My only comment is that I personally think the risk associated with tropicana being aquired is potentially significant. It wouldn't be the first time a PE firm has destroyed historic B2b relationships to shave margins fractionally higher. As tropicanna accounts for most of their revenue, the future contract renewals may not be so positive as the recent.
However, if this PE was looking to enhance margins in the short-term by squeezing Alico (no pun intended), you'd expect they'd do it through largest contract, the one that got renegotiated in June. So it seems like a stretch that they start doing it from this point forward.
Also, I "drilled" the CEO extensively about Tropicana, and based to his comments, he really seems relaxed about it, unfazed. Since Alico is Tropicana's dominant supplier and they most likely have a nearly equal bargaining position. Tropicana will buy anything that Alico can sell and that has been the case for decades
I'd really like to speak with somebody from PAI partners to see their POV.
Perhaps bad news pertaining to the orange farming business is good news for the stock? It will come under more pressure to sell land for housing development, etc?
Great analysis. Lots of very valuable details. You even managed to talk to the management! I admire your persistence. In my opinion, there is one thing missing for this analysis to be perfect: a price target. What is your price target, assuming that production will recover as you predict in your base scenario (not taking into account all other possible positives such as benefits of OTC treatment, federal relief grants, tax shields, or land sales)?
Impressive and thorough work here David, thank you for sharing this quality research with readers!
I became aware of this due to the hurricane Milton hitting some of my holdings. One thing I feel is hard to know or price in is climate change and heightened chance of high class hurricanes with temperatures rising. Let's say a typical 10 year storm turns into the typical 3 year storm? We see this happening more and more in Norway with floods (fascinatingly linked with hurricane season in the U.S as we are on the atmospheric receiving end of these energy movements that storms are).
Just a little crisis maximising from me here, its obviously a part of your risk assessment but I think it's probably prudent to bake in rougher and more frequent storms hitting Florida especially.
I agree with you, the climate danger seems like a risk impossible to accurately discount. It's an obvious risk that has increased in both intensity and frequency in recent years. However, I'm glad that all acres are insured and even if I'm mistaken on citrus production rebounding in the short-term due to something like Milton, I may still yet benefit from redevelopment into RE.
I believe that another severe hurricane decimating what remains of Florida's orange industry would made John and the team finally "give up" on citrus and completely shift to residential sales.
Im not in the stock market to become a farmer. Awful business that depends why to much on externalities. Bad weather is unpredictable and it can severe implications on companies and countries.
How do you see the risk of higher labor costs for harvesting if Trump gets elected and realizes his plans on mass deportation of unregistrated immigrants?
Amazing write up!
My only comment is that I personally think the risk associated with tropicana being aquired is potentially significant. It wouldn't be the first time a PE firm has destroyed historic B2b relationships to shave margins fractionally higher. As tropicanna accounts for most of their revenue, the future contract renewals may not be so positive as the recent.
Thank you, Tom!
You are right, it wouldn't be the first time.
However, if this PE was looking to enhance margins in the short-term by squeezing Alico (no pun intended), you'd expect they'd do it through largest contract, the one that got renegotiated in June. So it seems like a stretch that they start doing it from this point forward.
Also, I "drilled" the CEO extensively about Tropicana, and based to his comments, he really seems relaxed about it, unfazed. Since Alico is Tropicana's dominant supplier and they most likely have a nearly equal bargaining position. Tropicana will buy anything that Alico can sell and that has been the case for decades
I'd really like to speak with somebody from PAI partners to see their POV.
Thank you for the comment!
Perhaps bad news pertaining to the orange farming business is good news for the stock? It will come under more pressure to sell land for housing development, etc?
Perhaps yes. Good point
This is a very thorough write up. I have owned the stock off and on over the years and you flagged things I was not aware of.
Thank you, Patrick
Great analysis. Lots of very valuable details. You even managed to talk to the management! I admire your persistence. In my opinion, there is one thing missing for this analysis to be perfect: a price target. What is your price target, assuming that production will recover as you predict in your base scenario (not taking into account all other possible positives such as benefits of OTC treatment, federal relief grants, tax shields, or land sales)?
I appreciate the kind words, Dario! Thanks.
To be honest, I don't like to think in terms of price targets so I didn't provide one
I guess I'd start reassessing risk-reward or thinking about selling between 40-50$
Impressive and thorough work here David, thank you for sharing this quality research with readers!
I became aware of this due to the hurricane Milton hitting some of my holdings. One thing I feel is hard to know or price in is climate change and heightened chance of high class hurricanes with temperatures rising. Let's say a typical 10 year storm turns into the typical 3 year storm? We see this happening more and more in Norway with floods (fascinatingly linked with hurricane season in the U.S as we are on the atmospheric receiving end of these energy movements that storms are).
Just a little crisis maximising from me here, its obviously a part of your risk assessment but I think it's probably prudent to bake in rougher and more frequent storms hitting Florida especially.
Thank you!
I agree with you, the climate danger seems like a risk impossible to accurately discount. It's an obvious risk that has increased in both intensity and frequency in recent years. However, I'm glad that all acres are insured and even if I'm mistaken on citrus production rebounding in the short-term due to something like Milton, I may still yet benefit from redevelopment into RE.
I believe that another severe hurricane decimating what remains of Florida's orange industry would made John and the team finally "give up" on citrus and completely shift to residential sales.
Thanks for the comment.
Im not in the stock market to become a farmer. Awful business that depends why to much on externalities. Bad weather is unpredictable and it can severe implications on companies and countries.
Thanks for this outstanding analysis and in-depth research!
Was there anything of particular interest in the Q ending 30-June-2024 from your perspective?
No, not in particular
I posted my thoughts here
https://x.com/david_katunaric/status/1820871520392298946?t=A4CskU6Z7pN7TUGq9UDvzQ&s=19
Thank you!!
How do you see the risk of higher labor costs for harvesting if Trump gets elected and realizes his plans on mass deportation of unregistrated immigrants?
Yes, it is a risk to follow, however, Alico's workforce was stable even before mass immigration started occurring in Florida and in the US
Hi
thanks for putting the work out there :)
I tried to learn a bit regarding the citrus greening... and used perplexity for that (which I find nice in the Pro setting as a starter for topics). In case you are interested: https://www.perplexity.ai/search/i-read-about-citrus-greening-b-IKZdQGJKQDiy3T66NHe39Q
Thankss
I will check it out
I'm glad you liked it, Guy. Thanks a lot!