Canterbury Park

Gate City owns 8.8%. Increased position from 359,836 shares in Q1 to 443,559 in Q2. Insiders own 34%. Black Diamond owns 16.8%. Gabelli owns 11.2%. Sale??

“WELCOME TO THE PARK Everyone is welcome. The tables are hot. The craft beer is cold. And out on the track, a race is about to begin. This is the magic of Canterbury Park, a favorite destination for horse racing, casino action, concerts, events and all-around entertainment. We celebrate everything. We give you permission to let loose and have fun. Meet your friends, bring a date, invite the family and come play with us!”

These words are plastered on the front page of Canterbury Park’s website. Sounds like a good time, but looking at the park’s sleepy stock even more so. CPHC owns a racetrack, a casino, apartments, land, etc., in Shakopee, Minnesota. Market cap is $83.3 million.

I discovered CPHC when sifting Gate City’s 13F. They’re big book value guys that don’t lose money. In fact, they’ve outperformed the S&P by a wide margin since 2011. They stick to small and micro cap stocks, and the fund currently owns 8.72% of CPCH, increasing their position from 359,836 shares in Q1 to 443,559 in Q2 this year.

Gate City started filing 13Fs in Q4 of 2023 and reported owning 231,003 shares of CPHC, but it’s likely they bought shares before then. “militiaman” posted a VIC write-up of CPHC on June 29, 2022. I’m only guessing this account is Gate City’s because some of their recent posts include HTLD, HLX, EVC, ALCO, which collectively account for sixty point three percent of their fund.

Anyhow, the militiaman laid out all of the facts nicely and valued shares of CPHC at $35. “We value Canterbury Park with a discounted cash flow analysis to obtain an enterprise value of the current operations of $118 million. We add $13 million of net cash, $30 million in value for the Company’s current investments and excess land in Canterbury Commons, and $6 million in employee retention credits to obtain a target equity value of $167 million or $35/share, representing 50% upside to the recent share price.

Three years and one quarter later, CPCH trades at $16.38. Dividends haven’t picked up the slack either. Free cash flow is weak. Gate City is hanging on because CPCH sits on valuable assets that could sell for around their initial estimate of intrinsic value. “Churchill Downs has always appeared to be the logical acquiror for Canterbury” wrote militiaman in the comments section of their write up.

Both founders of CPHC passed away in recent years, too. Curt Sampson on July 16, 2020, and Dale Schenian on August 25, 2023. According to CPHC’s latest proxy, Curt’s son Randy, who’s been CEO since inception in 1994, owns 20% of the company, and the Estate of Dale H. Schenian owns 10.4%.

Other notable shareholders include Black Diamond at 16.2% and Gabelli AM at 11.7%. As well, investor presentations were revamped in the summer of ‘24. In this year’s edition, Canterbury highlighted that “Book value per share of $16.56 reflects cost basis of land, not current market value.”

And lined out “$10 per Share of Unrecognized Value” – $15 million, or $3.04 per share, of cash and short-term investments on the balance sheet. More than $19 million, or $3.80 per share, in tax increment financing receivable. About $16 million, or $3.16 per share, in land and cash to real estate JV projects.

“Outright Land Sale - Representative Value Scenario” – $20.8 million of total pad-ready land (32 acres), $3.6 million of total raw land (15 acres), totaling $24.4 million of land held for development, or $4.82 per share.

CPCH also owns the land underneath its casino, racetrack, grandstand, parking operations, etc., and the equipment that goes with it. This is valued at $52.0 million on the balance sheet, and they have another $6.8 million of receivables. So add it all up, and we get to around $130 million. Subtract total liabilities of $30 million, and the semi-adjusted book value is roughly $100 million, or $20 per share. What is this? A discount to book for ants!

“If Canterbury Park was able to offer slot machines, the value of the facility would be multiples of the current valuation.” wrote militaman. The Minnesota Racing Commission approved a game that is similar to slot machines in April of last year, called “Historical Horse Racing” or “HHR.” Still, the decision was overturned by state legislation just a month later.

“In the early morning hours, still in the afterglow of the 30th Anniversary Opening Night for Canterbury Park, the Minnesota House passed the bill to ban Historical Horse Racing Machines at Canterbury Park and Running Aces. The vote was 71-58 and then sent to the Senate for final passage. At approximately 10:55 AM, The Minnesota Senate voted to pass the ‘Ban HHR’ bill by a vote of 36-25.”

What is the probability of HHR approval now? Sports betting? Not sure, but Gate City, Gabelli, and Black Diamond definitely have a good read and are playing out the hand. Here is a link to the militiaman’s — write up and CPHC’s most recent — investor presentation, and Gate City’s — Q2 2025 13F.