FRP Holdings: An In-Depth Look at the Firm’s Aggregate Properties

Jonathan Isaac of Quilt Investment Management presented his investment thesis on FRP Holdings, Inc. (US: FRPH) at Wide-Moat Investing Summit 2023.

Summary:

This presentation on FRP begins with a discussion of the aggregate industry of Florida and Georgia, where FRP holds the majority of its aggregate properties. You will see how the aggregate industry’s supply-side and demand-side characteristics combine to impact the unit economics of an aggregate operation. Then, through the use of satellite imagery and other information, you are led through an analysis of the development potential of a few of FRP’s properties once the aggregates are depleted. After conducting a valuation of FRP’s aggregate properties, we discuss how FRP can potentially reduce the gap between its market price and its true worth.

Note: The valuation multiple discussed for United States Lime & Minerals (ticker symbol “USLM”) in the Question-and-Answer section of the oral/video presentation is based on: the share price on June 22nd, 2023, cash and cash equivalents and shares outstanding as of the most recent quarter end, and FY 2022 lime and limestone operations segment-level OIBDA. If we use trailing 12 months (“TTM”) lime and limestone operations segment-level OIBDA instead, USLM is trading at about 11x OIBDA, also after adjusting for cash and cash equivalents and assuming no value for the non-lime-and-limestone portion of the business. “OIBDA” is, for our purposes, Operating Income plus Depreciation, Amortization, and Depletion. After completing the oral/video presentation, we made a few minor edits to the PDF version of the presentation. A few more edits were made for clarity a few days later. Viewers should consult the PDF version available here as the latest version of this presentation. Notes regarding the edits are in the “Sources and Notes” section of the presentation, as “Note #1” and Note #2.”

Disclaimer/Disclosure: Of the securities mentioned in this synopsis and the note, Quilt Investment Management, LLC currently holds FRP Holdings (ticker symbol “FRPH”) and United States Lime & Minerals (ticker symbol “USLM”) in client accounts and may transact in either security, as well as any other security mentioned, without future updates. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of specific securities, investments, or investment strategies. Additionally, the information should not be construed as Quilt Investment Management, LLC’s solicitation to effect the rendering of personalized investment advice for compensation, over the internet or otherwise. This information is not intended to provide investment, tax, or legal advice. This is not a research report and/or a recommendation. Investments involve risk and, unless stated otherwise, are not guaranteed. Always be sure to first consult with a qualified financial adviser and/or a tax professional before investing, and to verify any information deemed to be accurate. Past performance is not indicative of future performance.

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About the instructor:

Jonathan Isaac is President and Portfolio Manager of Quilt Investment Management, LLC, a registered investment adviser in Portland, Oregon.

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