I think a negative is that it looks like a lowish margin, low roic business with highish debt, going into a slowdown. That can be a high risk scenario. In addition, the low liquidity, low market cap and the fact it is very unlikely to be a takeover target would put it in the "too hard/no catalysts for a re-rate" scenario.
I'd contend that the risk factors are not as large as they look on the surface - with spare capacity, ROIC should be improved and debt paid down at an acceptable rate off current cashflows. I also think they have deliberately selected for business which might be less vulnerable to both volume slowdown and supplier switching. So their strategy looks pretty sound so far.
In my experience, there really is no limit to how cheap a stock can get (by earnings ratio) when it falls into this category - although eventually dividend yield will often provide support once it gets to the eye-catching double digits. In this case, CKL really would benefit by paying down that debt, so bumping up the divs is probably low priority. But for the patient investor, provided the company is well managed, positive sentiment will eventually arrive and the liquidity/market cap/ s.p. upward spiral will create excellent returns.
CKL Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
