A Sell-Side Take On What The Bluegreen Spin-Off Means For BBX Capital

BBX Capital Corp BBX, a diversified holding company that focuses on real estate acquisition and development businesses, filed in early November to spin its Bluegreen Vacations business, a timeshare specialist. 

The Analyst

B. Riley FBR's Mike Crawford initiated coverage of BBX Capital's stock with a Buy rating and $11.75 price target.

The Thesis

BBX's decision to spin its Bluegreen Vacations Corporation BXG business into a new publicly traded entity is a move that could unlock "considerable" shareholder value, as the unit is "solidly profitable," Crawford said in the initiation note. (See Crawford's track record here.) 

Bluegreen's stock closed its first trading day Nov. 17 at $13 and then moved above its IPO price of $14 to $14.25, which implies a valuation of $980 million — still reasonable, given its attractive profile and $139 million in EBITDA on $661 million in revenue in 2016.

BBX's other real estate and middle-market investments, including a BBX Sweet Holdings subsidiary that includes the specialty store concept IT'SUGAR, has a book value of around $200 million, the analyst said. This valuation likely understates the current market value, especially from the non-Sweet assets, according to B. Riley FBR.

The analyst's $11.75 price target is based on a sum-of-the-parts valuation using a comp-discounted 9x EV/EBITDA multiple to the fiscal 2017 Bluegreen EBITDA estimate of $150 million, plus the value of the other assets, which are valued in aggregate at $219 million and then discounted for unallocated corporate expenses.

Price Action

Shares of BBX Capital have gained more than 50 percent since the start of 2017.

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