Seeking Alpha
Long/short equity, deep value, special situations, growth
Profile| Send Message|
( followers)

Summary

  • The company managed to post a decline in the bottom line for 2Q, but the top line grew 7.1% y/y.
  • We still have a bullish thesis on the stock, noting the long-term nature of the holding.
  • We didn’t anticipate the recent weakness in the stock but note that the company remains committed to development projects for unlocking shareholder value.

Tejon Ranch (NYSE:TRC) managed to post 2Q earnings of $0.04 a share (below the $0.10 it posted in the same quarter last year) and revenues were $8.01 billion (which was above the $7.47 billion in 2Q 2013). Given the nature of Tejon's business (from real estate to farming), variability in its year to year results is expected.

The company has no analyst estimates and only 1 analyst with a price target -- coming in at $65, suggesting 120% upside. Shares are down 18% since we first covered the stock back in November of last year. As we noted back then,

Tejon is one of the best, yet underrated, investments in the real estate market. The inherent beauty is the downside protection provided by the company's cash and assets. This makes the risk/reward very appealing. If the market continues to mis-value Tejon, the worst case is the stock remaining relatively flat; however, once its development projects start hitting on all cylinders, Mr. Market should begin realizing the company's inherent value.

It appears this is taking longer than expected. The key with Tejon is that it's a long-term opportunity. At the end of 2Q, Tejon had $54.7 million in cash and another $20 million available via credit lines. Management noted that it's aggressively pursuing development and investment projects -- including its decade long project of construction of the 23,000-person town of Centennial.

Source: Update: Tejon Ranch Earnings