Alexander & Baldwin: Hidden Assets in Hawaii (ALEX)

What do shipping, sugar, and real estate have in common? They are three of Alexander and Baldwin’s (ALEX) main lines of business. There’s an interesting story for each of these divisions, especially for real estate.

ALEX carries freight between Hawaii and various ports on the Pacific Coast of the US. Protected by the Jones Act which limits competition, ALEX dominates US-Hawaii shipping. As an example, it carried 148,100 out of the approximately 190,000 autos that traveled between Hawaii and the Mainland in 2005 (78% market share). Last month the company was scheduled to expand its operations and begin carrying freight between the Pacific Coast and China as well. ALEX’s transportation division also offers truck brokerage and logistics services.

The food products division grows sugar cane and coffee in Hawaii. The economics of sugar growing aren’t as sweet as its products, but ALEX is the largest producer of raw sugar in Hawaii. Last year the company produced 192,700 tons of raw sugar—about 76% of 2005 production in the state. In 2005 ALEX also had 3,100 acres of coffee trees under cultivation which produced 1.8 million pounds of green coffee, a relatively small crop.

Alexander and Baldwin’s real estate division owns, manages, and develops commercial and residential properties—mostly in Hawaii but with a few properties in California, Arizona, and other states. Here’s the interesting thing: the company was founded in 1870 and acquired most of its land in the first half of the twentieth century at about $150 an acre. While land values in Hawaii have skyrocketed, the land is recorded on the balance sheet at cost—per accounting rules. Borrowing words from ALEX’s management, the land’s “true value is not reflected in the company’s financial statements.