Kobex Capital Corp is a Toronto listed company currently selling at 25% discount to its net cash value. The investment case is simple and brief, it has CAD$28m in net cash, $34m book value, yet the market cap is CAD$21m. Cranberry Capital is an investment company run by Paul van Eeden and has been progressively buying shares in Kobex. You can read some of his views and ideas on Daily Reckoning which he writes for.
The company has recently changed its status from a mineral and exploration company to an investment company. It states that it is looking for opportunities to make an investment in the mineral space, but so far hasn’t found anything so has been both buying back shares and making shorter term investments.
The few investments it has made in the last couple of years though leave a lot to be desired, with one being almost written off in full.
“As at December 31, 2013 the Company held common shares in Blue Sky Uranium Corp. with a fair market value of $37,500. During the year ended December 31, 2014 the Company recognized an impairment in the fair value of these shares of $29,167 (2013 – $33,300) through the statement of loss. The carrying value of these shares as at March 31, 2015 is $8,333.
“In 2014, the Company purchased 1,000,000 common shares in Mountain Province Diamonds Inc. (“Mountain Province”) for $5,000,000. As at December 31, 2014, the fair value of the Company’s Mountain Province shares was $4,850,000, resulting in a $150,000 charge recorded in other comprehensive income. During the three months ended March 31, 2015, the Company acquired an additional 175,746 common shares in Mountain Province at a total cost of $702,988 by way of a rights offering and a $43,568 fair value increase was recorded in other comprehensive income for the period for the Company’s entire Mountain Province holdings.”
There is speculation that the company could liquidate if the share price continues to underperform, however I’m a little less optimistic. The majority shareholder Mr van Eeden has a seat on the board and earns a nice salary along with ‘consultancy fees’. The company is also charged fees for financial reporting by a separate company but which is listed as a related party. I think there is a real risk Mr van Eeden simply milks this company’s cash for fees.
I tend not to have many holdings in my portfolio so probably won’t take a risk with this, but for those that hold a wide basket of net-nets, this could be a decent addition.
Disclosure: Author has no position in KXM, but may initiate one in the future.
Investing Sidekick
Founder of Investing Sidekick. Works as a research analyst and is an avid value investor, always searching for undervalued shares.
From announcement of Dec 7th, they seem to be elrtemexy generous to their directors and staff. They have just issued another 559,700,000 Share Options at exercise price of 0.276I wonder this. Can Independent Directors truly be independent when they all have stock options?