Update on what I am doing, an aritcle on ALEX from a CFA, and two free digital magazines

What I am currently doing

I have been researching a new company and just finished up the valuations today.  It is a boring company that most have probably never heard of, which I like, has good margins, no debt, decent amount of cash, and best of all the company is currently valued about where I could be a buyer.

I still need to finish up my research and hope to have an article up within the next few days on this promising company.

I have also been looking through some of the sites from Jae Jun’s free digital magazine that I posted about yesterday, and have found a lot of good information.  I am going to incorporate some of the sites into my daily reading and hopefully I will not only learn a lot, but maybe even find some potential companies to research and invest in.  Again, I encourage everyone to at least look at the magazine to find some great investing, search, and analysis websites.

Alex article from a CFA

A CFA is a Certified Financial Analyst. The CFA designation is incredibly hard to get and the last time I checked there were only either 100,000 or 200,000 in the entire world.  They generally know what they are talking about.  The article talks about ALEX and how he has been an owner since before the spin-off, and that he is very interested in the post spin company mainly for the real estate assets they hold.

The writer pretty much comes to the same conclusion about ALEX that I stated in my two articles about ALEX, here and here.  I am just putting his article on the blog because it lets me know that I am doing something right if I come to the same conclusions as a CFA.

Two more free digital magazines

The first free magazine is the Valuewalk Daily.  It aggregates information about world news, business, the economy, investing, etc.

The second free magazine is from the CFA Institute.  It mostly talks about things that are going on in the investing world, companies, analysis, the Chinese economy, etc.  Looks to have some very valuable information in it.

I hope you enjoy.

Article published, and an invaluable article from the Motley Fool

My latest article got published on Seeking Alpha, and can be viewed here for those who want to follow the discussion in the comments section.

I thought I would share an invaluable article from The Motley Fool as well.  100 things I’ve Learned In Investing.  Every investor should read those lessons.  It never hurts to reinforce thoughts like those in the article, even if you have heard a lot of them before.

Enjoy the weekend.

 

Fantastic site and challenge. Alexander and Baldwin post spin analysis.

Found this amazing site, WhopperInvestments.com, from the comments section on csinvesting’s newest post.  The writer talks in the linked post how to become better at anything you do, and how to overcome the “OK” plateau.

He is going to be putting forth a blind valuation challenge every week to help become an “investing surgeon”, which should be a very good learning tool. He also lists the book where he got these some of ideas from, which I am planning to read shortly.  I am going to continue to look at the site and see what else can be learned from the past posts, which looks like it should be a lot.

I am currently researching and putting together another article on Alexander and Baldwin, this time a post spin valuation and analysis with updated numbers.  I will hopefully be able to put this up in the next few days.

 

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.