A&B stock surges
to record

The company is benefiting from
shipper Matson Navigation Co.
and real estate investments

Alexander & Baldwin Inc., once called a "hidden gem" by one of the analysts who covers the company, appears to have been discovered.

The parent of ocean shipper Matson Navigation Co. has surged more than 39 percent over the past six months and yesterday rose $1.72, or 4.4 percent, to close at an all-time high of $41.16. Until this week, A&B's previous high was $39, which it reached in 1989.

A&B spokesman John Kelley said there was no one event that contributed to yesterday's rise, but he said a meeting that company officials had with investors last week in New York might have contributed to the general enthusiasm for the shares. A&B's stock, which began the year at $33.75, has risen 22 percent this year. Including its 2.2 percent dividend yield, the shares have risen more than 25 percent.

"I think the market these days is particularly attuned to companies that have exhibited some good growth in their earnings and have a good value base, which A&B certainly does," Kelley said. "People like companies that have low debt; in other words, strong balance sheets.

"Quite frankly, (A&B President and Chief Executive) Allen Doane has articulated a business strategy where we've bought land outside of our legacy portfolio and we've been able to successfully create a new and vibrant source of earnings for the company. Particularly on the Matson side, we have growth thanks to the recovery of the Hawaii economy."

A 31 percent increase in Matson's operating profit last quarter helped A&B boost its net income 14.3 percent and its revenues 21.5 percent over the same period a year earlier.

Analyst Jamelah Leddy of Seattle-based McAdams Wright Ragen called the stock's run-up "quite impressive."

"One thing worth noting is that the company had a pretty large short position of 1.2 million shares," Leddy said.

That means investors borrowed stock, betting it would go down, in the hope that they could buy the shares back later and profit from the difference.

"I think a good possibility of what we've seen today is a short squeeze," Leddy said. "As the stock price goes higher, the shorts feel more and more pain. On a day like today, they feel a lot of pressure and that can drive the stock price up dramatically. Some investors had been betting against the company, and third-quarter results were good and prospects for the future are good."

Leddy said A&B's willingness to expand its real estate investments is boosting the bottom line. She said the company is now making higher-risk, but not necessarily risky, real estate investments.

"I think the earnings potential is significantly increasing in terms of the real estate side of the business, and they've done a very good job on the shipping side," Leddy said. "For years, the company had all this property in the state of Hawaii and they'd slowly, but surely, get the appropriate permits and develop the property themselves, or sell it. They didn't have a lot of earnings growth. But in the last couple of years, we've seen the company do a lot of different types of investments in the real estate market."

She cited the development of Lanikea, a 100-unit condominium in Waikiki; the Honolulu-based Alakea Corporate Tower, which was converted to office condominiums and later sold; and a joint venture development of Hokua, a high-end condominium across from Ala Moana Beach Park, which has binding contracts on 241 of the 247 units with an average price of $1 million per unit.

Kelley said other factors also could be contributing to the stock's recent gains.

He cited a more positive feeling in the market following the presidential election, the dollar's weakness against the yen, the recovery of Japanese tourism, a healthy dividend yield and a general indication of more good things in store for Hawaii.

Kelley also said the company is trying to attract more coverage from analysts who would do research and publish earnings estimates.

"It helps (investors) when they meet management and they get a feeling of how people think and react to one another, and what motivates them," Kelley said about the New York visit. "They like to kick the tires."