Wednesday, September 07, 2005

A Pineapple Company? Clyde, are you crazy?

Maui Land & Pineapple Co
Ticker: MLP
Price: $33.16
Market Cap: $244 million
Enterprise Value: $255 million
Shares Out: 7.23 million
2004 Revenue: $153 million
2004 Net Loss: $.383 million

So, your editor is not crazy after all. There’s more to this company than the $80 million in pineapples they sold in 2004. Actually, pineapples don’t seem to be a very lucrative business for this Hawaii based micro cap-the segment produced an operating loss of $11.3 million in 2004-and sales were down sharply from 2003’s $100.5 million.

Maui Land operates in two other significant segments, besides the yellow fruit: Resort, and Development. Avid Cheap Stocks readers didn’t have to read past the company’s name in order to understand our interest in this company. You’ve already read past postings about Tejon Ranch (California), St. Joes (Florida), PICO Holdings (Nevada), Avoca (Louisiana), JG Boswell (California), and know our fascination with companies holding land. We’ve been building a portfolio of these over the past few years, and Maui Land is the latest addition.

Resort segment: Kapalua Land Company
Nine Miles of Hawaii Beachfront

Part of Maui Land’s 28,200 acres include 22,800 in West Maui, including Kapalua Resort a golf community, which borders the ocean, and boasts 3 beaches, 2 hotels, 3 championship golf courses, 10 restaurants, and 700+ single family homes and condominiums. Oh, did I mention the 9 miles of beachfront property? This segment had operating revenue of $49 million in 2004, and an operating loss of $1.6 million

Development segment
This segment is responsible for the company’s construction, sales and development activities. Revenue for 2004 was $24 million, operating income was $12.7 million

The Land
Of the company’s 28,200 acres, about 5000 (as best we can tell, this is an estimate) are used in the pineapple business. While it’s difficult to estimate what that land and business are worth, we’ll assume the pineapple business is worth .5 times sales. Based on $80 million in 2004 sales, that would value that segment at $40 million. (Keep in mind, this is a guesstimate, as much as we love eating pineapples, we’ve never attempted to value a pineapple operation before.)


Backing out $40 million from the company’s current enterprise value:
Enterprise Value: $255
Pineapple Business: $40

Rest of company: $215

EV/Acre calculation
This is a calculation we’ve grown fond of here at Cheap Stocks. In this case we’ll calculate the EV/acre for the non-pineapple land first:

Rest of Company EV: $215
West Maui Acreage: 22,800 acres

EV/Acre: $9429 (actual)

Alternatively, if we use the entire amount of company acreage, not stripping out the pineapple business, we get the following:

Enterprise Value: $255
Total Acreage: 28,200

EV/acre: $9042 (actual)

Buying Hawaii Property Sight Unseen.
We’ve never even been to Hawaii, let alone seen Maui Land and Pineapple’s property or operation. Nonetheless, we were impressed by the numbers. Nine thousand and change per acre for Hawaii land seems like a no-brainer (Did we mention 9 miles of beachfront property?). But, you need to consider the source. We are crazy about land (in certain cases that is) here at Cheap Stocks. That being said, please consider the following: Maui Land’s sales have been relatively flat for years, and earnings are inconsistent at best:

Revenue/Net income (loss) in millions
2004: 153/ (.383)
2003: 151/ 6
2002: 148/ (5.7)
2001: 166/ 7.6
2000: 141/ .452
1999: 147/ 4.7

We encourage you to do your own research. There is other exposure available to Hawaii land in the form of a publicly traded company, namely Alexander and Baldwin (NASDAQ: ALEX). That’s another company we’ve been interested in over the years, they have some nice land holdings, and a profitable shipping business. But we missed the boat (no pun intended) on that one. Now trading in the $50 range, we passed on it in the teens a few years back. Certainly a more high profile name than Maui Land & Pineapple, and worthy of further research. Keep eating pineapples!

*The author has a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.

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