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Sunday, 06/18/2006 6:58:50 PM

Sunday, June 18, 2006 6:58:50 PM

Post# of 35
BLMC: The Ultimate Bargain

Biloxi Marsh Lands Corporation (BLMC.pk) is a deeply undervalued pink sheet micro-cap. Recently Clyde Milton (Cheap Stocks) submitted an interesting article to the Seeking Alpha Network regarding BLMC. http://smallcap.seekingalpha.com/article/11327.

Annual report data from 1998 to the present, quarterly reports, and press releases are available on BLMC’s web site: http://www.biloximarshlandscorp.com/

BLMC was founded in 1936 and owns 90,000 acres of land in St. Bernard Parish, Louisiana. BLMC generates revenues by receiving royalties from lessee natural gas exploration of its acreage. BLMC has minimal overhead and is basically a cash cow.

BLMC’s structure is similar to CKX Lands (CKX) and Texas Pacific Land Trust (TPL).
Unlike CKX and TPL, however, whose managements are passive, BLMC’s CEO is aggressively focused on maximizing shareholder value. In addition, on a comparative basis, BLMC’s P/E ratio, dividend yield, and underlying value, are dramatically more attractive.

Price: $30/share
Dividends 2005: $3.25
Dividends 2006 to date: $2.00
Yield: 11%
Earnings for 12 mos. ending 3/31/06: $5.35
P/E Ratio: 5.6

Consider:

1. BLMC’s BALANCE SHEET

A. Land at Cost: $2.61 per acre. BLMC owns approximately 90,000 acres of marshland in Louisiana. Its key value is the potential mineral rights.
B. Marketable securities are carried at cost. Unrealized gains for 2005 total $1.6 Million.
C. Proved reserves are not included on the balance sheet. Proved reserve information is delineated on page 2 of BLMC’s 2005 annual report. The reserve study is only based on production covering 3,900 acres (4%) of BLMC’s 90,000 acres of land.
D. BLMC has no long-term debt.

2. Other Hidden Assets

A. BLMC recently received the complete data of the 3D seismic survey completed by Meridian Resources (TMR), BLMC’s primary current lessee. This data covers 314 square miles including BLMC’s 90,000 acres.
B. Phase IV, which covers approximately 48 sq. miles of BLMC property, did not previously have a 3D seismic survey done. Phase 4 includes BLMC property encompassing the Tuscaloosa sand interval.
C. “Development of the deeper Tuscaloosa and Cretaceous intervals could prove to represent significant value” to BLMC. Meridian currently has a portion of this BLMC property under lease. The Tuscaloosa opportunity could increase BLMC’s revenues and earnings exponentially!
D. The pipeline infrastructure running throughout BLMC acreage “and the right to use excess capacity and take over the pipeline after abandonment may prove to be valuable for future development of” BLMC mineral interests.”
E. BLMC’s possessory action (referenced on Page 3 of the annual report) has the potential of yielding “in excess of 28 million dollars.” The Louisiana Supreme Court recently ruled in favor of BLMC on the issue of title relating to such action. Note, however, that the State of Louisiana may have some claim to a portion of such proceeds based on water bottom rights.
F. 82,000 acres of BLMC land are “open and available for exploration and development”. BLMC has “retained the services of a consulting geologist and two geophysicists to review and reprocess the 3D data….”BLMC’s possession of the 3D Seismic studies and ability to identify additional prospects on BLMC property may enable them to receive royalties from future lessees in excess of the standard 25% due to this valuable data.

3. INCOME STATEMENT

A. Expenses are less than 7% of revenues. BLMC’s focus is on receiving royalties derived from leases on its land.
B. Salaries and bonuses are at reasonable levels.
C. During 2005, dividends distributed to shareholders were $3.25/share. “During 2006 (BLMC) intends to “equal or exceed the amount of dividends paid during 2005.” At current share levels, BLMC’s dividend yield approximates 10%.
D. Revenues for 2005 were negatively impacted by Hurricanes Katrina and Rita. Nevertheless, earnings for the twelve months ending 3/31/06 were $5.35/share. Thus, the P/E ratio is 5.6.

Natural gas prices, which recently spiked, could have an impact on stock performance. The key catalyst, however, will be the extent of hydrocarbons beneath BLMC’s extensive acreage.