Supremex Inc T.SXP

Alternate Symbol(s): SUMXF

Forest Products Paper & Paper Products

Supremex Inc. is a Canada-based company, which manufactures and markets envelopes and provides paper-based packaging solutions designed to the specifications of national and multinational corporations, direct mailers, resellers, government entities, small-medium enterprises (SMEs) and solutions providers. The Company operates through two segments: the manufacturing and sale of envelopes and the manufacturing and sale of paper-based packaging solutions and specialty products. It also manufactures and distributes a diverse range of packaging and specialty products, including high-end quality folding carton packaging and e-commerce fulfillment packaging solutions. Its other packaging and specialty products include the Conformer Products, labels, polyethylene bags for courier applications, bubble mailers and Enviro-logiX. It operates 10 manufacturing facilities across four provinces in Canada and six manufacturing facilities in four states in the United States.

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Supremex Inc > Hidden Value - do the math

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Comment by HermannHalleron Apr 07, 2022 6:54pm

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Post# 34586224

RE:RE:Hidden Value - do the math

I think that's management's position, that they could just borrow the money instead. But they are not doing that either. I mean, if they have a plan that is anywhere near as accretive to earnings, I would be happy to hear it.

The fact is that they are sitting on a windfall, shareholders should receive some benefit. The windfall has come from an over-heated real estate market. No one is buying SXP as a real estate play, they need to do something with it. We wouldn't even know about this value if GC didn't get it added to the proxy.

Companies that care about creating value for shareholders often take advantage of mispricing between public and private markets. Fairfax did this last year, selling a portion of a subsidiary and using the proceeds to do a substantial issuer bid. The sale of Odyssey to a couple of pension funds got a great price, and they used the money to buy back shares below book value. SXP similarly has a great opportunity here.

Capharnaum wrote:

HermannHaller wrote: Before anyone decides how to vote, they should do the math on these proposals. The value of these two buildings is enormous. Factoring in closing costs, and tax on the capital gain, they could still come away with over $50 million. And then what? They could buy back 10 million shares at $5! Now estimate the rent they have to pay on the buildings, take that off income (net of tax), then take your new lowered income divided by the much reduced share count...EPS goes up 44%.

Now they probably wouldn't use the entire amount to buy back shares, or maybe they pay out a special dividend, but however you slice it, there's a lot of hidden value here.

Their loan is asset back with those buildings, so they would have to redo their loan without using the buildings as backing assets. This could lead into increased fews and interests.

Also, if they can have a loan based on other assets and that the cashflows coming out from a sale and lease-back would be worse than the current cashflows, then they should just take an additional $50M loan to get the extra cash, if they needed that cash.

Basically, it always comes down to future cashflows and the best use of assets should mirror that. I think the answer from the management is pretty clear that future cashflows wouldn't be better served with the solution proposed.