St. Joe is a company you probably have not heard of, unless you spend time following the epic battles of high profile fund managers who take opposing stakes in companies and then wage public battles about who has taken the correct position.
The bullish and bearish arguments both center around the valuation, both present and future, of the over 550K acres of land and real estate assets that St. Joe owned predominantly in the Panhandle of Northwest Florida.
First, let's first consider the ~385K acre land sale to AgReserves of primarily non-core timberland. The bearish argument previously espoused has been that the bulk of the over 550K acres owned by St. Joe was only worth close to $1,500 per acre. Many bears might look at this land sale, and cry victory, considering the ~$560M sales price valued the land at about $1,475 per acre.
However, St. Joe has consistently stated that this land was a non-core holding. Spend just a few minutes looking at a map of Florida and you will see the bulk of this land is completely rural, and so far away from ever being developed, that it certainly is more valuable as timberland. I would argue that the bears should eat crow based on St. Joe having the foresight to complete this transaction.
In FY 2013, St. Joe generated $9.6M in net income from timber sales related to the land sold to AgReserves. Instead of arguing what this land was worth, I think the market is overlooking the fact that St. Joe took an asset and sold it for almost 60x the earnings that asset generated in the prior year. When you assume that, after taxes, this asset sale will generate close to $500M in cash for St. Joe, the company would simply have to earn a return of 3% a year on this cash to generate 50% more earnings than the asset was previously generating as timberland.