|Shares Out. (in M):||19||P/E||0||0|
|Market Cap (in $M):||234||P/FCF||0||0|
|Net Debt (in $M):||0||EBIT||0||0|
I’ll preface this by saying I’ve never really invested in land banks (except a small CTO position for a short time) after seeing the JOE back and forth between Einhorn and Berkowitz earlier in my career – to me, they are usually uninvestable value traps never monetized.
However, Maui Land & Pineapple (MLP) is an exception given the incredible location of their land in Kapalua, development/sale/monetization plan, quality of management/insider ownership and massive discount vs. the stock price, offering 250% upside to $41/share.
Interest ‘Piquer’ – Recent Sales
1. Shops at Wailea, 16 acres (including the mall though) sold for $342m
2. Wailea Beach Marriott, 22 acres (including the hotel) sold for $325m
3. Ritz Carlton Kapalua, 54 acres (including the hotel) sold for $200m
MLP owns 900 acres in Kapalua comparable to the land above (and in some cases better) that’s fully entitled and includes water, two very high barriers to development in Hawaii and the company has a market cap of only $200m and no net debt, along with a slight cash flow generating operating business!
They also own another 10,800 comparable acres of agriculturally zoned land and 9,000 acres in comparable conservation land in West Maui. In addition, they own 2,100 acres of lower quality agricultural land in Upcountry Maui (to which we attribute no value).
We see conservative upside to $41 or 250% based on NPV values on future developments and a multiple on the core business.
Brief Company History
MLP began as a pineapple plantation over 100 years ago, diversifying into sugarcane shortly thereafter. The pineapple fields were outfitted with infrastructure to irrigate which is a huge advantage today since water entitlements/infrastructure is so important in Hawaii for development permitting. The previous management team levered up the business (with onerous covenant restrictions on development) and continued to run the loss-generating pineapple operations through 2009. While the losses were obfuscated by profits from selling land before the recession, when property prices fell, the board shut down the pineapple operations, sold non-core assets (including the Kapalua golf courses) and worked to delever the balance sheet over the following 8 years, finally reducing net debt to 0 by late 2017. Post delevering, the company is now entering its next phase, development/sales of their incredibly valuable land bank. Steve Case owns the majority of the company after buying the stake owned by the Weinberg Trust in 1999; he joined the board in 2008.
Strength in the overall Hawaii/Maui Real Estate Market