acre.
$1200 x 12,525 acres = $15.03M or $7.74 per share, just for the land.
In Cameron, I found a much more manageable parcel of 265 acres for $1.9345M, or $7300 an acre.
$7300 x 12,525 acres = $91.432M, or $47.13 per share, just for the land.
In Cameron, I also found raw lots of .27 acres for $29,000 or .26 acres for $27,000. That works out to $100k an acre for raw land.
$100,000 x 12525 acres = $1.25B, or $645 per share, just for the land.
There's the data; draw your own conclusions. Please feel welcome to correct my assumptions and calculations.
Drillingsolutions, you seemed to be informed. Do you have any idea why this company is holding so much cash? It looks like they could easily pay a $3 per share special dividend, which they should do unless they have some major investments (hopefully strong IRR ones) in the works. Any insights on this?
Must agree with your comment that our approximately 12,525 net acres (owned by only 1,942,495 shares) represent good value....we also have oil and gas rights on that land.....yet I still see CKX earnings as part of its attraction.
Last year with an extraordinary item (+$0.22), our earnings were $1.15 and each share paid me $0.28 in dividends.
Timber market activity was somewhat depressed due to the #$%$ housing market. If housing does anything, or if paper companies pick up, we should see good bids for timber rights.
So to buy a bargain share that is building net tangible asset value as fast as this one (they are buying more land with their money) seems all good to me.
Thanks, moolah, I saw that. I also notice that they have been saying this for some time, and that most of their property transactions of late appear relatively small. Ideally, they find a solid property and deploy all the cash. I would even like a modest amount of leverage. But, on the other hand if they are being super conservative and playing small ball, I would rather get the cash returned to shareholders. They do say they see values improving... anyone have local color or specialized knowledge on opportunties they might be considering?