Portfolio Valuation Updates Q4 2024
Earnings and valuation updates for TLF, ALCO, MPAA, BTI
Tandy Leather Factory
Tandy Leather Company (TLF) reported a 2.4% decline in revenue for the full year 2024, with an operating profit of $0.6 million and net income of $0.8 million. This net income figure is quite the sharp drop from the $3.8 million recorded in the last year. Despite this, the company ended the year with $13.3 million in cash, up from $12.2 million, and stockholder equity increased slightly from $56.3 million to $57.2 million. Recently, Tandy sold their headquarters, which coincided with a large special dividend. However, the latest balance sheet does not yet reflect the impact of this transaction, requiring some estimates to assess the company's financial position post-sale.
At cost, Tandy’s property and plant were valued at $31.7 million, though depreciation had reduced the net value to $12.3 million. The property alone was recorded at a cost of $10.3 million, with land valued at $1.4 million. The headquarters building, originally purchased in 2007 for $4.5 million. I am estimating the building to have depreciated by about two-thirds, suggesting that it and the land were on the books for about $5 million. The company sold the property for $26.5 million, and after accounting for fees, taxes, and relocation costs, might have netted around $15 million in proceeds. This transaction would have increased the company’s book value by about $10 million. Then the $12 million special dividend paid out following the sale offset the gain. As a result, the cash balance post-dividend may be slightly lower by a couple of million, but could also be about the same, compared to before the sale.
The $1.50 per share special dividend was payable on February 18th, with the ex-dividend date on February 19th since it exceeded 25% of the company’s market capitalization. Prior to the dividend, Tandy’s stock traded at $5.42, but after going ex-dividend, it opened at $3.69, a drop of $1.73. By closing that day, the stock was at $3.96, down $1.46 from the prior day. Typically, special dividends result in a proportional stock price drop, but in Tandy’s case, this logic seems flawed because much of the real estate value was not reflected on the balance sheet. Once the financials fully adjust, the balance sheet should be in a similar or even stronger position than before the sale.
Using the Q4 2024 figures and my estimates, Tandy’s current balance sheet likely consisted of $13.3 million in existing cash, $15 million in real estate proceeds, $35.5 million in inventory, and $1.7 million in other current assets, bringing total short-term assets to $65.5 million. With total liabilities at $17.8 million and 8.783 million shares outstanding, the estimated liquidation value before the dividend was $47.7 million, or $5.43 per share. Adjusting for lease liabilities, the net current asset value (NCAV) was around $6.30 per share. After the $12 million dividend payout, estimated current assets stand at $53.5 million, higher than the figure at the end of 2024, while the post-dividend NCAV is around $4.05 per share. At a current stock price of $3.30, the stock is trading at a 19% discount to net-net value.
Before the sale, Tandy was already trading at NCAV, which seemed undervalued. I have held Tandy shares for about nine months, mostly buying in the low to mid-$4 range but also adding more shares in the low $5 range leading up to the dividend. With the stock’s post-dividend drop, the higher-cost shares are underwater, while lower-cost shares remain slightly profitable. The total position consists of 5,932 shares acquired for $28,481, at an average price of $4.80. The current value of the shares are approximately $19,279, plus the $8,898 dividend received, resulting in a total value of $28,177, so down about 1% overall. While there is a chance of me being a “bag holder” for some time, I believe that the stock should trade at least at NCAV, so I will wait things out.
Alico
In the first fiscal quarter of fiscal 2025, Alico’s (ALCO) revenue increased 20% year-over-year, but the company reported a net loss of $9.2 million, or $1.20 per share. Stockholder equity declined by $10 million compared to the previous year. Alico reaffirmed its expectation of $20 million in land sales for the year. These land sales, combined with the upcoming Valencia harvest, are expected to fund operations through fiscal 2027.
Alico’s harvests primarily take place during the second and third fiscal quarters, and total harvest volume was down 12.5% year-over-year. However, improved pricing from a stronger contract with Tropicana helped offset some of the decline. Despite this, management expects overall harvests to come in lower than last year. The earnings call did not provide many new insights, with the CEO reiterating the company’s plan to exit the citrus business and focus on selling land.
Equity has been trending downward due to the recent losses, with total equity currently at $247 million. This produces to a book value of $32.36 per share. I have been valuing the stock at 1.5 times book value, which results in an estimated share price of $48.50. The CEO has previously stated that the present value of Alico’s land holdings is between $650 million and $750 million.
My own rough valuation estimates the company’s 53,400 acres of citrus groves at approximately $9,000 per acre, putting their total worth at $480 million. The company’s investor presentation breaks this down further, valuing 5,500 acres of near-term development land at $350 million ($63,600 per acre), 7,100 acres with long-term development potential at $160 million ($22,500 per acre), and 40,770 acres of agricultural land at $185 million ($4,500 per acre). Incorporating this estimated land value into the balance sheet results in a net asset value of $75 per share, significantly higher than the current market price. While it could take years for Alico to fully unlock this value, I remain patient and will hold my position for now.
Motorcar Parts of America
In fiscal Q3 2025, Motorcar Parts of America (MPAA) reported an 8.3% increase in sales, while gross profit surged 49%. Net income was still lackluster $2.3 million, but better than last years loss of $2.40 a share in EPS. The company made progress in reducing its bank debt, lowering it by $30 million to $84 million from $114 million. Gross margins improved substantially, rising from 17.5% to 24.1%. Profits were aided by a $3.9 million reduction in interest expenses.
Alternator sales remained solid despite overall industry weakness, while brake products, a more recent addition, initially weighed on gross margins as production ramped up. However, improved efficiencies in brake manufacturing were a key driver of the significant margin expansion. Management reiterated that MPAA’s parts are essential replacements, when they fail the vehicle is inoperable. This suggests demand should be relatively stable, especially with the average car now nearly 13 years old.
Regarding tariffs on Chinese imports, the CEO stated that MPAA would pass on a surcharge to customers while continuing efforts to reduce reliance on Chinese sourcing. As for potential tariffs on Mexico, management downplayed concerns, suggesting they are likely a negotiation tactic. Interest rates remain a major factor in expenses, but the company has actively reduced debt, which should help mitigate the impact.
MPAA currently holds an equity value of $262 million, with 19.72 million shares outstanding and a book value of $13.30 per share. Shares are trading slightly below book value, and with my position up over 100%, I’ll be tempted to sell if the stock approaches $13.
British American Tobacco
British American Tobacco (BTI) reported total adjusted organic sales of £27.2 billion and operating profit of £14.4 billion. However, non-adjusted profits were impacted by the Canada settlement, bringing the operating margin to 45.8%. In the U.S., the adjusted organic operating margin stood at 56.8%. The company increased its dividend by 2% and initiated a £900 million share buyback program. Additionally, leverage improved to 2.4x, aligning with the company’s goal of reaching its target by 2026.
BTI experienced an 8.9% decline in total combustible volumes, significantly higher than the 2% decline in the overall industry. Despite this, total combustible sales were down only 1.9% and remained flat when adjusting for the impact of exiting the Russia and Belarus markets. In the U.S., combustible volumes declined 10%, compared to an 8.4% industry decline, with sales down 4% and profits falling 3.5%.
In the non-combustible segment, U.S. vapor sales declined by 1%, while U.S. modern oral products grew by over 200%, though they still account for only 8% of new category sales. Overall, new category sales grew 4.6%. The total sales from new categories increased 8.9%, primarily driven by modern oral products, now making up 13% of total sales but contributing only £251 million in operating profit.
The recent launch of Velo Plus in the U.S. has shown promising early results. Looking ahead to 2025, BTI expects cigarette volumes to decline by 2%, with revenue projected to increase by 1% and operating profit by 1.5% to 2.5%.
For my valuation, I am estimating revenue for 2025 at $33.25 billion, assuming a 40% operating margin and a 25% tax rate. For cost of debt, BBB bond yields are at 5.28% so I will use that, and I am using an 8% cost of equity. Adjusting for the tax benefits of interest payments, a reasonable capital structure would consist of two-thirds equity and one-third debt, leading to a weighted average cost of capital (WACC) of 6.67%. This results in an enterprise value of $149.6 billion. After accounting for cash and debt, the equity value stands at $108.3 billion, equating to a share price of $48.60—approximately $10 higher than the current market price. While shares appear modestly undervalued, I plan to hold my position but do not intend to add further at this time.
Stocks mentioned: TLF 0.00%↑ ALCO 0.00%↑ MPAA 0.00%↑ BTI 0.00%↑
mpaa (and many others) will realize trump always backs off large and broad china tariffs out of fear and corruption.
the net financial benefit of friendshoring in canmex is shrinking, and even going negative considering relocation capex and wind-down costs. make china great again.