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In post one of this series on Dole (NYSE:DOLE) and its competitors here, I got into a valuation of Dole and the potential spin-off that could unlock its value.

In my next two posts I will detail two of Dole's biggest competitors, first Chiquita (NYSE:CQB) and then Fresh Del Monte (NYSE:FDP). I will value both of the companies and detail their businesses.

In the fourth post of this series I will attempt to determine if a merger between any of the three companies should happen, and what I think would be the best options. I will go over the margins of each company and try to determine if any of the three have any sustainable competitive advantages. I will also put forth my thesis of which one, if any, would be a good long-term buy without the possibility of a spin-off or merger from any of the companies.

I will start with the valuations of Chiquita, and then get into the details and analysis of the company.

Chiquita Brands International is a leading international marketer and distributor of high-quality fresh and value-added food products from energy-rich Chiquita bananas and complimentary fruits to nutritious blends of convenient green salads, according to the description taken from its website. It does business under the Chiquita and Fresh Express premium brands and other related trademarks and operates in nearly 70 countries worldwide. For further information please refer to the website.

Both Chiquita valuations were done on 6-20-2012. All numbers are in millions of U.S. dollars, except per share information, unless otherwise noted. Valuations done using March 2012 10Q and 2011 10K.

These valuations are done by me, using my estimates, and are not a recommendation for you to buy the stock. Do your own homework.

Assets: Book Value:Reproduction Value:
Current Assets
Cash 41 41
Marketable Securities0 0
Accounts Receivable (Net)267 190
Inventories 238 119
Prepaid Expenses 43 20
Other Current Assets111 44
Total Current Assets700 414
PP&E Net 370 185
Goodwill 177 77
Intangible Assets 555 166.5
Total Assets 1802 842.5

  • Total Shares are 46

Reproduction Value:

  • With IA: 842/46=$18.32 per share.
  • Without IA: 676/46=$14.70 per share.

Current Price is $4.84 per share.

Second Valuation:

  • Cash and Cash equivalents of 41
  • Number of shares are 46
  • Total Current liabilities are 383

Short-term investments of 0 + cash and cash equivalents of 41- current liabilities of 383=-342

  • -342/46=-$7.43 in net cash per share.

Chiquita has a trailing twelve month EBIT of 25.

5X, 10X, and 14X EBIT.

  • 5X25=125+41=166.
  • 10X25=250+41=291
  • 14X25=350+41=391
  • 166/46=$3.61 per share.
  • 291/46=$6.33 per share.
  • 391/46=$8.50 per share.

Current share price is $4.84.

Being an extremely conservative investor I usually use the lowest valuation number I get and use that one as what the company should be valued at. So not only is it currently overvalued with my low estimate at $3.61, there is even less margin of safety due to the -$7.43 in net cash per share. Even if I used the $8.50 number as my estimate of value, subtracting the negative net cash per share only leaves you at $1.07 per share.

Enterprise Value, which is taken from Yahoo Finance is currently $756.72 million.

I adjusted, and added to the enterprise value because it has a lot of obligations over the next few years that aren't counted in the regular debt number.

To the enterprise value I added TOTAL operating leases, pension and purchase commitments.

Adjusting the enterprise value is 756.72+2392=3148.72

  • Unadjusted EV/EBIT=30.27
  • Adjusted EV/EBIT=125.95

Both numbers are incredibly high, especially as you compare them with Dole and Chiquita.

On page 9 of Chiquita's 2011 10K it states total debt outstanding is at $572.5 million. Page 10 is where it lists the other "contractual obligations" with the total obligations being $3,167 million.

This is another reason why you MUST read annual and quarterly reports. When I first started I would have never known about those other obligations. I would have taken the $572.5 million number and compared that with Dole's debt and thought that Chiquita was in a much better position.

With the above information I will not be buying into Chiquita at this time.

In my next post, the third of the series, I will value and talk about Fresh Del Monte's operations.

In the fourth and final posting in this series I will look into Dole's numbers again to see if I missed any of its contractual obligations. I will also compare all three companies' margins and decide if any of the three companies meet my criteria for a long-term value hold, without any spin-off or merger.

Source: Chiquita: Valuation And Analysis Series (Part 2)