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Reading The St. Joe Company's 10-K, Then Backing Up The Truck To Buy More

Mar. 04, 2021 1:25 PM ETThe St. Joe Company (JOE) Stock92 Comments
Kingdom Capital profile picture
Kingdom Capital


  • St. Joe owns over 170,000 acres of land in Northwest Florida.
  • While some would dismiss the stock as overvalued due to high P/E or P/B, these investors have not dug beneath the surface.
  • Even a valuation of JOE's future residential lot sales could substantiate the value of the business, giving you the remaining recurring revenue streams for free.

Some companies are really easy to write about, but The St. Joe Company (NYSE:JOE) is not one of them. So I'm taking a bit different approach here, walking through their new 10-K to highlight just how good of an opportunity this is.


First, a description of their operations:

St. Joe was incorporated in the State of Florida in 1936. We are a real estate development, asset management and operating company. We own 171,000 acres of land in Northwest Florida. The Bay-Walton Sector Plan ("Sector Plan") entitles, or gives legal rights, for us to develop over 170,000 residential dwelling units, over 22 million square feet of retail, commercial and industrial space and over 3,000 hotel rooms on lands within Florida's Bay and Walton counties. We also have additional entitlements, or legal rights, to develop acreage outside of the Sector Plan. Approximately 86% of our real estate is located in Florida's Bay, Gulf, and Walton counties. Approximately 90% of our real estate is located within 15 miles of the Gulf of Mexico.

At their current market cap, that means St. Joe is valued just under $17k per acre. Real estate is all about location, location, location though, so this doesn't tell us too much.

St. Joe believes its long-term, owner-oriented capital and management allows us to optimize the value of Northwest Florida real estate by developing residential, hospitality, and commercial projects that meet growing market demands. This strategy should provide opportunities to build recurring revenues and enterprise value for the foreseeable future. We may partner with or explore the sale of discrete assets when we and/or others can better deploy resources. In 2020, the majority of our revenue was generated from sales, activities and operations on approximately 2% of our land.

So, the majority of their results for FY20 were from about

This article was written by

Kingdom Capital profile picture
Deep value investor focused primarily on microcap stocks. Registered Investment Advisor located in Virginia.

Analyst’s Disclosure: I am/we are long JOE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (92)

bazooooka profile picture
Been long for awhile but might add more.
fisherick profile picture
@bazooooka I don't know....took profits this week. This stock has been stuck in a trading range ever since the big runup at the end of last yr....relative performance since that big run kind of sux. I guess catalyst gonna be when recurring rev's from hotels/commercial stuff really kicks in. It'll happen. I'll prob get. back in at some point....maybe let the charts kind of guide me. This is one of those cases where I love the company and the story, but the stock seems to be stuck in neutral.
Kingdom Capital profile picture

94% net income growth, record backlog, business is booming
TommyIrish profile picture
@Kingdom Capital

Stock down 2.34% to $47!?

Stock was $47 was also when you wrote the article in March.

Key Delta in your valuation since then?
Kingdom Capital profile picture
It's up 5% after hours, and the cashflow looks great. Growth even better than I modeled.

I maintained in the article this was a buy and forget investment, not worried about 7 months as a timeframe here.
TommyIrish profile picture
@Kingdom Capital

Cheers, I was serious about point by point delta.

From 7 months ago - results vs. your expectations?

Based on what I think I know I would say $25.

Perhaps I am missing something.

But can't be micro has to be macro to wet my appetite.
Kingdom Capital profile picture

I suggested 50% revenue and EBITDA growth was possible for FY21, but through 6 months they've grown EBITDA over 350% and revenue 165%....grew their metric of "cash generated for distribution or investment" from $26.2 to $58.6m, $1 per share with half the year to go
The Boy Plunger profile picture
if you're looking for a deeply undervalued Florida land play you should check out ALCO
TommyIrish profile picture
@The Boy Plunger

Unfortunate ticker.

But, yes, looks cheaper.

Bull case?
The Boy Plunger profile picture
@TommyIrish the simple bull case is that the company is trading at book value and an implied value of ~$3K/acre for the entire 103K acres they own. That is a decent valuation for the 58K non-citrus acres, but about 1/3 of what the 45K citrus acres are worth. If you assume $9K/acre for citrus and $2K/acre for the rest you get about ~$50/share. The near term catalyst is that they are in the process of selling a significant portion of the non-citrus acres to pay down debt and buy back stock. Also, the droughts in the Western US and South America will probably be a good tailwind for citrus prices for a while.
@Kingdom Capital, I've been trying to attach a value to JOE with DCF in Damodaran's style. Seems like I can reach current price of cca 43-47$/sh by assuming operating margin increases 30% -> 45% over the next 5 years (as they do seem to have relatively fixed operating costs) and remains at 45% afterwards and revenue growing by at least 40% for the next 5 years.

Value quickly drops if operating margins fail to increase in such way. Don't you think these are very strong / best-case assumptions?
Kingdom Capital profile picture
@nikom I think you're right, doing a DCF on these guys is difficult. On one hand, you're looking at a business that grew revenue 122% Q/Q most recently, and has a ton of upcoming catalysts. On the other, it's not like a DCF is going to just spit out $100/share in the next few years while they're sitting on 2% of the land generating most of the revenue.

That's why one of the things I alluded to above was the plots alone being possibly worth the entire market cap - I'm not saying everything will be realized in the next couple of years but the value isn't going anywhere at the same time that inflation may really start to hit.

You've got a massive medical campus, air force base reinvestment, and Margaritaville all getting ready to hit one of the fastest growing counties in the US and these guys own a huge chunk of it. They've only been paying a dividend for a few quarters because they've only just hit the inflection on the bottom line exceeding the reinvestment needed.

There could be plenty of hiccups between now and 10 years out, but I have a hard time seeing this one not playing out favorably for holders 10 years down the road.
@Kingdom Capital Yeah, when I assume such growth and operating margins for the next 5-10 years, the only value DCF spits out is from expected cash flows. It completely ignores the remaining asset value of undeveloped land at year 10 (probably still around 90%).
Kingdom Capital profile picture
@nikom if you want to put a value on the land on top of the DCF and roll it back at 10% for 10 years you can do that too, but that still leave you with the problem of “what’s the value of the land”
The Boy Plunger profile picture
pretty amazing that even in this environment this company can't make money, wow
TommyIrish profile picture
@The Boy Plunger

"Here rests a company that never made any money, in good markets or bad, management sucking investors dry at evert stage."

WHERE is Gordon Gekko for a rewarding funeral?
Kingdom Capital profile picture
@The Boy Plunger I assume this is a joke? They just grew revenue 122% and reported $3.2m of net income...

fisherick profile picture
@The Boy Plunger a dude named the boy plunger is breaking my balls over JOE's attributes. What a mess. Where is auroleon when you need him.
i followed you for a long time in GME boards. good too see that you are bullish on JOE

thoughts on earnings next week? they should be crushing it but stock is flat. rising yields probably caused this consolidation.
Kingdom Capital profile picture
@nacliamsi nothing I've seen would make me think earnings slow down materially next week, but could be some timing stuff, you never know. It's a buy and forget stock for that reason.
fisherick profile picture
Pretty chart setting up on JOE. Nice little bottom recently which held at the January lows. Appears to be setting up to make a run and maybe take out the hi's from couple months ago. All depends on execution. If they report good #'s and raise dividend again.....low 50's could become support in my opinion.
Flat Arthur profile picture
@fisherick I'm no technician, but from all I can see JOE is firing on all cylinders. The build out is on the verge of becoming self-reinforcing as they deepen the economy along the panhandle. The only question in my mind is how high are expectations for growth?
fisherick profile picture
@Flat Arthur One headwind I'm a little concerned about is labor availability and materials costs. But I would think a company with the scale of JOE in markets where they operate....they have to have an advantage over entities with less resources.
Flat Arthur profile picture
@fisherick My understanding is that on most of the lots JOE is selling, the buyer is linked up with a developer and the costs of construction are on them. No doubt JOE bears the costs and runs the risk of labor availability on the infrastructure & clubs they are building. Net/net I think rising inflation & rising wages benefit JOE because their asset base is so huge relative to the operating business.
Kingdom Capital profile picture

Florida’s home supply is low? Interesting
The company says they can create up to 170,000 residential lots. How long realistically do you think it will take them to develop this? They sold 379 in 2019 and 509 in 2020. At 1000 per year, twice the current pace, it would take them 170 years. To reach the 20k for the $3 billion current market value would take 20 years.
Kingdom Capital profile picture
@UncleLongHair if you look at their press releases and projects underway, 1k lots this year seems eminently doable. They just sold out a development at $450k per lot. That's about 4x their average price from FY20.

Even if they don't sell more than 20k inside the next 20 years (which I think is likely) they still are owning the ecosystem surrounding these developments. The services, the insurance, the club memberships, etc.

The lots can substantiate the value, but my point was mainly that it's a revenue stream that isn't going anywhere. It's the growing recurring streams that give it the most upside.
Capital.G profile picture
Great analysis as always @Kingdom Capital, thank you. When I married about 30 years ago, my wife's aunt told us, the best investment you'll ever make is finding someone you want to spend the rest of your life with. The second best investment is real estate because the planet isn't getting bigger but the population is. That investment worked out well for her, and well, surprise she left NJ and retired in FL.

Understanding the journey JOE has been on explains why there are such polarized views. Developing thousands of acres is a multigenerational journey. I've had the good fortune to work for a land developer in NJ during high school and the first 5 years of my IT career. For him, he bartered for work at 50 cents an hour plus an acre a week at 16. He lived in and out of bankruptcy for much of his adult life. Then, a few decades later the 80's happened, rates fell, houses got bigger, and suddenly he owned thousands of acres where people wanted to be. While he hadn't thought through annuity revenue streams with commercial development and leasing, he "technically" retired in Reagan's first term; paid off all debt except recurring property taxes which kept him perennial poor for decades past, then continues to do the heavy equipment side of land development.

Go JOE! Continuing to accumulate hold long, respectfully disagreeing with opinions otherwise.
sphereless profile picture
Thanks for the deep-dive, I sold some puts today on JOE. Think there is some fairly /stable value here. Hope it sells off a bit more, we shall see.
Kingdom C.,

Can you also confirm what bjw and Extreme Income say about JOE's acerage being above storm surge.

Thanks and thanks for sharing your great article.
@scottep2 Thanks!
Load up the cart!
@Cameron G I’m sorry to tell you that Bruce Berkowitz, himself, is unloading his cart right now. I’m not long nor short on $JOE right now. But it is too too risky to buy Joe at $50 at this point of the housing/yield cycle.
ramgaana profile picture
@Saudi Investor Berkowitz is unloading his cart?? He sold 400k shares out of the 26.4m he owns. Probably has bills to pay. Is that what you are referring to as "unloading his cart." Come on!
@ramgaana yeah about 1.5 % of his stash!
Jeremy Blum profile picture
Absolutely not! I recall back in 2006, 2007 being part of a raging debate on the Yahoo Finance board over this stock. I was one of the bears. Back then JOE had over 500,000 acres of land, also almost all within 15 miles of the coast. They have since sold of the majority of their land and have little to show for it. It didn't go out as dividends, that just started. JOE has always been the next big thing. Going back 15 years, they have never earned more than $1 EPS. They have recently benefitted from the housing boom, and still couldn't break $1. Now interest rates are rising. This is not the place to be.
ramgaana profile picture
@Jeremy Blum You believe in things like land value or is it just about EPS to you sir? Thank you
@Jeremy Blum Even Bruce Berkowitz thinks it is overvalued now. He sold 606,866 shares around $50 per share, so 30 millions to his pocket in just 3 days. More to be reported soon?
Kingdom Capital profile picture
@Saudi Investor it’s most of his fund and he owns half the company. Trimming 2% of his stake hardly equates to it being overvalued.
The Boy Plunger profile picture
The Villages (best selling master planned community in history) took over 50 years to sell 50,000 homes in a market that is near Disney and a city over 2 million people and does not freeze in the winter! It will take JOE 100 years to sell out, DCF of that is much much lower than the current stock price. This one is just another story stock caught up in the fed bubble, caveat emptor.
Kingdom Capital profile picture
@The Boy Plunger JOE selling through a thousand homes per year while owning a huge part of the local ecosystem doesn’t sound so bad. Good luck to you.
@The Boy Plunger You're conflating the DCF of selling plots with a realization of value here. Article above (and the others cited) do a good job of noting that it's not just selling land plots, but fees associated with property management as well as timber sales.

If you're worried about a Fed bubble (maybe scared of inflation on the horizon) land is a great hedge...
Is it true that JOE's land is, on average, 30' above sea level? If true this would eliminate the storm surge risk from a hurricane.

Has anyone looked into this?
@1205 & 1207 It is true--highest elevation in the state of FLA. Their properties have incurred minimal damage in recent storm, and it's definitely a selling point for home buyers & developers.
Extreme Income Plus profile picture
@1205 & 1207 I concur with @bjw1012 below. I made a recon trip to the Panhandle early this year and it was a fascinating visit. One thing I discovered is that, yes, this is true.
South Walton (County), encompassing the marvelous 30A resort area (smack dab in JOE country), is a shockingly rolling countryside. Being from central FL I've never seen anything like it elsewhere in FL.

I'm long JOE, short puts and getting longer as we drop. I never advise "loving" a stock since it can't love you back, but I tell ya, this is gonna be a winner in my book.

Extreme Income Plus
long JOE in several family accounts, short puts...YMMV
Flat Arthur profile picture
@1205 & 1207 I looked at this as a possible explanation for the discount. NOAA has good mapping tools for modeling a rise in sea levels. Even with a 7' rise (more than most climate experts expect over the next 50 years), very little of JOE real estate is impacted.

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