Maui Land and Pineapple Update

If there's anything we like to cover besides net/nets here at Cheap Stocks, it's real estate, more specifically, company's that own relatively large amounts of raw land, commercial property, or a combination of the two. My portfolio is chock full of these companies, from retailers such as Cabela's, to restauarants (Cracker Barrell, Denny's) to shipping company's (Alexander and Baldwin) to agriculture (JG Boswell and Limoneira), to name just a few.

Over the years, I've also sold out of some names as well. Maui Land and Pineapple is a great example. I continue to follow the company, however, looking for a re-entry point, or making a determination of whether I want to take a new position.

MLP, which owns 24,500 acres primarily in Maui, Hawaii, including 10.6 miles of ocean frontage with 3300 of lineal feet along sandy beaches, has fallen on hard times during the recession. The company recently reported a $54 million loss for the second quarter, which included more than $37 million in writedowns, $21.3 million of which represented a decrease in value of the Company’s investment in the Kapalua Bay resort. Clearly, the downturns in real estate prices and resort visitors has been a double whammy for MLP. The stock now trades at $6.22, down 79% from it's 52 week high of $29.69.

While there is still value in MLP, declining cash ($1.5 million) and debt ($60 million short-term, and $35 million long-term) complicate matters for this $50 million market cap company.

Some recent transactions, however, demonstrate the value of some of MLP's land. In March, the company sold its Plantation Golf Course for $50 million in cash. (It's a somewhat complicated transaction, for more detail, see note 10 in the most recent 10Q).

In March 2007, the Company sold the land underlying the Ritz-Carlton, Kapalua hotel. 49 acres, for $25 million in cash and a 21.4% interest in the Hotel JV. As of June 30, 2009, MLP's stake fell to 15.9% of the hotel, due to cash calls in which MLP did not participate.

A good portion of MLP's land is preserved, including the 8,304-acre Pu‘u Kukui Watershed Preserve, which is the largest private nature preserve in Hawai‘i, and the 3,307-acre Honolua-Mokule‘ia Marine Life Conservation District, both located in West Maui. An additional 2000 acres is used in the oompany's pineapple growing operation.

With a current enterprise value of about $145 million, the EV to acres calculation we are fond of works out to just over $5900. Of course, not all of MLP's land is as valuable as the ocean front property, and this calculation does include the preserved land.

We'll keep an eye on this company, it does have it's share of issues, but is interesting nonetheless. Keep in mind that average trading volume is just 35,000 shares/day, and Steve Case owns nearly 43% of the shares.

*The author does not have a position in Maui Land and Pineapple. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. The author will not trade any of the securities mentioned (buy, sell, short) for at least two weeks
following the date of this post.

Rising Tide Shrinks the Net/Net Universe: Top 5 by Market Cap

Without a doubt, the recent market "recovery" off March lows has had a dramatic effect in the land of misfit companies; more specifically, the number of net/nets is falling. This is not at all surprising; we've seen it happen several times before when markets recover.

There are still 140 or so net/nets with market caps greater than $5 million, but those at the upper end of the market cap spectrum are few and far between. Case and point, on February 19th, there were more than 320 such net/nets; 38 of which had market caps above $100 million. Currently, there are just 10 above $100 million.

The top 5 Net/Nets by market cap:

Adaptec
Ticker:ADPT
Price:$2.91
Market Cap:$350
NCAV:375
Market Cap/NCAV:.93
Cash/Share:$3.14

Opnext Inc
Ticker:OPXT
Price:$2.20
Market Cap:$195
NCAV:$200
Market Cap/NCAV:.975
Cash/Share:$1.87


Volt Information Sciences Inc
Ticker:VOL
Price:$8.95
Market Cap:$186
NCAV:$200
Market Cap/NCAV:.93
Cash/Share: $6.99

Audiovoxx
Ticker:VOXX
Price:$7.30
Market Cap:$167
NCAV:$212
NCAV/Market Cap:.79
Cash/Share:$2.73
Note: Audiovoxx seems to be a perennial net/net. Has been on the list for several years.

Silicon Graphics
Ticker:SGI
Price:$5.39
Market Cap:$161
NCAV:$200
NCAV/Market Cap:.81
Cash/Share:$5.82

Stay tuned. There's never a dull moment in the wonderful world of net/nets....

*The author does not have positions in any of the companies mentioned. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.

Back in the Good Old USA; Catalyst Investment Research in the Wall Street Journal

Your Cheap Stocks editor recently returned from a 10 day mission trip to the Dominican Republic. It was truly an eye opening experience. Thirty Americans and several Dominicans worked to clear a small piece of land, so that a church can be built on the site in the town of Haina. We used axes, shovels, pick axes, and machetes- possibly the greatest tool ever, and a must have in every garden shed- to get the job done. I come back very appreciative of the small things that we take for granted: clean, cold water, ice, toilet paper, a toilet that flushes, you name it. What the Dominicans we worked with lacked in material possessions, and many of the things we don't think we can live without, they more than made up for in their joy. Amazing people. As a side note, machete's were so popular with our group, that 18 brand new ones ($8.00 each) came home with us, in our checked luggage.

Hedge Fund Solution's Catalyst Investment Research in the Wall Street Journal

While I was away, the latest from Catalyst Investment Research (The Hedge Fund Solutions product that I've teamed up with Damien Park on), a special report on recent Steel Partners activity, was featured in the Wall Street Journal print and on-line editions.

Finally,it's back to work, and more regular postings. Stay tuned.