Alexander and Baldwin (Nasdaq:ALEX) owns an interesting mix of assets, including shipping, real estate and agricultural businesses, complemented by a huge holding of land in Hawaii. Although the company's businesses are out of favor now, the current share price may represent an opportunity to get into this company before the recession ends and its various businesses recover.
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The company's shipping businesses are conducted through its Matson subsidiary. Matson provides containerized cargo and automobile shipping between Hawaii and the U.S. Mainland, Guam and Micronesia, and has recently expanded service to Asia. The company currently owns 17 vessels. This business is suffering from the recession, the sharp drop in car sales and a fall in overall container traffic but still earned $106 million in 2008. A smaller logistics division earned $19 million in 2008. The company competes in its shipping business with Horizon Lines (NYSE:HRZ), which has a fleet of 21 ships. Both companies are protected from foreign competition by the Jones Act, which prohibits the transportation of cargo between the U.S. Pacific Coast and Hawaii by foreign flagged vessels.

The company's agribusinesses operates under the Hawaiian Commercial and Sugar Company, and the subsidiary lost $13 million in 2008. The company grows sugar on 35,000 acres in Maui, and Coffee on 3,000 acres on the island of Kauai.

Alexander and Baldwin owns a total of 88,790 acres of land in Hawaii, and another 540 acres on the mainland U.S. Some of this land is categorized as watershed or conservation, and might be difficult to develop, but the balance is agricultural land that provides an upside should it get a higher value as development land for commercial or residential use. The company pursues this development through its A & B Properties Division. The value of this land is not fully reflected on its balance sheet, as much of it was purchased many years ago. Another company with extensive land holdings in Hawaii is Maui Land and Pineapple (NYSE:MLP), which owns more than 25,000 acres dedicated to pineapple growing or development. Most companies with large land holding are organized as real estate investment trusts (REIT). These include Rayonier (NYSE:RYN), which owns or leases 2.6 million acres across the U.S. and Plum Creek Timber (NYSE:PCL), which owns 7.389 million acres of land. Since they are REITs, both companies must pay out at least 90% of taxable income to their shareholders, or it would be subject to federal taxes. (For more, see What Are REITs?)

First Quarter
First quarter of 2009 earnings were not good for Alexander and Baldwin. The company earned only $3.0 million in net income, and saw double digit drops in volume for containerized cargo and automobile shipments. Its sugar business also saw lower margins in the quarter, due to falling prices and higher production costs. Alexander and Baldwin's earnings, like many other companies, are being hurt by the recession, but recent evidence of a stabilization may be what the company needs in order to turn things around. Investors could also benefit from a large holding of land that is currently undervalued on the balance sheet. (For more, read Exploring Real Estate Investments.)

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Tickers in this Article: ALEX, PCL, RYN, MLP, HRZ

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