Wednesday, December 26, 2007

Land Review 2007: Part I

What better way to say goodbye to 2007, we thought, than to review some of the companies holding one of our favorite assets, land. It’s generally been a pretty rough year for most firms that have anything to do with real estate. Some have no doubt been punished well beyond justification, but then again, Mr. Market is in control, and does as he sees fit. We believe this has created some compelling opportunities even if the housing situation worsens.

For the purposes of this piece, we’ve identified 20 or so companies with various operating businesses, that have substantial land holdings. Some of these have land that is a peripheral part of operations, or just one of several operating businesses. These companies have typically been less affected by recent market events; especially if their other operations are firing on all cylinders. Others have suffered from a double whammy: huge declines due to the geographical location of their land, and the fact that land is their primary business.

Two data calculations we use are worthy of explanation:

EV/Acres: Enterprise Value of the company/Total owned acres
Enterprise value is the market value of the firm plus debt, minus cash, and is an approximation of all claims that equity and debt holders have on a firm. We believe EV is a better estimate of true current market value, because it represents all claims investors hold in the capital structure, not just equity.

We use this calculation not to attempt to value the land on a per acre basis, but rather for perspective. The results of this calculation will be all over the board depending on the amount of land a company holds, how prominent it is in a company’s operations, as well as the land’s quality. (Obviously, timber land and marsh land is less valuable than vacation property)

Shares Per Acre
This represents the number of shares you would need to own in order to own one acre of a particular company’s land. This measure has no particular use, other than it is interesting to your Cheap Stocks editor, and helps measure an equity stake where the underlying company owns land in different terms. (For example, instead of saying you just picked up 550 shares of Tejon Ranch, you could say you just bought 10 acres of California land).

Below is Part I, the first ten companies.

(Market Cap and EV are in $ millions)
Alexander and Baldwin
Ticker: ALEX
Recent Price: $52.95
52 High/Low: 59.42/43.62
Avg Volume: 200000
Mkt Cap: 2227(million)
Ent Value: 2674(million)
Acres Owned: 89440
EV/Acre: $29,897
Location: Hawaii
Primary Use: Agriculture/development
Shares/Acre: 574

Alico
Ticker: ALCO
Recent Price: $36.87
52 High/Low: 65/35.88
Avg Volume: 21000
Mkt Cap: 271
Ent Value: 327
Acres Owned: 135466
EV/Acre: $2414
Location: Florida
Primary Use: Agriculture/Cattle
Shares/Acre: 574

Biloxi Marsh Lands
Ticker: BLMC
Recent Price: $31.00
52 High/Low: 39/28.25
Avg Volume: 200
Mkt Cap: 76
Ent Value: 70
Acres Owned: 90000
EV/Acre: $778
Location: Louisiana
Primary Use: Oil and Gas
Shares/Acre: 25

Blue Ridge Real Estate
Ticker: BLRGZ
Recent Price: $31
52 High/Low: 39/28.25
Avg Volume: 72
Mkt Cap: 76
Ent Value: 93
Acres Owned: 17009
EV/Acre: $5468
Location: Pennsylvania
Primary Use: Ski resorts, commercial, development
Shares/Acre: 176

Consolidated Tomoka Land
Ticker: CTO
Recent Price: $62.74
52 High/Low: 80.5/60.5
Avg Volume: 11400
Mkt Cap: 359
Ent Value: 363
Acres Owned: 11500
EV/Acre: $31,565
Location: Florida
Primary Use: Commercial, golf, development
Shares/Acre: 503

JG Boswell
Ticker: BWEL
Recent Price: $1025
52 High/Low: 1075/686
Avg Volume:
Mkt Cap: 960(est)
Ent Value: 1030(est)
Acres Owned: 172000
EV/Acre: $5,988
Location: California
Primary Use: Agriculture/development
Shares/Acre: 6

Maui Land and Pineapple
Ticker: MLP
Recent Price: $26.62
52 High/Low: 38.99/25.7
Avg Volume: 12200
Mkt Cap: 217
Ent Value: 248
Acres Owned: 25400
EV/Acre: $9,764
Location: Hawaii
Primary Use: Development/Agriculture
Shares/Acre: 367

PICO Holdings
Ticker: PICO
Recent Price: $34.16
52 High/Low: 49/33.01
Avg Volume: 164000
Mkt Cap: 543
Ent Value: 590
Acres Owned: 560000
EV/Acre: $1,054
Location: Nevada
Primary Use: Water/development
Shares/Acre: 31

Plum Creek Timber
Ticker: PCL
Recent Price: $45.16
52 High/Low: 48.45/37.13
Avg Volume: 1359000
Mkt Cap: 7780
Ent Value: 10092
Acres Owned: 8200000
EV/Acre: $1,231
Location: 18 states
Primary Use: Timber, some development
Shares/Acre: 27

Rayonier
Ticker: RYN
Recent Price: $45.59
52 High/Low: 49.55/38.17
Avg Volume: 545000
Mkt Cap: 3555
Ent Value: 4084
Acres Owned: 1931323
EV/Acre: $2,115
Location: several states
Primary Use: Timber, some development
Shares/Acre: 46

We’ll publish the balance of the list in our next posting.

We would like to thank all of our readers for a fantastic 2007. Our readership has grown by leaps and bounds over the year, and we just hit the 500 mark in subscribers. In any event, we look forward to delivering compelling, off the beaten path investment ideas in 2008.

*The author holds positions in BLMC, BWEL, MLP, PICO and PCL. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. The author will not trade any of the securities mentioned (buy, sell, short) for at least two weeks following the date of this post.

1 comment:

Tony said...

These are definitely interesting picks, but many of them appear to be "value traps," e.g. they only have value if they are liquidated and don't provide much cash flow to the investor otherwise.