Get in Touch

Stonegate Capital Partners Updates Coverage On Alico, Inc. (Nasdaq: ALCO)

Key Takeaways
  • Market leader in citrus
  • Solid cash flows drive investments and return of capital
  • Focused on deleveraging & more favorable debt terms

DALLAS, TX -- August 29, 2022 -- Alico, Inc. (Nasdaq: ALCO): Stonegate Capital Partners updates coverage on Alico, Inc. (Nasdaq: ALCO). The full report can be accessed by clicking on the following link: https://stonegateinc.com/reports/ALCO_Q2FY22.pdf

COMPANY DESCRIPTION

Alico is an agribusiness company with a legacy of achievement and innovation in citrus and conservation. The Company currently owns approximately 74,000 acres of land across eight Florida counties. The current principal lines of business are citrus groves and land conservation/leasing. The Alico Citrus segment cultivates citrus trees to produce citrus for delivery to the processed and fresh citrus markets and is one of the largest citrus growers in the United States. The Land Management segment owns and manages land in Collier, Glades, and Hendry Counties, and leases land for recreational and grazing purposes, conservation, and mining activities.

COMPANY SUMMARY

  • Market leader in citrus – Alico is one of the largest citrus growers in the US with ~49,000 gross citrus acres throughout the State of Florida. The Company maintains a 14% to 15% market share of the Florida Citrus Industry, which combined with Brazil, produce ~78% of the world’s orange juice. Tropicana is Alico’s largest customer, accounting for ~90% of ALCO’s revenue in FY21.
  • Real estate strategy to drive shareholder returns – Alico currently possesses 74,000 acres of both citrus groves and ranch land, which provided a framework for average estimated values of its landholdings which may be worth in the range of $505M to $628M. In FY21, ALCO sold ~19,800 acres of ranchland acres and buyer demand remains high. The Company’s strategy continues to pursue strategic land purchases or sale opportunities to drive returns on invested capital. Since 2018, Alico has sold ~49,000 acres of ranch land.
  • Investing for future growth – At the beginning of 2017, the Company made a strategic decision to invest heavily in tree planting beginning in fiscal year 2018 to help position it for future growth. The Company planted over 400,000 trees in both FY18 and FY19, over 300,000 trees in FY20, and over 365,000 trees in FY21. The new trees were planted in a tighter setting to increase the overall density of each grove with expectations of driving higher future production. Citrus trees become fruit bearing in about four to five years after planting and begin to peak around seven to eight years after planting. Alico expects to see the positive impacts of the new plantings over the next several years.
  • Solid cash flows drive investments and return of capital – Historically, Alico has generated solid cash flows that has allowed it to either invest in its business or return capital. The return of capital includes a quarterly dividend since 1974, tender offer and share buybacks, and debt repayments. Since 2014, the Company has returned about $174.2M in capital, including $29.8M in FY22 to date. Importantly, in Jun’21, Alico’s board of directors approved an increase in the quarterly dividend, from $0.18 per common share, to $0.50 per common share.
  • Focused on deleveraging & more favorable debt terms – Since FY15, Alico has reduced its long-term debt by 47%. In May’21, ALCO completed the modification of its fixed rate term loans, which improves cash flow by $5M to $6M annually.
  • Valuation – Based on our F22 estimates and using an EV/EBITDA multiple range of 15.0x to 30.0x, we arrive at a valuation range of $10.75 to $34.75 with a mid-point of $18.75. We also note that Alico’s management provides a land value framework, and based on these estimates, we arrive at a valuation range of $51.50 to $67.75 with a mid-point of $59.75. See page 5 for more details

About Stonegate Capital Partners
Stonegate Capital Partners is a Dallas-based corporate advisory firm dedicated to serving the specialized needs of small-cap public companies. Since our inception, our mission has been to find innovative, undervalued public companies for our network of leading institutional investors who seek high-quality investment opportunities.

Key Takeaways
  • Market leader in citrus
  • Solid cash flows drive investments and return of capital
  • Focused on deleveraging & more favorable debt terms
Media Gallery
Related Bios
Marco Rodriguez
Director of Research Stonegate Capital Markets
View Full Bio>>
Contacts
Stonegate Capital Partners
info@stonegateinc.com
(214) 987-4121
General