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Will J. Alexander's Corporation bite the dust … or has it already? (JAX)

|Includes: J. Alexander's Holdings, Inc. (JAX)
Last year, during the market panic, J Alexander's Corporation (NASDAQ:JAX) reached prices below $2.  It is now trading at around $3.50.  Has it climbed too far too fast, especially for a company whose existence as a going concern has been brought into question?

J. Alexander's has $15.8 million dollars of land on its balance sheet … unappreciated. In a thumbnail sketch, I recently estimated the land to be worth about $24,000,000 after appreciation.  (Give or take a thumb or two. See previous post at https://seekingalpha.com/instablog/582827-mattberry/55643-j-alexander-s-corp-jax-and-land-value). The market cap for this twenty-year-old company is at the moment $20,800,000. JAX has apparently sunk its teeth into the real estate.
Of course there are problems.  JAX has "bit the dust," in a good way, because people are afraid it just might ... in a bad way. Same stores sales are down, have been down, and may well in fact continue to be down with the next earnings statement.  There’s also the little matter of a debt covenant warning. (See https://seekingalpha.com/instablog/582827-mattberry/56477-maybe-it-s-not-as-bad-as-it-looks-j-alexanders-jax-warning-of-noncompliance-with-debt-covenants.)  And so, what if we went ahead and took the worst for granted, however probable or improbable:  liquidation.
 In my thumbnail sketch, J. Alexander's buildings came in at $25,500,000 (after a depreciation estimate). I did not include liquidated equipment in the previous analysis, but I will here. I found a published list of equipment sold off at a recently bankrupt Bennigans restaurant in Indiana for roughly $58,250. (Found at Commercial Liquidators of America’s web site.)   I took this number and multiplied by the number of J. Alexander's restaurants, 33, and arrived at $1.9 million. J. Alexander's restaurants are typically 7000 to 8000 square feet, and Bennigans’ are 5000 to 7000, but I'll stick with a rounded number of $2,000,000.

The math,
 
$24,000,000 Land
$25,500,000 Buildings
$2,000,000 Equipment
$51,500,000 Assets
$31,500,000 Liabilities
$20,000,000 stripped down assets
 
With 5,946,860 shares outstanding, we have $3.36 per share liquidated assets. Interestingly, with an earnings announcement due soon, the stock has been trading around $3.5 and for the past 3 months has found $3.36 near its low.

. JAX thumbnail sketch of liquidation value and recent share price

It appears that J. Alexanders' price has found some ground ... real ground perhaps. 
 


Disclosure: Long JAX