Intrigued by the JG Boswell Story

May.19.08 | About: Boswell (J.G.) (BWEL)

Shares of cotton and farming giant JG Boswell, owner of an estimated 142,000 California acres, and another 30,000 in Australia, have bounced around quite a bit this past year, from $760 in June to $1175 in November, closing last week at $980. The stock still trades "by appointment", so if you don't like illiquidity, this company is not for you.

The appeal of Boswell (OTCPK:BWEL) is not in its farming operations, which although impressive in their own right, merely represent the current use of assets which might ultimately be much more valuable used for other purposes.

The company continues to develop its Yokohl Ranch project, a master planned community of 35,000 acres in Tulare County California which may have a 10 year life. The Eastlake project, a master planned community in Chula Vista, California is near completion.

But, as we've stated several times before, the real gem may lie beneath some of Boswell's land: massive amounts of water that may be worth several billions. ("May" being the operative word. Ultimately, in order for value to be realized, assets must be converted, or have a good probability of being converted into cash. Water is a touchy and political subject, especially in California)

We recently obtained a copy of the company’s 2007 annual report, and here are the highlights for the year ended June 2007:

  • Current Price: $980
  • Current Dividend Yield: 1.43%
  • Quarterly Dividend: $3.50/share
  • Revenue: $338.958 million
  • Net Income: $13.96 million
  • Diluted EPS/share: $14.20
  • Current Assets: $203.038 million
  • Cash: $3.891 million
  • Total Assets: $645.909 million
  • Current Liabilities: $150.506 million
  • Short Term Debt: $88.272 million
  • Long Term Debt: $0
  • Stockholders Equity: $450.221 million
  • Shares Out: 974,105
  • Book Value Per share: $441.65
  • Market Cap: $954.6 million
  • Enterprise Value: $1038.98 million
  • Enterprise Value/California Acre: $7317 (estimated)

Based on just the California land, we estimate Enterprise Value/Acre to be about $7300, and that ignores any value in the Australian land. We continue to be intrigued by the Boswell story. Buyer beware, though: Shares are difficult to obtain, information is scarce, and there is little liquidity.

Disclosure: The author has a position in JG Boswell. The author will not trade any of the securities mentioned (buy, sell, short) for at least two weeks following the date of this post.