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PICO Holdings (PICO)

benhacker

By benhacker
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Guest Dazel

Guest Dazel

Posted
Posted

http://money.msn.com/business-news/article.aspx?feed=BW&Date=20130717&ID=16711521&topic=TOPIC_IPO&isub=2

 

 

More importantly the ipo of UCP is today....Pico has not sold it's stake in UCP it has purchased a different class of share with the ipo proceeds so the market cap will give investors a better idea of what the sum of the parts of Pico are worth.

 

It will also give Pico some exposure to the other real estate and water Assets they own within Vidler water company.

  • 1 month later...
Cunninghamew Newbie

Cunninghamew

Posted
Posted

Now that UCP LLC ("UCP") is a stand alone entity, I was wondering if anyone has tried to put a value on it?

 

Is the easiest way to value just to look at "lots owned" and ascribe a conservative value to each and then discount it back, because real estate is fairly illiquid and you cant monetize today. I.e. they owned 4,363 lots as of 6/30/2012. The latest 8-k indicated that the average selling price per lot was $126k. If I want to be conservative lets just assume $90k per lot. That gets me to a current market real estate value of about $392,000,000. Then some discount would need to be applied from here.

 

My assumption is that all of the cash outlays for "lots owned" have already occured, so they can just sell them and it is all gravy. Is that correct? Outside of transaction fees and taxes you would incur...

 

I would not give any value to the lots controlled to keep things simple, but it looks like they can aquire more properties at fairly attractive rates.

 

Additionally, they raised a lot of cash during the IPO that will be held on the balance sheet. I am assuming the cash was raised so they could fund homebuilding via Benchmark Communities and hopefully realize a higher ASP (looks like the margins are better).

 

Would you look at the Enterprise Value / Value of the Real Estate?

Guest Dazel

Guest Dazel

Posted
Posted

 

 

The real estate is worth between $300m to $400m...we have confirmed this with brokers in the area of UCP land holdings...so it is worth much more in the private market than the stock market. An obvious disconnect that only goes on so long...the herd is talking about interest rates when the developers know there is a shortage in housing.

 

 

Dazel.

LC Mentor

LC

Posted
Posted

Dazel, how do you feel about UCP being more of an "obviously undervalued" investment vs PICO? 

 

The situation reminds me of Exor vs. Fiat...Exor being the holding company which has a large investment in Fiat and is undervalued on a general level, but Fiat seems easier for the market to understand versus a holding company as a pure-play.

 

If the real estate owned by UCP is on the low end of your range (i.e. 300m)...you're looking at a dollar selling for 80 cents.

 

PICO on the other hand has more uncertainty regarding valuing Vidler's assets & what margins the canola plant(s) will be working with.

Guest Dazel

Guest Dazel

Posted
Posted

;)https://www.theice.com/marketdata/reports/icefuturescanada/ReportContent.shtml?canolaCrushMarginReport=

 

Crush margins are headed straight up...$103 u.s and $108 cdn...does anyone know off hand if Pico fits into one or both cdn and u.s margins? They are situated very close to the cdn border and will likely buy cdn canola as the u.s dollar is higher than the cdn dollar by 5% and there are much greater quantities in Canada.

  • 2 weeks later...
Guest Dazel

Guest Dazel

Posted
Posted

 

 

Pico should benefit greatly from uncle Ben...homebuilders are taking off. They need some water sales.. the market is discounting the division because it lacks activity to show it's value.

 

 

Dazel.

  • 3 weeks later...
  • 4 months later...
Guest Dazel

Guest Dazel

Posted
Posted

https://www.theice.com/marketdata/reports/icefuturescanada/ReportContent.shtml?canolaCrushMarginReport=

 

Pico's canola crushing plant has gone from a dog to a cash machine.

margins for the industry are now above $220 and maybe higher for Pico as they can buy Canadian Canola (record crop last year) for .90 cent dollars with the exchange...they can crush 1300 tonnes a day. do the math.

 

Their water assets are looking up as well with the recent droughts in California and the housing rebound helps both Vidler and UCP.

 

Dazel.

  • 2 weeks later...
  • 8 months later...
Fairfaxnut Newbie

Fairfaxnut

Posted
Posted

Just wondering if Dazel is still holding this.  Looks very interesting here, especially with the Tesla factory being built in the Reno area.  This could be the catalyst they need to bank on their water assets.

  • 7 months later...
SI Newbie

SI

Posted
Posted

Good to see the $85mn of debt gone. Watching them lose another $11mn last quarter in Northstar/Canola and then seeing them need the debt waiver 2 weeks ago it seemed that a take-under was 'certain'; the bear case of not being able to shut it down, further equity contributions potentially being required, with no end insight was tortuous for the long struggling longs - just look at that shareholder list which looks like a funeral small cap value(and it felt that way at the annual meeting earlier this week) in active mgmt.

 

With all that said as backdrop, I think the mkt should respond fairly positively to tonight's announcement.

 

With the balance sheet cleaned up post this transaction, a small buyback likely to ensue, a stock with a pro-forma book value over $17 and mkt quotation under $14, no debt(UCP has debt at the subsidiary level against its assets), a simpler story with the upped focus on just 2 related and geographically adjacent assets - it seems like equity investors may finally get a reprieve.

 

Mgmt now has the oppty to turn their attention to solving for mr. mkt in UCP before the Vidler asset story starts to see some sales yardsticks.

 

 

  • 2 weeks later...
SI Newbie

SI

Posted
Posted

This looks more interesting this week than when they did the deal

 

So what has gone on in the stock that has you looking:

(1)  We are seeing natural resource sellers(maybe even margin calls?!?)

(2)  index sellers as weight was reduced in the Russell within the past month

(3)  3 activists have filed(great write-up of the asset by mutual fund river road from late March in a link here: http://www.valuewalk.com/2015/04/pico-holdings-activism/)

(4)  and what I have termed the small cap asset-value funeral which I think has unearthed a decent price oppty as their shareholders are getting redeemed

 

which I juxtapose with positive fundamentals:

 

(1)  After a recent divestiture, there is no cash burn other than small corporate staff and no debt. 

(2)  Builder Mkts intact, where I think we get a transaction as comps trade 1.15x(small caps) and 1.8x BV(large caps). Its homebuilder is 57% controlled by Pico so it has a massive illiquidity discount.

(3)  Water Mkts that I think have the potential for dynamic upside

(4)  With water in mkts where development outlook is firm

a.  The scale daunting with AMZN, Drowns, Tesla, 15 Japanese Battery developers, Apple, Google, etc

(5)  Mgmt under pressure increases likelihood of water / builder transaction

(6)  An expensive mkt....

  • 3 weeks later...
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