Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Grantcw who wrote (41097)	1/19/2011 1:38:26 PM
From: E_K_S	Read Replies (1) \| Respond to of 78490

Hi Grantcw - Re: SUPERVALU Inc. (SVU) - The hidden value that the investment community is missing . . . You have it partially correct that SVU's value is in it's real estate. This was true right after the Albertson's merger but a lot of the owned real estate (many of the Osco Drug stores) was sold to a private equity firm that assumed some of the debt for the real estate. SVU was left with some of the best store locations acquired at a discounted price but as a result had to book a huge "goodwill" expense that reflected their net acquisition costs above the tangible value of the acquired assets . Over the last several quarters, SVU has been writing off these goodwill charges which reflected in losses reported by the company. As you detailed in your post, they own approx 38% of their store locations, all accounted for at the acquisition price at the time of the Albertson's acquisition. Since then the real estate values on these parcels have not gone up in value but do remain quite a valuable assets. However, they now carry a huge debt load which they must pay down. The Crown Jewel for Super Value - Their Supply Chain Services ============================================================== Supervalue's crown Jewel is their logistics and distribution network. The real estate is all company owned (many locations have been owned by the company for decades). Cost is carried on the books but the actual market value is much higher. The value kicker is that the ongoing operation is a big money maker. Their distribution centers rival Walmart's operations and some industry experts says it is more efficient. They have Warehouse Facilities located in 28 States supervalu.com Above is a list of their warehouse distribution centers. The company has been consolidating facilities to better serve both their company owned stores and those where they have contracted distribution agreements. Supervalue's Supply Chain Services contributed 22.2% of their fiscal 2009 sales. ( forbes.com ) This segment provides food distribution and logistics services to the company's retail food stores as well as to approximately 2,200 national, regional and independent grocery stores, mass merchants and the military. The segment is also a secondary supplier to another 500 retailers. It also offers third-party logistics services support for warehouse management, transportation and procurement. Many analysts do not associate any value to SVU's Supply Chain Services and industry expertise. My opinion is that if this division is spun off it is worth at least $5.50/share. Currently it has more value when it services their company owned stores but could be set up as a stand alone company that supplies one or more of the big three super markets and/or Target/Costco super centers. The new CEO that SVU brought it early last year is from Wal-Mart and has extensive marketing experience. I suspect the SVU board will give the new CEO 24 months to get his new marketing and promotional programs working. There will probably be more sales of company owned stores too. A final remaking of the company may be the spin off of their logistics Supply Chain business and/or buying and integrating a private label brand into their supply chain offering. The key is for the company to work off their debt from their generated cash flows. They are paying this down at the rate of almost $1.00/share per year. They have about $7.00/share in debt. I will be adding more shares next month as soon as my 31 day wash period has expired. EKS