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

To: Dan Meleney who wrote (7002)	4/30/1999 8:59:00 AM
From: jeffbas	Respond to of 78744

What is the catalyst for the value to be realized on SVIN?

To: Dan Meleney who wrote (7002)	4/30/1999 9:46:00 AM
From: Daniel Chisholm	Read Replies (1) \| Respond to of 78744

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

To: Dan Meleney who wrote (7002)	4/30/1999 10:48:00 AM
From: Paul Senior	Read Replies (2) \| Respond to of 78744

Pass on SVIN based on my quick screen. I don't see where land is so undervalued-- because to me it looks like land is bulk grape vineyards. Commodity. Looks more like a family business that should be a private business more than it should be a publicly traded company. JMO. Plus, of course -g-, harumph, harumph, I would be preferring the large,land-rich companies with access to capital - that I've posted on --- rather than this little company --g-- . Paul Senior

To: Dan Meleney who wrote (7002)	4/30/1999 11:04:00 AM
From: geoffrey Wren	Read Replies (1) \| Respond to of 78744

I looked at SVIN before, and passed. If it counts, I follow the wine industry as a consumer. One of my main hesitations was the one you mentioned three times: wine industry. Who makes money in it? I see that MOND has done well over the past 5 years, but CHLN has gone nowhere. It is hard to get a feel for the industry, but there are so few public companies. The land they own is good land in Monterey and San Benito counties, but maybe it would have been better left to lettuce and broccoli. They report contracts to sell grapes to GLEN ELLEN, BEAULIEU VINEYARD, BV COASTAL, BLOSSOM HILL, PAUL MASSON, ALMADEN, DEER VALLEY, DUNNEWOOD, and MYSTIC CLIFFS. There is a LOT of competition at this level. They call them the "fighting varietals." Profit margins have to be tight here. This from the 10K is more intriguing: "The Company also has long-term grape purchase agreements with other well-known producers of ultra premium wines, including Beringer Wine Estates, Chalone Wine Group, The Hess Collection Winery, David Bruce Winery and Gundlach-Bundschu Winery. The terms of the Company's long-term grape purchase contracts extend to between 2001 and 2014, and have "evergreen" provisions requiring two or three years' prior written notice of termination. These contracts generally require the customers to purchase substantially all of the Company's production from specified vineyards at a formula price based upon the previous harvest year's sales prices in California's leading coastal regions, including Napa, Sonoma, Mendocino and Monterey Counties." These no doubt are for extensive vineyards now planted but not producing. Premium wineries generally won't touch vines producing for less than 4 years, and prefer older vines yet. I guess here the question is now many acres do they have contracted to premium vintners, and whether the vineyards will produce the grapes that the premium vintners expect, because otherwise they will cancel with 2 years' notice. Somehow SVIN does not look so bad now; I'll start following it again for awhile. Geoff Wren