Sunday, May 18, 2008

JG Boswell Update (BWEL)

Shares of cotton and farming giant JG Boswell, owner of an estimated 142,000 California acres, and another 30,000 in Australia, have bounced around quite a bit this past year, from $760 in June to $1175 in November, closing last week at $980. The stock still trades "by appointment", so if you don't like illiquidity, this company is not for you.

The appeal of Boswell (BWEL) is not in its farming operations, which although impressive in their own right, merely represent the current use of assets which might ultimately be much more valuable used for other purposes.

The company continues to develop its Yokohl Ranch project, a master planned community of 35,000 acres in Tulare County California which may have a 10 year life. The Eastlake project, a master planned community in Chula Vista, California is near completion.

But, as we've stated several times before, the real gem may lie beneath some of Boswell's land: massive amounts of water that may be worth several billions. ("May" being the operative word. Ultimately, in order for value to be realized, assets must be converted, or have a good probability of being converted into cash. Water is a touchy and political subject, especially in California)

We recently obtained a copy of the company’s 2007 annual report, and here are the highlights for the year ended June 2007:

Current Price: $980
Current Dvd Yield: 1.43%
Quarterly Dvd: $3.50/shr
Revenue: $338.958 million
Net Income: $13.96 million
Diluted EPS/shr: $14.20
Current Assets: $203.038 million
Cash: $3.891 million
Total Assets: $645.909 million
Current Liab: $150.506 million
Short Term Debt: $88.272 million
Long Term Debt: $0
Stockholders Equity: $450.221 million
Shares Out: 974,105
Book Value Per share: $441.65
Market Cap: $954.6 million
Enterprise Value: $1038.98 million
Enterprise Value/California Acre: $7317 (estimated)

Based on just the California land, we estimate Enterprise Value/Acre to be about $7300, and that ignores any value in the Australian land. We continue to be intrigued by the Boswell story. Buyer beware, though: Shares are difficult to obtain, information is scarce, and there is little liquidity.

*The author has a position in JG Boswell. 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.

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