MARKET MAGIC
JAMM AQUINO / JAQUINO@STARBULLETIN.COM
Alexander Kinzler, president and chief operating officer of Barnwell Industries Inc., said the company's stock is undervalued even though shares have doubled in each of the last two years.
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Barnwell steps on the gas as stock doubles for second straight year
Barnwell Industries Inc. has seen its stock price double in each of the last two years and in 2005 split its high-flying shares twice.
In the go-go years of the late 1990s, such euphoria could be a signal that the company's stock was ready to top out.
But the Honolulu-based conglomerate, whose primary business involves oil and natural gas operations in Canada, may not be ready to run out of fuel just yet.
Even with a two-year gain of more than 375 percent and a price/earnings ratio of 32, Alexander Kinzler, president and chief operating officer of Barnwell, says the company's shares are still a bargain.
"Any company can double its stock price," Kinzler said. "We believe our stock price is still undervalued based on our oil and gas assets and the (Big Island) real estate still to be valued."
Barnwell was the best local performer in Hawaii in 2005 for the second year in a row as it rose 103.1 percent to a split-adjusted $25.10. The price increase came on the heels of a 134.3 percent advance in 2004.
The company also split its stock 2-for-1 in January and 3-for-1 in November, and paid dividends to its investors each quarter. As recently as 2003, Barnwell wasn't even paying dividends.
But the oil gods are smiling now upon Barnwell, which received increased exposure after being added to the newly formed Russell Microcap Index last July.
The company, a 77.6 percent owner in a Big Island development partnership and a statewide water drilling operator, also continues to explore the possibility of moving from the American Stock Exchange to a more prestigious index as it looks for ways to grow.
"We're evaluating various opportunities in real estate, as well as in the oil and gas business with the increased revenues we've been receiving," Kinzler said. "We're planning to invest the oil and gas capital commensurate with the increased revenue."
Barnwell's oil and gas segment had a fiscal 2005 revenue increase of $8.9 million, or 37 percent, over the previous year due to higher prices for the commodities.
Kinzler expects the prices to remain elevated for the next couple of years and Barnwell's stock to be a beneficiary.
"As long as there's unrest in the Middle East and troops in Iraq, commodity prices will remain high," said Kinzler, who expects oil prices to hover in the mid-$60s for the foreseeable future before trending upward. "Oil and gas companies are spending greater amounts of capital investing in exploration and development, which is our particular niche, and that's going to generate a lot of projects in the coming years."
It may have been a flat year in 2005 for the major indexes, but local stocks represented by the Bloomberg Honolulu Star-Bulletin index enjoyed a banner year with a gain of 22.2 percent.
By comparison, the Dow Jones industrial average slipped 0.6 percent, the Standard & Poor's 500 index rose 3 percent and the Nasdaq composite index edged up 1.4 percent.
Six of the 11 Hawaii companies in the index posted gains last year with three of them, including Barnwell, achieving returns of more than 20 percent.
Alexander & Baldwin Inc., which announced a since-scaled-back $650 million retail and residential development project on the Kakaako waterfront in September, was the second-best performer as it rose 27.9 percent to close the year at $54.24, just off its all-time high of $55.40 reached on Dec. 22. A&B's project, which came under fire over ocean access, is expected to be the topic of a legislative fight during the upcoming session.
Hoku Scientific Inc., the fuel-cell technology developer that went public on Aug. 5 at $6 a share, rose 26.5 percent to end at $7.59.
It was a lackluster performance for the bank-related stocks as Bank of Hawaii Corp. gained 1.6 percent to $51.54, Central Pacific Financial Corp. slipped 0.7 percent to $35.92 and Hawaiian Electric Industries Inc., the owner of American Savings Bank and the dominant utility provider in the state, slipped 11.1 percent to $25.90.
HEI, which offers the highest dividend yield among local companies at 4.8 percent, had a 6.9 percent overall loss.
Hawaiian Holdings Inc., parent of Hawaiian Airlines, lost nearly half its value in 2005 as it nose-dived 41.6 percent to $3.99. A year earlier, it soared 128.4 percent after it became apparent that its stock wouldn't be canceled by a new investor group buying the bankrupt airline.
Among other local companies, Mera Pharmaceuticals Inc. gained 6.7 percent to 1.6 cents, ML Macadamia Orchards LP rose 3.9 percent to $5.80 and Maui Land & Pineapple Co. fell 13.6 percent to $33.93.
Cyanotech Corp., which brought up the rear with a 54.9 percent decline to 65 cents, ended the year by receiving a delisting notice from Nasdaq that it has 180 days to get its stock price up to $1 or higher for 10 consecutive trading days.