Seekingalpha.com posted my article Alexander & Baldwin: Spin-Off Analysis And Valuations

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Alexander & Baldwin: Spin-Off Analysis And Valuations

Alexander & Baldwin (NYSE: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.

Full article can be seen here, for those that are interested in following the discussion in the comments section.

Dole Valuations

Here are my valuations of Dole (DOLE)

Dole asset valuation done on 5-19-2012.  All #’s in millions of $.  Using March 2012 10Q and 2011 10K.

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                                            106                                                   106

Marketable Securities                     0                                                       0

Accounts Receivable (net)          739                                                   628

Inventories                                   877                                                   438.5

Prepaid Expenses                        64                                                      32

Deferred taxes-tax liability           185                                                   55.5

Total CA                                     1,971                                                1,260

PP&E Net                                    901                                                   540.6

Goodwill                                      413                                                     124

Intangible Assets                        740                                                     370

689 million of IA is their estimate of what the DOLE brand is worth.

Total Assets                             4,025                                                 2,294.6

Number of shares = 88m

With IA: 4,025/88=$45.74 per sahre

Without IA: 3,285/88=$37.33 per share

Reproduction Value

With IA 2294.6/88=$26.08 per share

Without IA 1924.6/88=$21.88 per share.

Current share price=$8.96 per share

Second Dole valuation:

Done on 5-19-2012 using March 2012 10Q and 2011 10K.  Numbers in millions of $.

Cash and cash equivalents=106 + short term investments of 0=106

Number of shares=88

Total Current Liabilities=1,090

Short term investments+cash and cash equivalents-current liabiliites=-984

-984/88= -$11.18 in net cash per share

EBIT of 300 taken from 2011 10K

5X, 10X, and 14X EBIT= 5X=1,500, 10X=3,000, 14X=4,200

1,500 + C &CE above of 106=1606, 3,000 +106=3,106, 4,200+106=4,306

1606/88=$18.25 per share

3106/88=$35.05 per share

4306/88=$48.93 per share

Current price is $8.96 per share

Current market cap=782.9 million

EV=MKT cap+debt,minority interest & preferred shares- total C&CE

EV=782.9+1626=39=0-106=3,381 m                                      EV/EBIT=11.27

Dole owns 117,000 acres of land, mostly in Hawaii. 117,000 X $5000, which I think is a conservative estimate of land prices in Hawaii=$585 million in potential worth of land.

585/88= $6.65 per share potential of land per share, with again a current share price of $8.96 per share.

Subtracting my estimate of their potential land value you get the rest of Dole, cash, and debt for $2.31.

Being a very conservative investor, normally I would never touch a stock with this much debt in relation to market cap, EBIT, cash on hand, and a negative net cash number, even with the massive margin of safety.

Another knock against it is that it is a fresh fruit business, which makes it a commodity business leading to widely fluctuating prices, revenues, and margins.

However, the management has has been paying down debt slowly over the past several years. Dole is also currently under strategic review by their directors and management to see how they can unlock lost value and pay down debt at the same time.

http://seekingalpha.com/news-article/2700131-dole-food-company-inc-announces-first-quarter-2012-results-and-strategic-business-review

In the article they state that “As part of this review, the alternatives we may consider include a full or partial separation of one or more of our businesses through a spin-off or other capital markets transaction, as well as other alternatives that will enhance shareholder value. We are committed to enhancing shareholder value and this review is a company priority.”

Normally I would take the above statement with a grain of salt but their biggest shareholder Mr. David Murdock currently owns 58.1% of all shares.  He originally brought Dole public again in 2009 at a price of $12.50 per share meaning he has already lost several hundreds of millions of dollars.  Obviously he would want to do what is in his own self interest and hopefully what is best for the shareholders to make that money back, and unlock further value.

Leading me to believe that they are going to find under their strategic review that they are either going to sell off some assets, including some of the land, or more likely spin off one or more companies to help pay down some of their debt.

Personally I think they should move most of their resources into the packaged fruits section of their business as it has the highest margins by far, concentrate less on the fresh fruit section by selling or spinning off at least a portion of that business , sell or spin off the fresh vegetable section outright, and either lease or sell part of their land holdings which could substantially pay down debt and raise the stock price.  They would also be a more focused company if the above were to occur as well.

Again feel free to give feedback.

My valuations of Vivendi

I have used two different valuation techniques for Vivendi (VIVHY) Here we go.

Asset reproduction valuation done on 4-2-2012.  All #’s in millions of Euros unless otherwise noted.  Using 2011 10-k.

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                                                        3,304                                              3,304
Marketable Securities                              1,544                                              1,544
Accounts Receivable (net)                      6,730                                              4,500
Inventories                                               805                                                   500
Prepaid Expenses                                     0                                                       0
Deferred Taxes – tax liability                    700                                                  400
Total current assets                               13,083                                             10,248

PP&E Net                                                 9,001                                              6,000
Goodwill                                                  25,029                                            12,514.5
Intangible Assets                                     6,814                                                3,407
Total Assets                                            53,927                                            32,169.5

Number of shares 1,242
With IA: 53,927/1,242=43.42 Euros per share = $57.40 per share
Without IA: 47,113/1,242=37.93 Euros per share = $50.14 per share

Reproduction value:
With IA 32,169.5/1,242= 24.90 Euros per share = $34.24 per share
Without IA 28,762.5/1,242= 23.16 Euros per share = $30.62 per share

Current share price on 4-21-2012 = $16.50 per share

Sum of the parts valuations done on 4-26-2012 #s in millions of Euros unless otherwise noted.

44% of SFR bought in 2011 for 77,750 million Euros. Implied value of total stake since Vivendi now owns 100% of SFR = 17,360 Euros

60% of Activision (ATVI) =6,587 Euros

100% of SFR + 60% of ATVI =23,947 m Euros = $31,629 million

Vivendi has a total market cap currently of $23.46 billion

So you are getting most of the 60% of ATVI, all of GVT, all of Canal+, all of UMG, 53% of Maroc Telecom, which equals 5.41 billion Euros, all cash and debt for free, by just purchasing part of ATVI and all of SFR.
GVT, Canal+, UMG, and Maroc Telecom are the rest of their subsidiaries.

Valuing the whole of Vivendi, cash, and debt using above estimates, I am estimating very conservatively 40 Billion Euros = $53.832 billion of total value for Vivendi.

$53.832 billion/number of shares at full dilution of 1.250 billion= $43.07 per share

Current share price = $18.60 per share

This valuation would be used if they were to do a spin off or selling some of their assets and companies.

The reproduction valuation is generally the most conservative intrinsic value estimate and the one I use the most since I am very conservative and want the biggest margin of safety as possible.

Some other things I like about Vivendi besides the massive margin of safety are they pay a healthy yearly dividend. They have consistent free cash flow of at least 3 billion Euros per year after cap ex. Good margins. Cash and cash equivalents of over 3 billion Euros. Net operating loss carry forwards of around 8 billion Euros. Seth Klarman owns shares of Vivendi at his hedge fund Baupost Group, and has been buying more recently, actually got lucky and got in at a cheaper price than Klarman. Also the management of Vivendi is reviewing what they could do to unlock the value that is missing right now, by their own estimates at least 40%, could be spin offs or sale of some of their subsidiaries.

Risks: A lot of debt and continual huge amounts of cap ex in their telecom subsidiaries. European debt issues; most of their business is done in Europe, specifically France. If they decide not to do a spin off or asset sale it could take a while to unlock value, which would not bother me since it would enable me to acquire more shares.

Would like them to eventually do some kind of spin off or asset sale to pay down their debt which should also increase the share price. Would not even mind if they cancelled the dividend for a year or two to pay down debt either.

Feel free to give feedback.

Portfolio structure

Before I get to my valuation of Vivendi and the reasons I decided to buy it I want to go over how I am structuring my portfolio now.

I have structured my portfolio into two different categories: Long term value holds which I intend to hold for years and hopefully decades. The second category is special situations which as of right now I am mainly learning about spin offs, but eventually hope to include some bankrupt/distressed debt, right offerings, etc and plan to hold for 6 months to 3 years.

Current portfolio list from previous post and my plans for them:

Stocks that I bought without doing valuation or as much research as I am doing now:

Intel (INTC) Long term value hold. This was where I started to do what I am doing now.

Philip Morris (PM) Long term value hold. One of my highest conviction picks along with Intel and Vivendi in the long term section.

Altria (MO) Long term value hold, like the potential of the smokeless tobacco segment and their stake in SAB Miller.  I am worried about their high amount of debt though.

Kinder Morgan Management (KMR) Likely long term value hold.  Bought before their merger with El Paso.  Worried about the debt.  Most likely going to keep position at least for a while to see how the new merged entity plays out.

Main Street Capital (MAIN) Long term hold with high monthly dividend.

Vodafone (VOD) Long term value hold.  Wish I would have done the valuation on this and waited till it was a bit cheaper but like the dividend that it is the biggest phone company in the world. Most important non core asset is they own 45% of Verizon.

Universal Insurance Holding (UVE) not sure what to do with this one yet. Greatly under valued, by my estimate has $6.40 net cash per share with full dilution of options, and I get a minimum value of $9.85 per share, current price is $3.68 per share.  Normally that would lead me to buy more shares but now that I have done more research on the company a few things worry me. First obviously is Florida and the hurricanes that hit there every year.  Second and most importantly I had a couple questions for their IR department which were pretty straight forward and easy questions to answer and they wouldn’t answer them for me, which bothered me more than the hurricanes. So conflicted on this one.

Got kind of lucky with most of the above in that I bought them when they were selling cheaper than what they should be selling at. Now for the not so lucky portion with the old way of what I was doing.

Taseko Mines (TGB) holding for now and waiting until November to see if their Prosperity mine is approved, if it is I am going to likely sell, hopefully at a small profit, will reassess at that time if I am going to hold or not.  Bought way overpriced, but like future potential in the mines they own and aren’t operating yet.

Have already weeded out other previous overpriced and bad stocks that I would have never bought with the valuation and research I am doing now, again at a total loss of around $600. Live and you learn.

Now onto the two companies with my new philosophy of doing things and what my new philosophy is.

Undervalued by at least 50% for long term holds, at least 25% undervalued for special situations. Some kind of catalyst involved or catalyst that I can predict might happen Examples: Big time value/activist investor involved, strategic review, spin off, etc. Insiders are buying or already own a big chunk of the company. Some kind of sustainable competitive advantage for the long term holds, bonus for the special situations. Will continue to add to this list above. Low debt and a lot of cash.  Investment does not have to reach all of the criteria above but the more the better.

Dole (DOLE) Spin off potential and grossly undervalued by my estimate.  Company is under strategic review right now deciding on whether they want to sell assets or do a spinoff or spinoffs to get their debt under control. Will give my valuation, reasons for buying into them, and risks in future post.

Vivendi (VIVHY) Long term hold, possible spinoff situation as well.  My next post will be my valuations of Vivendi, reasons for buying, and risks.