A Toronto-area investor is putting pressure on Supremex to get more shareholder value from the Montreal-based manufacturer of envelopes, pizza boxes and other packaging products. George Christopoulos has just revealed that he holds approximately a 10% stake in the company. At the current stock price, this stake is worth approximately $8 million.
George Christopoulos describes himself as a "value-type" private investor.
He says he bought shares of Supremex for investment purposes and had discussions with CEO Stewart Emerson and chairman Robert Johnston to share his ideas.
In particular, he claims to have presented on December 30 two "shareholder proposals" to be discussed in detail in the next information circular in anticipation of the annual meeting of shareholders.
In a telephone interview, George Christopoulos said he wanted to wait before unveiling the content of his proposals, but nevertheless stressed that demand is currently high for industrial buildings in Toronto and Montreal.
He points out that Supremex owns only two of the buildings it occupies, but that the value of these buildings has never been higher.
"Supremex's stock is extremely undervalued," christopoulos said. It trades at 3.7 times its operating profit. Few companies exchange with such a low valuation multiple. »
The company is well managed, he said, and generates "very good" operating income and "very good" cash flow.
"Management realizes that the stock is undervalued and repurchased nearly 1.3 million shares last year, equivalent to approximately 5% of the outstanding shares. When you buy back shares at a price well below the intrinsic value of the company, you create value for all shareholders. They could have bought more aggressively, but maybe it will happen," he says.
The CEO of Supremex did not give an interview to La Presse, but still confirms that the management evaluates the "merits of the proposals received". "We regularly engage with our shareholders and welcome constructive feedback to improve long-term shareholder value," he said in an electronic communication.
Asked to comment on the potential benefits of the sale of real estate and more substantial share buybacks, analyst Neil Linsdell of IA Securities responds that such claims are not unreasonable.
"However," he says, "these initiatives need to be evaluated in light of other opportunities, such as those in the packaging sector where acquisitions could be made."
Neil Linsdell believes that the transition made by Supremex is not appreciated at its true value.
"The stock has been under pressure for years due to the perception that the company is first and foremost a manufacturer of envelopes in its decline. However, packaging activities (folding boxes, pizza boxes, etc.) now generate up to 30% of turnover and management aims to increase this proportion to 50% by 2025, mainly by making acquisitions using, in particular, cash generated by the manufacture of envelopes. »
This expert describes Supremex's performance since the beginning of the pandemic as "solid". "The company is showing good growth, gaining market share in the U.S., optimizing its operations in Canada, and increasing margins despite significant challenges."
George Christopoulos says he has not yet formally applied for a seat on the board, hinting that he might do so. "The next step for me is to have a follow-up discussion with the chair of the board."
Supremex's stock has nearly tripled its value since its march 2020 low. The stock closed down 2.5% at $3.09 on the Toronto Stock Exchange on Tuesday.