Off-the radar agribusiness name Limoneira (LMNR) , which is included in the basket of other off-the-beaten-path agriculture and land-related companies in my portfolio, has taken some steps over the years that the others have not.
First, back in 2010, the then 117-year-old company left the confines of the pink sheets to list on the Nasdaq. That is as an atypical move, especially since the advent of Sarbanes-Oxley in 2002, which prompted some small companies to move to the pink sheets in order to avoid the regulatory costs associated with those regulations.
Admittedly, Limoneira made the move to list because the number of its registered shareholders had breached the limit to be a non-reporting company. Some companies that delist themselves have gotten creative in order to reduce their number of shareholders below that threshold. Perhaps the most effective way is to undergo a reverse stock split that would leave some shareholders with fractional shares that the companies then would purchase for cash.
In LMNR’s case, prior to listing, the company underwent a 10-for-1 (forward) stock split in order to provide more liquidity and make its share price, which was in the $200 range prior to the split, more palatable to prospective shareholders.
While Limoneira may be better known in the market than it was prior to 2010, it has remained on the fringe. I’ve been pleased to see greater effort from LMNR to grow investor awareness, which is highlighted by a presentation made earlier this week at the 29th annual ROTH conference.
While company-generated presentations are always favorable to their cause and need to be viewed with a healthy amount of skepticism, this one does a great job of laying out Limoneira’s vast array of assets. Frankly, that’s the reason I took a position in the first place, when it was still a pink-sheet company.
Here are the highlights in terms of assets/business:
- Agribusiness: A leading provider of lemons (4,750 planted acres, or about 7.5 square miles), Limoneira also grows oranges (1,460 acres), specialty crops (900 acres) including wine grapes and pistachios, and avocados (1,000 acres).
- Real Estate Development: Three projects in Ventura County and Santa Barbara County California; total book value $77 million
- Rental Operations: 260 farm-worker housing units, 500 acres of agricultural land
- Water Rights: 28,000 acre-feet associated with owned acreage, 8,600 acre-feet of adjudicated rights in the Santa Paula basin, and 11,700 acre-feet of Class 3 Colorado water rights.
- Other: LMNR also owns 300,000 shares of avocado company Calavo Growers(CVGW) that are valued at $18.3 million
This is a seemingly solid package of assets for a company with an enterprise value of just $356 million. The thing that may keep some investors away is that Limoneira typically trades at a higher price/earnings ratio (currently 32x) than is palatable for a value-related name. In this case, the value is in the assets, but only the patient need apply. Asset plays can drag on for years. While I am comfortable with that, many are not.