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Scheid Vineyards: An Extreme Undervaluation Hiding In The Dark

Apr. 09, 2021 3:34 PM ETScheid Vineyards Inc. (SVIN) Stock29 Comments
ShadowStock profile picture


  • The assets trade at a fraction of market value.
  • The fair market value of existing tangible assets is substantial.
  • The investment thesis is simple but far from certain.

Scheid Vineyards (OTCPK:SVIN) produces and markets wine. And, their operations cover around 4,200 acreages, with ten vineyards offering 29 grape varieties. For the first 15 years, Scheid was a grape farmer selling its harvest to wineries. The company was established in 1971 when Al Scheid acquired his first property in Monterey County.

SVIN went dark in 2016. Therefore, a 15-12G was filed with the SEC to avoid the cost and distractions of SarbOx compliance. The move was negative for shareholders as a going dark transaction causes illiquidity from a reduced float, larger price spread. And difficulty obtaining financial data from a majority-owned and managed family operation.

The investment thesis is simple but far from certain. The rationale, it's a deep discount to the sum of its parts with a future focus on improving existing operations with a branded wine.

Price = $15.75; EV per share = 128.60; Market Cap = 16.71M; Enterprise Value = 136.49M

52-Week Range = $13.79 - $23.25; 52-Week Chg = -25.00%

TB Per Share = 29.12; P/TB = .52, EV/Rev = 2.58; P/S = .25

I believe my numbers are accurate, backing into the market value using the shares outstanding. But multiple financial sites have different MC values.

Google finance Market Cap = 11.03M, Yahoo = 32.881M, OTC Markets = 11.461M, Morningstar = 15.36M, Reuters = 11.03M

I am bullish as it trades below intrinsic value. But, recognize that offsetting the asset's fair value is a capital-destroying family-held company. For example, shareholder equity declined -30.33% or -11.206M over the prior 24 prior quarters. EBIT aggregated over the same 24 prior quarters was -10.564M, EBITDA +24.433M.

Below is an attempt at a fair market NAV per share estimate. I started with reported book values (04/06/21) to arrive at an estimated fair market value. No market premium was placed on the existing

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ShadowStock profile picture
"There Are No Bad Assets Just Bad Prices" : Exploiting Market Anomalies with Neglected Data.

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Comments (29)

Robert Lewis profile picture
It looks like they will continue to sell off assets to support their wine business and shareholders will never see any money
Company just released shareholder letter dated today. States that recent vineyard sales of 1193 acres (2/3 of which were leased) for $33 million--$13 million in cash and $20 million assumed debt-will increase book value p/s from $29 to $49.
Charlie's Munger profile picture
@deepvalue66 they should lose all of that wi a year, then they can burn more of their furniture
@deepvalue66 I like it. They also showed substantial growth in DTC and Bulk Wine, and to a lesser extent, in wholesale. I also like the foray into low cal wines and will be interested to see how that sells. Now if they could only stop hemorrhaging money...
@Doobanator This is a company run for the owner/management, not for outside shareholders. Your "hemorrhaging money" is their compensation
Robert Lewis profile picture
Isn"t anyone afraid that the negative cash flow will eat up all the value?
@Robert Lewis It was a scam at the ipo. The owner bragged about paying more to get it sold. Whore that I am, I said yes and flipped it as fast as I could. I'm shocked it hit a 100. Must have been a reverse spilt. My price was 7.

You are a RE guru, it's not NYC, but what do you think of FPH? The old Newhall.
Robert Lewis profile picture
@Pops007 It is beyond my skill set but looks good. There is a strong demand at present for suburban housing
bengalesq profile picture
Tiny cap and for all I know the owners could care less about making a profit - maybe this is a sideline. What I do know is that if I give them my money to lump in with theirs they take it with them...and they control the direction of the business...and they haven't been doing a great job at that. If there was a way to force a sale then the value of the underlying assets matter. Until then, it is just a hope.
Stonk Slayd Capital Management profile picture
@bengalesq absolutely. no catalyst = garbage.
Maui Land & Pineapple (MLP) is another company with market cap much less than NAV that has a majority shareholder. You have to wait until they get bought out which might be a long time.
@PreCambrian If you're a long term investor, it might be worth the wait.
Charlie's Munger profile picture
@PreCambrian stay away from hawaii and Maui in particular
ShadowStock profile picture
An approach I use to discover new ideas is. Scrape historical financial statements for ~ten thousand stocks listed on US exchanges. The scrapped data include BS, IS, CF for multiple prior years. Further, data used includes insider data, institutional ownership, float values, shares short. And historical per share values for enterprise, market, share, debt activity, industry, NAISC code, ratios, etc.

The scrapped data is cleaned, improved, and then loaded into database tables. The discovery and analysis process uses business intelligence, Excel, Access software as examples. The data dumps help uncover material deviations from its market price versus the actual current and historical financial position. This process improves risk-taking odds. It compares current market prices to current, historical, and relative value estimates.

Charlie Munger said the stock market is a pari-mutuel system similar to the racetrack. Everybody goes there and bets. Then the odds (expected value) changes based on what’s bet. That’s what happens in the stock market.
The key is in determining whether the stock’s market price represents opportunity. NOT if it’s a good company but good odds.

Successful investors view the impact on market price changes versus known fundamentals. Diverge by a sufficient margin from the odds on offer (stock price). Investors place a bet.

"There Are No Bad Assets Just Bad Prices."
negative op margins and negative cash flows the last four years...no thanks
Stonk Slayd Capital Management profile picture
@dude2000 yeah no thanks
The vineyards are worth at least $40,000/acre in that area. Inventory is probably worth less than book value. My sister had 800 acres of grapes nearby that the wineries wouldn't buy due to the wildfire smoke last year. She contract crushed and fermented it and hopefully will be able to sell it to recoup her growing and processing costs. If the equipment includes the big electrical windmill next to the winery that is a write off. I never see it turn to generate electricity. I can't see that Scheid's small winery would be worth more than 4,200 acres of vineyard (if that is PPE). And if PPE is the winery then I don't know what "Bldg & Improv" and "Mach, F, Equip" are. I haven't been inside the winery but just looking from the outside it might be worth $15,000,000 plant and equipment. Land is extra. Looking at the vineyard sale that you mentioned it appears that the vineyard was about 2/3 indebted. My rough guess at value would be 4,200 x $40,000 = $168,000,000 less 983,000 (shares) x $125.24 liabilities/share = $123,110,000. This is about $45,000,000 (or $45.66/share) as long as you got everything.
ShadowStock profile picture
@PreCambrian Thanks for this information! I was wrong not to focus on the OVERHEAD allocation. Inventory book value must include estimates of indirect costs(overhead). My focus was on raw material and direct labor costs.

Scheid does have 123 acres of non-agricultural land. This land is zoned for residential development in Greenfield City Monterey County, California.
@ShadowStock I will check exactly where it is. Probably just south of Elm Avenue. My guess is that it is worth $400,000 to $800,000 per acre depending upon how much of the approvals they obtain themselves.

My friends say that they are having a difficult time expanding sales of their labels. Marketing is the difficult part of the wine business in their category (premium to super premium).
@PreCambrian From their most recent filing, I believe share count is 881,086 (733,617 class A and 147,469 class B). I think they spent much more than $15mm building the winery. I recall Mindset Capital saying they had invested more than $75mm in those facilities (www.mindsetcapital.com/...).
There must be some debt that hasn’t been found or they don’t have a full interest in the vineyards. I will check this out since I am right down the road from them.
GreatQuarter profile picture
What an interesting story @ShadowStock ! Cogent thesis and well documented, especially given the lack of SEC filings. Thank you!
ShadowStock profile picture
@GreatQuarter Thanks! I'm glad but surprised SeekingAlpha picked my Sunday's SVIN blog post (shadowstock.blogspot). It’s been a long time since I posted anything on the blog. So, I felt compelled to post something. I selected one of my long positions, SVIN. The Scheid family is capable. Time will tell if management proves competent capital allocation skills for minority shareholders. They failed over the past ten years.
@ShadowStock thanks for this article. I too play in the undervalued asset market as a source of investment ideas. In addition to having assets not recognized by the market, successful investing requires a trigger for the revaluation. In the case of Schmidt, the former exists. The latter does not. Until the family decides to the exit , this is dead money
astute pathways profile picture
@ShadowStock I found this article under STOCK IDEAS...not blogspot
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