St. Joe Can Overcome Oil Scare
online.barrons.com
Fears of the spreading Gulf oil spill have pummeled shares of the Florida land developer. Those fears are overblown.
St. Joe is far from a pure-play on tourism and coastal resorts. The company generated just less than $30 million in revenues from its club and resort business in 2009, representing less than one-fifth of St. Joe's $142 million in revenues.
Still, investors' impressions are tough to change, and some of them might not have caught up with the reality that, while St. Joe once was focused on the coastline, and thus heavily exposed to vacationers, it's become something else: a commercial developer focused on office complexes and light industrial space.
It's fair to say, however, that St. Joe isn't completely inoculated from exposure to a slowdown in tourism to the Florida Panhandle -- just not in the way some investors are thinking. The local communities last month opened the new Northwest Florida Beaches International Airport near Panama City.
It's the first new international airport to open in the U.S. over a decade. St. Joe donated the land for the airport, betting that its adjacent land holdings would increase in value.
In order to help lure Southwest Airlines (LUV) as an anchor tenant of the airport, St. Joe agreed to backstop the airline: If Southwest suffers a quarterly loss on its operations to the airport, St. Joe is on the hook to reimburse the company.
Nevertheless, the worries about the impact of the oil spill have clouded investors' perceptions of the company, bulls on the stock say. The fact that it has no real peers makes it tougher to set a valuation. McGrath pegs the company's net asset value at $52 a share -- more than double where it's trading. |
