Marvelous Microcaps
Alico, Inc. (ALCO)
INTRO:
At Perritt Capital Management, we take focused positions in companies where we have a high conviction in their success; companies that are out of the mainstream of small cap investing. To highlight our process, we are pleased to present the newest installment in our ongoing series “Marvelous Microcaps – Big Ideas on Small Companies.” This series profiles companies that we believe have a niche in their existing markets or are launching a product that could disrupt their marketplace.
THE COMPANY:
Alico, Inc. (ALCO) is an agricultural and land management company with 103,000 acres of land in Florida. It is also one of the largest citrus producers in the U.S. The land not being used for citrus is leased for grazing rights, hunting, farming, and mining and oil extraction rights. Given the preponderance of hurricanes in Florida, the company has started efforts to transition citrus groves to developable residential and commercial land. Regardless of what the land is used for, the current enterprise value is $277 million. That equates to a very economical $5000/acre for Florida land.
WHY WE OWN: THE PERRITT ADVANTAGE
We believe ALCO is an undiscovered gem with its growth opportunities and potential monetization of non-core land assets. Any stock weakness due to weather and the effect on the citrus crops is an opportunity to buy the stock. Hurricane Milton did not cause significant tree damage but there will be a measurable fruit drop in some areas. Tropicana is their largest customer amounting to 88% of 2023 revenue. There may be a further increase in orange juice prices due to the storms in Florida. ALCO just renewed their contract with Tropicana for 3 more years and at prices that are 33-50% higher.
In the third quarter of 2024, ALCO sold 798 acres of citrus groves for $7.2m or $9000/acre. Using management’s estimates, their real estate could be worth about $50/share. There is considerable upside as some of the land is near major cities and could be worth quite a bit more. This is a company that has a solid business evidenced by a long-term contract with a major client for its citrus product. Underlying all of this is a hugely valuable asset in their land.