Urbana Corp. (URB/A.TO) was a great investment through 2013
although has been stumbling through most of 2014. While the fantastic asset
basket has been steadily growing, the stock price has been falling. Through a
simple sum of marketable securities plus cash less liabilities we are able to
determine a fair value market cap equal to $2.05. Currently the stock is
trading in the mid $1.70s range creating the opportunity to buy CBOE Holdings,
Intercontinental Exchange, AGF Management, Bank of America Corp., Barrick Gold,
Citigroup, Morgan Stanley at an 18% discount. We all know from Warren Buffet, that buying assets below market-value will prove lucrative over time. (See attacged spreadsheet)
Another trend with Urbana recently has been their reduction
in liabilities. As of Friday May 30th, they had completely eliminated their
“BMO Demand Loan” debt, which (added with their reductions over
the previous 3 weeks) resulted in a 92% decrease in liabilities for the month
as a whole.
Last week we communicated with Mr. Tom Caldwell some idea’s
to further unlock shareholder value. While initially shutting down our ideas of
more aggressive buybacks and implementing an SIB. We felt by the end of the
conversation Mr. Caldwell would at least evaluate our recommendations and take
them under consideration. Given Mr. Caldwell’s long-term track record &
market knowledge we assume he believes shareholder buybacks can be very
short-sighted. That being said, we feel in the circumstances of Urbana Corp.,
the best use of capital is through share buybacks to remove the discount from
public equities. We also believe Urbana should continue with buybacks to
maintain a maximum discount of 5% from our fair market valuation.
As a side note, we would rather see more buybacks than
private investments in Caldwell
Financial & Caldwell Growth Opportunities which only generates
fees for Mr. Caldwell. We’ll be further evaluating the net benefit of
these investments in the next few weeks and providing further comments.
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