We came across a bull thesis on FRP Holdings, Inc. (FRPH) on ValueInvestorsClub by Rulon Gardner. VIC is our preferred site because the ideas there are generally posted by aspiring analysts who try to find holes in their own story. We find the ideas presented on the site well thought out and worthy of a serious look. Click here for the full article. Below we summarized the FRPH bull thesis.
The Jacksonville, Florida-based FRP Holdings is a holding company involved in the real estate business in the United States (see best countries to invest in real estate). The company, through its subsidiaries, deals in acquisition, development, ownership and operation of industrial and commercial properties.
The analyst believes FRPH has several positive factors supporting potential higher valuation. Here are some of the strengths the company can capitalize on.
Strong Real Estate Portfolio And Cash Position
FRPH has a strong real estate portfolio spread across different parts of the United States.
Prime Properties In The Capital (Value $307 million – net of debt)
The company has multi-family and development assets primarily located in Washington, DC. In a tough competitive environment, where rents have tanked 15% and occupancy has dropped by the same amount, and there was a rent increase moratorium in Washington DC in 2020, FRPH has managed to maintain a 90-95% occupancy.
Rock Pits And Aggregate Land Holdings In Florida and Georgia (Value $230 million)
The company owns number of rock pits, which are highly profitable. Factors supporting the success include; high cost of shifting a pit, low cost of legal protection, and high margins. FRPH probably has 80-100 years of reserves at present, which have remained unchanged despite annual depletion in the past few years. The company’s land ownership across various parts of the country gives it a steady income streaming from royalties.
Miscellaneous Warehouses And Land (Value $79 million)
Inventory of various warehouses spread across the country, and land parcels used for mining also give FRPH ample yield.
Cash Balance (Value $150 million)
The company has $74 million of cash and almost $76 million in short term fixed income instruments. The total of $150 million in cash is approximately 1/3 of the market cap.
Quality Management Team
All the senior members of the board are committed to enhance the shareholder value. With building of an empire put on the back burner, the team has been concentrating on acquiring undervalued assets, and optimizing them for best possible margins. Stock buyback initiatives also has helped the company create better value for investors.
A number of FRPH’s assets are not generating any cash flow, which should change by 2022-end.
Based on the shares outstanding, the NAV per share comes to $79 versus the price ($50.76) on the day the original blog was written. The analyst believes FRPH is likely to trade around $85+ by 2021-end.