Maui Land & Pineapple (MLP): 900 Acres of Hawaiian Resort Land for $250,000 an Acre
Maui Land & Pineapple (MLP) owns real estate on the island of Maui (which is in Hawaii). The company has 22,800 acres of land carried on its books at prices dating back to the 1911 to 1932 period. So, book value is meaningless here. The total size of the land holdings is also meaningless here. Of the 22,800 acres, 9,000 acres are conservation land. That leaves only 13,800 acres of potentially productive land. Almost all of that (12,900 acres) is zoned for agriculture.
That leaves 900 acres zoned for residential use.
Let’s compare those 900 acres of land to the company’s enterprise value to get a sense of just how expensive this stock is on a price per acre basis. The company has 19.18 million shares outstanding. As I write this, the stock price is $11.40 a share.
Since we’re talking shares outstanding, I’m going to pause to discuss liquidity. I may run managed accounts focused on the most illiquid stocks out there (because I believe stocks with wide bid/ask prices tend to be less efficiently priced than stocks that trade constantly at almost no spread), but I know some members of Focused Compounding prefer more liquid investments. MLP should be liquid enough for everyone. The stock trades about $300,000 worth of shares per a day. It’s listed on the New York Stock Exchange.
Now, a bonus aside for those interested in ultra-illiquid stocks: if you’re interested in Maui Land & Pineapple after reading this write-up, you should definitely check out is closest “peer” of sorts – Kaanapali Land LLC (KANP). KANP is an illiquid (it trades about $2,000 worth of stock on an average day) over-the-counter stock. I’m not going to discuss KANP here. However, what land it owns – which I think is much more speculative and possibly worth much less than the land I’m about to discuss owned by MLP – is only something like 4 miles from the land we’ll be talking about here.
Now back to the enterprise value calculation. MLP stock is at $11.40 a share and there are 19.18 million shares outstanding. So, that’s $11.40 times 19.18 million equals $219 million. You can find the company’s 10-Q on EDGAR and decide how much net cash or net debt to add to that $219 million to get the correct enterprise value. There’s a tiny bit of cash, a tiny bit of debt, some retirement benefit obligations, etc. For our purposes, all balance sheet items excluding the 900 acres of residential zoned land are a rounding error. So, I’m going to round the market cap up from $219 million to $220 million and call that the enterprise value.
Now, we can calculate the price ratio that matters most here. It’s not price-to-book (meaningless because the land is carried at at 1911 to 1932 values) or price-to-earnings (also meaningless because it includes land sales which are very lumpy from year-to-year). It’s enterprise value per acre. So, that’s $220 million in EV divided by 900 acres of residential land equals $244,444 an acre. So, the market is valuing Maui Land & Pineapple at $244,444 an acre. Let’s round that up to $250,000 an acre.
If you’re living anywhere in the continental U.S., you’re thinking this idea is a pass right here. Raw land can’t be worth $250,000 an acre. However, in Hawaii it can be. I have a January 2018 (so only 6-month old) claim by the Realtors Association of Maui that the median home price on that island is now $698,000. When combined with a few other facts, that figure becomes very interesting. One, I have other data showing that the (arithmetic) mean home price in Hawaii is significantly higher than the median. Two, I have data that gives the land value of home prices in the entire state of Hawaii as a percent of the value of a home. In other words, it gives a breakdown of land value and buildings and improvements for each year. This is important because at different times and in different places the price of a home can consist mostly of the cost of erecting a house (materials, labor, etc.) or it can consist mostly of the cost of the land you are putting the house on. Back in the 1970s, there were some U.S. states where over 90% of the cost of a home was literally the cost of the home. The land was only 10% of the purchase price. Statewide in Hawaii, land’s share of a home’s value is often in the 70% to 75% range. Lately it’s been 75%.
So, let’s start by trying to make some guesses about how much an acre of residential land on Maui could be worth. We’ll use the median home price of $698,000 and a slightly lower value for the land share of that home’s price (two-thirds instead of three-quarters). So, $698,000 times 0.67 equals $465,000. If you average one house per one acre on the island of Maui, that acre should be worth around $465,000 before you put the house on it.
How good is that first stab at valuing Maui Land & Pineapple on a per acre basis?
Well, it’s slightly conservative in some ways. If you are developing 900 acres, the high-priced units may skew the value of the entire project above the median. So, maybe we should’ve used a mean home price but we used a median. And then we used a two-thirds land share of home value instead of the actual three-quarters land share that’s common in Hawaii.
But, that’s a generic guess. We actually know something about the land Maui Land & Pineapple owns. And we know something about the company’s development plans.
I will quote from the company’s 10-K. Everything I am valuing in this write-up comes from the planned development discussed in these few paragraphs:
“Kapalua Mauka is a long-term expansion of the Kapalua Resort which is located directly upslope of the existing resort development. As presently planned, it encompasses 800 acres and includes up to 639 residential units…including up to 27 additional holes of golf…Kapalua Central Resort is a commercial town center and residential community located in the core of the Kapalua Resort. It is comprised of 46 acres and is planned to include up to 61,000 square feet of commercial space and 188 condominium and multi-family residential units.”
This gives us something more specific to go on. We already know they are planning to develop 800-900 acres. But, here we have a figure for the number of residential units: 639 units in Kapalua Mauka plus 188 condominium and multi-family residential units in Kapalua Central Resort for a total of 827 housing units. To simplify, let’s say they are basically putting 800 housing units on 800 acres. It rounds things off and might be a touch conservative (though this is a plan – so it may turn out to be overly aggressive if management is planning for more condos than it’ll really build).
We also get information about the specific location of these units. One, they will be within the Kapalua master planned community. Two, they will be “upslope” (I think “Mauka” means something like toward the mountain). Three, they might be near a golf course (remember, they’re adding another 27 holes).
Now, I have to talk about the existing Kapalua resort. The resort as it presently exists is about 2,100 acres. I haven’t talked about it, because Maui Land & Pineapple has sold most of this off. Probably the two best known parts of it are the Ritz-Carlton Kapalua (as best I can tell, rooms go for $800 to low $1,000s a night and the hotel itself was – in the recent past – listed for sale at around $210 million). Then there are the existing golf courses. There’s the “Bay Course” and the “Plantation Course”. The Plantation Course hosts a PGA event each January. I know nothing about golf, but it’s possible based on some information I’ve found that the Plantation Course is usually ranked one of the best if not the very best golf course in Hawaii.
That’s a lot of talk about three things Maui Land & Pineapple doesn’t actually own: The Ritz-Carlton and the Plantation Course and Bay Course. I mention them here because this company either has sold land to these entities before (which we’ll discuss) or some may speculate the company will sell land to these entities in the future.
On the world “speculate” I’ll finally mention that there is a Value Investor’s Club post on this company. Go to Value Investor’s Club, select “All Ideas (A-Z)” and then go alphabetically to Maui Land & Pineapple (MLP). The write-up is about 6 months old. I think it’s too promotional a discussion of the stock for me to seriously discuss here. But, it’s good to get a second opinion. And the author of that post may be a lot better informed than me. He seems to have talked to some people about the property. He mentions talking to management. I have not talked to management. Nor have I talked to anyone more knowledgeable about property in Hawaii (a state I have never visited).
That won’t stop me from trying to refine my estimate of the value of this land even further. We’re going to use the information we have now: 800+ residential units, inside the Kapalua master planned community, upslope (so let’s assume away from the ocean – mostly to be conservative), and the word “golf” to find comparables for these planned units.
I went through all the condos listed for sale that are within the Kapalua resort. Obviously, oceanfront condos sell for more. For example, here are the stats on the 19 “Kapalua Bay Villas” (really condos) listed for sale at this moment. Remember, prices are list prices not sale prices (I don’t have access to those). This is the “ask” price we’re talking about here not the “last trade” price. Also, without going off on a statistical tangent – this is a sample of 19 of the 141 condos in that community. I didn’t select this sample. It was selected by owners listing these properties. I simply used all condos within the community that are currently listed for sale as the population to calculate some of these stats for.
Here we go. For the “Kapalua Bay Villas” (so, oceanfront condos built in 1977) the range of prices is $874,000 to $2 million. The median is $1.3 million. The mean is $1.29 million. The standard deviation is $306,456 and the coefficient of variation (standard deviation scaled to the mean) is 24%.
As you’d expect, there is less variation on a price per square foot basis than a price per unit basis.
The range for these oceanfront condos built in the 1970s is $740 to $1,456 per square foot. The median price per square foot is $1,037. The mean is $1,014. The standard deviation is $151. And the coefficient of variation is 15%.
These are not the best comparables. I just used them as an example to show you what some condos in the Kapalua resort sell for. I’ll get to the community within the resort I am using as my “peer” for the Kapalua Mauka planned development in a second. First, I want to discuss some of those stats.
One, because this is a high-density condo type development – the mean is coming in at or below the median. So, we can assume the median condo in a development is pretty representative of the entire project valued cumulatively. In fact, even if we just use the unit basis we get a 24% coefficient of variation and a mean and median that are basically the same. This is helpful, because it’s often easier to eyeball the median in a group than the mean. Finally, let’s consider the age of these condos. They’re 41 years old. Some reviews I’ve read online mention this resort is a bit old and outdated in some ways considering the prices (these are renters vacationing in one of the condos talking). The new development will obviously be new construction. And then we have the amount of crowding. Because this is an oceanfront condo community, the crowding is extreme. They put 27 buildings on 16.5 acres. We’re talking something like more than 5 condos per building and about 2 buildings per 3 acres. Some of the other communities are less crowded. But, I can find several examples of at least one condo per acre to more like one condo for every two-thirds of an acre. So, a plan to put 800+ residential units on 800+ acres of developable land sounds right in line with this community overall.
Okay. I teased you with the condo community in the resort I think is an overpriced peer. Now, we’re going to use the community I think is a true peer. This community has 20 listings. That doesn’t sound like a huge sample. But, that’s part of the reason I showed you the range, median, mean, and variation data on that oceanfront community first. You’ll see similar variation (actually, even less) in this next community. By starting with the generic residential real estate picture on the island of Maui as a whole and then moving down to the generic residential real estate picture in this master planned community as a whole and then finally drilling down to this one particular peer – I wanted to gradually establish the reasonableness of the appraisal figures we’ll eventually come to.
The peer community I chose is called “Kapalua Golf Villas”. I chose it for a few reasons. One, it’s not oceanfront. Two, it has golf course views. And three, it has the lowest average listing price of any of the communities within the resort. So, it meets my two requirements of comparability (location is next to a golf course not next to an ocean) and conservatism (it’s the cheapest peer I could find).
Here are the stats for the 20 condos in the Kapalua Golf Villas currently listed for sale. The minimum price is $598,000. The maximum is $970,000. The median is $788,000. The mean is $825,679. The standard deviation is $111,327. And the coefficient of variation is 13%. Here, the price per square foot doesn’t vary any less than the price per unit (many of the units are the exact same size). It’s more convenient for us to use price per unit. So, let’s do that now.
The median was $788,000. And it was the lower of the two averages (the mean was $825,679).
There are a few ways to go from here. I like to keep things simple and be able to do more of the math in my head. So, I’ll simplify some of the assumptions. The ratio of planned units (827) to my rounded estimate of 800 units is actually greater than the ratio of $800,000 per unit to $788,000 (the actual median price for the comparable community). So, I’m going to simplify – via two separate roundings – the problem of 827 units times $788,000 to just 800 units times $800,000. It’s a lot cleaner that way.
So, 800 planned units at a median sales price of $800,000 would be $640 million. The company’s current market cap is $220 million. This means that if land’s share of the final condo prices is about 35% of the sale price – the stock is priced at what the land is worth now. On the other extreme end, if the land makes up 75% of the value of a residential unit (as it does statewide in Hawaii) then the market cap should be $480 million. In that case, the stock price should be $25 a share. Right now, it’s $11.40 a share. Let’s call that a double from here.
Do I think the land the company owns could be worth less than about 33% of the price of the condos they will sell? Or, to put it another way, do I think there’s any way this company’s 900 acres of land inside the resort is worth less than $250,000 an acre (roughly what the stock is selling for).
We can think of it this way: what’s the risk the stock is overpriced right now?
Well, if the company puts less than 1 condo per acre on the developable land and the land component of each condo is worth less than $250,000 – that’s your risk right there. Based on the information I’ve gathered so far, I don’t really think you would put less than about 1 unit per acre on the land or that the unit would sell for much less than about $800,000. Even if we assume land makes up only 50% (not more like three-quarters) of the value of a condo, we are talking about a price per acre of more like $400,000 rather than the stock’s current market cap of about $250,000 per acre. To assume the value is as low as $250,000 per acre you need to assume some combination of condos per acre, sale price of a condo, and land share of that sale price that’s low. For example, you can assume 1 condo per acre and $800,000 sale price per condo at a 30% land share of the value equals $240,000 per acre. That basically gets you to today’s stock market value. They do have agricultural land they lease, a water utility, a real estate brokerage, etc. But, it doesn’t move the needle.
So, I can see a scenario where you get an appraisal value equal to today’s price if you assume a really low value of land in proportion to the sale price of a condo. This seems unreasonable though.
Why?
Look at it from a builder’s perspective. Assume the median house on Maui costs $700,000 and three-quarters of that is land. That means the median cost of the structure $175,000. Let’s round that up to $200,000. Let’s say you could build a condo for $200,000 and sell it for $800,000. That leaves $600,000 for you to pay for the land you’re putting the condo on plus earn your profit. On one extreme end, we might assume that some condo builders (like homebuilders) could eke out a breakeven or profitable result on just a 20% margin. That assigns a very high value to the land. Basically, if builders are willing to bid up the land to the point they only make 20% – the land has a lot of value.
The value of land that can be developed for condos should be determined by the bargaining power of the land owner versus the bargaining power of the builder. If the builder can put a condo on every acre and sell that condo for $800,000 – it just seems to me like they’d be paying more like $400,000 to $500,000 per acre of land than $200,000 to $300,000. Otherwise, some other builder would be willing to pay a higher price for the land. So, if I had to guess what average price per acre someone would pay for all 800 acres right now if the land was really ready to start putting 800 condos on it today – I’d guess it’s more like $500,000 an acre than $250,000 an acre. The stock is priced more like $250,000 an acre. So, the right appraisal price on the land would put an appraisal on the stock of $25 a share not $11 a share.
We’re now ready to talk about monetization. How will Maui Land & Pineapple actually make money on this land?
Here’s what the company has to say about the development in its 10-K. It says the approximate number of acres are 900, the anticipated completion date is 2019-2039, and the projected costs to complete are $500 million to $1 billion.
I held off talking to you about that development cost for a reason. Maui Land & Pineapple doesn’t have liquid assets. It doesn’t have a lot of liabilities either. But, everything on this balance sheet except for these 900 acres is basically peanuts compared to the value of this land. The annual cash flows in and out from everything else are also basically peanuts compared to the value of this land.
So, we’re talking about 900 acres that might be worth $450 million or something (in terms of the land already there) once you put another $500 million to $1 billion into that land. But, this is a company with no cash, productive assets, etc. that could ever finance something like that. The value of the project is clearly 3 to 5 times the market cap. And the value of the land itself may be 2 times the market cap.
The development cost projection is also hinting at one of two things. Either, they’re going to get a really low return on the actual investment in development – or, I may be underestimating the final sale price per acre they’re going to get. I mean, the figure of $500 million to $1 billion in development over 20 years did stand out to me considering this is closer to a $200 million market cap stock. Notice this means your annual development investment – even if spaced out evenly over 20 years – is like 10% to 20% of the entire starting market cap of your company right now.
How do you finance this? Do you finance it yourself? Or do you sell it?
Obviously, there are lots of options. You can borrow and build. You can sell it all off. You can sell part to finance building another part. Which is MLP going to do?
I can’t answer questions like that. I know those are the sorts of things people want modeled. But, there’s just no useful information I can provide about future guesses on that stuff.
I can look at the estimated development costs, comparable condo sales in the community, etc. and compare the scale of those things to the scale of this market cap. The market cap is small relative to what this land might be worth and relative to what the cost of this development project will eventually be.
That presents two possible risks here.
One, there’s the “dead money” risk. The company doesn’t have the resources to do this alone. They haven’t always acted that fast in the past (this community began development over 40 years ago). So, maybe this stock is selling for 50% of my appraisal value of its land, but that gap won’t close in 5 years, 10 years, or even 20 years. So, you have a 50-cent dollar that takes 25 years to become a 100 cent dollar.
How do we quantify that risk?
It’s hard to say. We can look at it two ways. One, how volatile is the stock? If the stock’s very volatile and they don’t do anything it may work as a “cigar butt” stock. The stock may go from $11 to $25 at some point even if they don’t get very far on this project.
This company is an $11.40 stock today. About 22 years ago, it was a $12 stock. That’s not a great track record. However, as you’d expect with any stock – especially with an asset value play stock like this – investors get greedy at times and fearful at others. In 2005, the stock hit $44 a share. By 2013, it had dropped below $3 a share. In the long-run, it’s been plenty volatile. So, if you are a “value trader” of sorts who wants to buy the stock whenever it reaches about 50% of your appraisal value and sell the stock when it exceeds 100% of your appraisal value – you might get the chance. It may still take years. But, it’s unlikely the stock would stay below your appraisal value for something like 20 years. That’s the trader mentality.
What about the true buy and hold investor mentality? Well, then it becomes a question of annual returns on raw land. Generally, raw land should have poor returns. However, all the data I have for Hawaii going back about 40 years shows close to 6% annual compound growth in the nominal price of residential housing units.
I haven’t really discussed the overhead here. The company has G&A costs that lower returns compared to purely holding raw land inside a resort. It has other things that offset much of that however (for example, it leases some of the agricultural land I gave no value to, it has a water utility, and it gets commissions on resales of condos that use the company’s real estate agent). It’s not impossible that raw land in a master planned community you do nothing with for 20 years and then build condos on in 2038 would have actually appreciated at like 5% plus a year. Let’s call inflation 3% a year. I certainly think that even with corporate expenses you should be able to see your appraisal value hold its real value. My best guess is that your appraisal value on these 900 acres will compound at between 3% and 6% a year for as long as you hold the stock and the company doesn’t develop the land. That’s not as good as timberland or farmland or commercial real estate that has been developed. But it’s better than a random house in a random state. Compounding could – in the long-run – be somewhere between a government bond portfolio and a corporate bond portfolio. So, if you want to imagine the drag on this “dead money” for long periods of time, I’d say it’s like allocating “x” percent of your portfolio (whatever you choose to put into MLP) into a basket of bonds instead of a basket of stocks. It’s a drag. But, it’s not the same drag as actually earning 0% on your money. And, if you’re willing to adopt a trading mindset, the stock will be way more volatile than bonds. So, you might be able to buy today and then sell out if the stock doubles or something on the anticipation of a development that doesn’t actually get going yet.
The other risk is the scarier one. What if Maui Land & Pineapple tries to take on a lot of debt and develop this property itself? What if it goes badly? The company ran into financial trouble about a decade ago. And you can read this write-up by Nate Tobik of Oddball Stocks where he passed on the company because of its poor liquidity position (that post was written just 2 and a half years ago).
The company did sell off assets after that. For example, in February of 2017, it sold the Kapalua Golf Academy practice course to the company that owns the Bay Course and Plantation course. It has sold a lot off to this company recently. The practice course was 15 acres and sold for $7 million. So, that’s $467,000 an acre. They also sold the Kapalua Village Center which was 3.4 acres and a 26,000 square foot building for $18 million. I’m not going to calculate that on either a per acre or per square foot basis as both give high valuations. It was a former golf clubhouse and that buyer probably had strategic reasons for wanting it.
My point is simply that the company was able to sell off assets $15 million here, $3 million there, $18 million here, $7 million there, etc. And some of the sales were of big chunks of land I’ve classified as worthless. Is it possible a company could enter bankruptcy while sitting on 800+ acres of residential land and almost 13,000 acres of agricultural land? Maybe in a financial crisis, or maybe through extreme ineptitude in the use of large borrowings. But, I don’t take the credit risk here seriously at all. The only way I see the company getting into financial problems is if it tries to finance the full $500 million to $1 billion of developing these 800+ acres itself and the project goes badly.
I think the approach I’ve used is best. Don’t worry a lot about the monetization. Instead come up with an appraisal value of the key asset (the residential land). Update your appraisal value per acre whenever possible. Look at where the stock is pricing that land on a per acre basis. Right now, the stock is pricing the residential land at under $250,000 an acre. The Ben Graham investor type rule of thumb is usually to buy at a discount of at least one-third. So, if you think those 800 acres at the resort are worth $400,000 an acre or more – this stock should be a buy. If not, it’s a pass. I wouldn’t assign any value to the agricultural land. I didn’t mention that the company is planning a development of 300 acres of that agricultural land (for a less valuable but still residential / commercial use). Why didn’t I mention that planned development? They don’t have all the approvals it’d need. So, it’s a lottery ticket.
You can do the math and see that if you have 13,000 acres of agricultural land and just 20% of that land has a 20% chance of being approved for other uses that’s the same as having over 500 acres of land that you could develop at some point. Again, I didn’t mention that because it’s a lottery ticket. It also wouldn’t be in as valuable a location as the resort land that has the needed approvals and they’ve started work on. So, I’ve focused on the most valuable land, with the needed approvals, that is being built on now or will be soon.
The only asset I think we can take a serious stab at trying to appraise is the 800 acres yet to be developed at the Kapalua resort. And from a handicapping perspective we know that’s valued at less than $250,000 an acre in the stock market. What would it be valued at in the Hawaiian real estate market?
The question you have to ask yourself is whether you personally think that land is worth more in the $200,000 to $300,000 an acre range or $400,000 to $600,000 an acre range. If you think it’s worth $200,000 to $300,000 an acre – it’s a pass. If you think it’s worth $400,000 to $600,000 an acre – it’s a buy.
What about the catalyst?
The 10-K has – for the last couple years at least – shown the planned completion of the development as 2019-2039. If you assume the value of the land is about $400,000 per acre and it takes 20 years to close the value gap and the land value increases just as the rate of inflation – you can get a return as low as 5.5% over 20 years. If you assume the value of the land is more like $600,000 per acre and it will take 10 years for the value gap to close and the land value increases at 6% a year – you get a return of a bit over 15% a year.
So, if you’re right about the value of the land (and think it’s double what the stock is trading for now) but get stuck in the stock for 10 or 20 years, your likely returns would be in the 5% to 15% range.
If you are able to get your “puff” out of this cigar butt faster, because other investors get excited about the stock at some point or because the company actually sells off a lot of the land within 10 years – you could make a lot more than 15% a year. For example, if the stock closes its value gap in just 5 years (going from 50% of your appraisal value to 100% of your appraisal value) while the land itself also grows in value by 5% a year – you’d make a 20% annual return over 5 years.
What’s the most likely scenario? I don’t know. You can read the company’s past history, its current 10-K, etc. to get an idea.
I will add that this is a controlled company. The former CEO of America Online (Steve Case) owns 60% of the stock. He’s from Hawaii originally. And he’s obviously a very wealthy man. So, he may be as interested in the conservation land etc. as actually monetizing the resort’s value. I have no insight on that.
Finally, one last point. I’ve been saying that they will put condos on this land. I don’t know that. In fact, I know that’s not true. They clearly didn’t say “condos” in that first paragraph of the 10-K. And we know that a developer is building some truly gigantic homes as part of the first phase of this development.
So why did I use a condo based estimate? It’s just the best comparable data I have – so there’s no point in trying to value it if it’s luxury homes.
We know in some cases it is luxury homes, because there’s an article about Mahana estates you can read here. The actual Mahana Estates website is here. I’d caution you not to extrapolate from the listings you see there. Big lots all along the ocean tend to go for incredibly high prices per acre – but you’re going to have very few such lots to sell. There is some more detail about Mahana estates at the developer’s website. Note this phase includes 125 acres of land and a contract value of $300 million. Again, I’d strongly warn against extrapolating out that per acre number across all 800+ acres of this development. However, you’ll note the article mentions that “dirt” in some cases will go for $1 million or more per acre – meaning the homeowner will pay more than $1 million per acre for the land portion of their home purchase. Overall, the impression I get from reading about Mahana estates is that the stock market’s $250,000 per acre valuation of MLP is below the per acre valuation the Hawaiian real estate market would set for the same assets.
I want to make clear that throughout this post I’ve tried to come up with an estimated appraisal range for this company. I haven’t tried to model the actual future. I haven’t tried to project whether these will be condos or luxury homes on the 800 acres. I haven’t tried to project whether they’ll mostly be delivered in 2025, 2030, 2035, or 2040. I don’t think that matters much. What matters is the appraisal value of the 800 acres (as land) right now, whether that appraisal value will compound in the future, and how high or low the stock market’s value per acre is versus that appraisal value. I’m just trying to lay out whether this company is sitting on 800+ acres worth something like $200,000 an acre or $600,000 acre or something in between. I’ve given you all the data I have. It’s a matter of personal judgment from here.
So, will I be putting in a buy order for Maui Land & Pineapple tomorrow morning?
Overall, I think it’s difficult enough to appraise this land that I’m less sure of its value than I am of Keweenaw’s timberland. However, it seems easy enough to value just the undeveloped land at the resort to see that this stock’s market cap is not higher than the value of all of its land. The stock isn’t expensive. It might underperform if it turns out to be a dead money stock or if it bites off more than it can chew when it comes to developing the land it owns.
However, I think the odds are pretty high the company is worth twice its market cap. And I think the odds are pretty low that it’s worth less than its market cap. The asset position is so strong that even though the company doesn’t have much in the way of cash flow – I consider it financially sound.
So, assessing the downside risk: I don’t think the land is worth any less than the market cap. And I don’t think the financial position is weak.
The upside is harder to quantify because my appraisal is going to have to be some figure plus or minus at least $100,000 per acre – maybe more. And, on top of that, I’m not sure how quickly the land will be monetized.
So, I’m not at all sure I’ll be buying this stock. However, I am sure that I’ll be researching it further.
Geoff’s initial interest level: 80%