Hidden Land Company has $42 million of proceeds coming in
The title is the entire thesis.
There is a publicly traded company that has inked to sell $42 million of land assets, after quarter end.
The company has already closed on $7.5 million of these assets and the remaining $34.5 million will likely close sometime in the near future.
The management team briefly spoke about the $7.5 million of asset sales on their earnings call but did not speak of the $34.5 million that is under contract.
In addition, this $34.5 million of asset sales was not highlighted in the company’s press release (dropped yesterday) and the only mention of the potential land sale is a single line at the bottom of the annual report.
You really would have to do some detective work to find this valuable sentence.
What makes this extremely interesting, is the company’s market cap is a mere $246 million. There is $38.1 million of cash on the balance sheet, offset by $85 million, of really cheap and longer term debt.
Receiving an additional $42 million, would bolster the cash position to $80.1 million and put the company at a net debt position of just $5 million. The enterprise value would fall to just $251 million.
Now what makes this $42 million land sale compelling, is the fact the company recently turned on a $50 million share repurchase program.
The company has not smacked the buyback yet, but my guess, is that when they receive the proceeds from the land sale, they will likely begin buying in the open market, or even better, initiate a tender offer for 10-15% of the shares outstanding.
Not only would this juice up the stock price, but it would create significant value as the company would likely be buying stock way below replacement cost of the remaining land assets, which are likely worth $750-800 million.
This is one of my favorite value stocks and one of my largest positions.
I don’t think there is any downside at the current price. And a significant amount of upside as the company will continue to sell land assets, move other assets through entitlement and execute on a share repurchase program.
In addition, I think there is short term upside from the company closing $42 million of land sales, and an announcement of a share repurchase or tender offer for 10-15% of the shares outstanding.