Clark Street Value recently shared his thoughts on the freshly launched strategic review at CKX Lands. It is a tiny company that owns land in Southwest Louisiana and generates royalties from oil and gas producers as well as timber sales. Management thinks CKX is undervalued and the language in the press release suggests that management buyout is one of the options being considered.
The market currently values CKX at around $1400/acre. Looking at the land prices in Louisiana parishes where CKX owns land parcels, $1900/acre seems to be a more reasonable valuation and would put the stock at $15/share (21% upside). Some incremental value could come from the company’s residential ranchettes which are selling for $13k/acre. Management owns 11% of CKX and has a generous incentive package, most of which would vest at $15/share.
Note: The ‘Ideas Elsewhere’ section is intended to highlight interesting event-driven investment ideas by other authors. These ideas are not my own, and I am simply summarizing them to bring attention of SSI subscribers. I do not intend to actively follow the developments of these ideas, so you should expect limited updates or follow-ups in the comments section.