SVIN - My gosh, just peeked at their 10-K, this really looks like a horrible business to be in!
In each of 98 and 97 they had roughly $18M revenue and $3.5M earnings. Their Yahoo! profile indicates that they have 5150 acres. That works out to $3500 revenue per acre, and $680 earnings per acre. I have no idea if this is representative of the industry or of this company (I didn't dig deep enough to determine this), however I will assume that it is, and jump off from here!
Their 10-K describes how it takes 3 years and $15-18,000 to get one acre up and running. Spending $15K to generate $3500 per year in sales seems like lunacy to me! (then again, I'm not in the cable TV business ;-). That's a P/E of 22.
Whaddya want to guess (I don't know this) that an acre of land is good for 15-20 years before you have to replant it? In other words, that the whole business is a recipe to (slowly) bleed money ad infinitum?
If that's not stupid enough, who in their right mind would pay $50-100,000 for an acre of prime land? Assuming $65K per acre, that's 18.5X revenues, 95X earnings! Wine.com?
Unless there are immediate plans for the value to be unlocked, by selling their land now while there are other suckers to take it off their hands at these prices, I wouldn't buy. Why buy a company with a hidden asset that requires a greater fool to buy it in order for that value to be realized?
Now if the land could be sold for other purposes, I suppose that could justify valuing it at $50K+ per acre, however one would have to dig a bit deeper into the details of the holdings and management's intentions.
- Daniel |
