Alexander and Baldwin Inc (ALEX) spin off analysis and valuation.

Alexander and Baldwin (ALEX) is a Hawaiian company that has operations in two very distinct businesses that are about to be spun off into two separate companiesAlexander and Baldwin after the spin is going to be a land owning, leasing, and building/office owning and leasing company with operations in Hawaii and California.  Their subsidiary A&B Properties is also going to be spun into the new ALEX, which is the only reason I am even interested in this stock after my valuations, and we will get to that later. The Agribusiness subsidiary, a Hawaiian sugar and renewable energy company, is also going to be kept in the new ALEX.

Matson, which is going to be spun off from ALEX, is a transportation and shipping company with operations in Hawaii, Guam, China, and other islands in the Pacific Ocean.

Before I get to my analysis of the spin off here are my valuations of ALEX pre spin off.

ALEX asset valuation done on 5-19-2012.  All numbers in millions of US dollars, except number of shares and price per share.  Using 2011 10K and March 2012 10Q.

These valuations are done by me, using my estimates, and is not a recommendation for you to buy the stock. Do your own homework.

Assets Book Value Reproduction Value
Current Assets
Cash 22 22
Marketable Securities 0 0
Accounts Receivable (Net) 173 147
Inventories 40 20
Prepaid Expenses 32 16
Deferred taxes-tax liability 0 0
Total Current Assets 267 205
PP&E Net 1,634 817
Goodwill 0 0
Total Assets 1,901 1022

Total shares=42

  • 1901/42=$45.26 per share.

Reproduction Value

  • 1022/42=$24.33 per share.

Current price pre spin=$48.08 per share.

Second ALEX valuation done on 5-19-2012 using March 2012 10Q and 2011 10K.  All numbers in millions of US dollars, except number of shares and price per share.

  • Cash and cash equivalents are 22+Short term investment of 0
  • Number of shares=42
  • Total current liabilities=278

Short term investments + Cash and cash equivalents-current liabilities=-256

  • -256/42=-$6.10 of net cash per share.

EBIT of 114 taken from 2011 10K

  • 5X, 10X, &14X EBIT are: 5X=570, 10X=1114, 14X=1596
  • 5X+22 of C&CE=592, 10X+22=1136, 14X+22=1618
  • 592/42=$14.10 per share.
  • 1136/42=$27.05 per share.
  • 1618/42=$38.35 per share.

Current share price=$48.08 per share. Current Market cap=$2 billion

Enterprise Value=Market cap+debt+minority interest&preferred shares-total C&CE.

  • 2000+559+0+0-22=2537
  • EV/EBIT=22.25

So not only is Alex extremely overvalued by my estimates on an intrinsic value basis, on a relative EV/EBIT level it is still overvalued at 22.25.  The only thing redeeming this spin off in my eyes is their land ownership of ALEX and the potential that comes with that.

The only reason I kept researching this company after my valuations was that A&B Properties owns 88,000 acres of land, most of which is in Hawaii.

Conservatively valuing the land at $5000 per acre you get; 88000X$5000=$440 million in potential land value.  Now dividing that by the number of shares you get 440/42=$10.48 of potential land value per share.  That is not even counting the 8 million square feet of office, industrial, and retail properties that they own.

For now I won’t even consider owning ALEX, with my most conservative estimate of price being $14.10 per share and the share price around $48.  I will continue to research, see how they structure the spin off, and watch for an opportunity if the price gets low enough.


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