ST. JOE COMPANY (JOE) Jaguar Investing Series What is St. Joe - PowerPoint PPT Presentation

ST. JOE COMPANY (JOE) Jaguar Investing Series

What is St. Joe Company? Today, St. Joe is a land owner in Florida that monetizes its Northwest Florida holdings via: • Housing and real estate (48% of revenue) • Hospitality and leisure operations (36%) • Commercial and retail leasing (12%) • Forestry and timber (4%) Note: See Pages 2 to 3 of write-up for summary of the company’s interesting history from 1936 to present, plus explanation on how the company managed to become the largest private land owner in Florida. 2 // JAGUAR INVESTING BY JAGUARMEDIA: ST. JOE COMPANY (JOE)

St. Joe’s Financials (Part 1) If we only focus on headline EPS, Revenue, and CFO numbers, the data will look completely incoherent. 3 // JAGUAR INVESTING BY JAGUARMEDIA: ST. JOE COMPANY (JOE)

St. Joe’s Financials (Part 2) Ever since the company cleaned up its land portfolio and Jorge Gonzalez took over as CEO, the financials have quietly gotten much less volatile and more predictable. 4 // JAGUAR INVESTING BY JAGUARMEDIA: ST. JOE COMPANY (JOE)

Why we think St. Joe’s turnaround story has already begun (Part 1) US suburban housing remains in undersupply because of dormancy in homebuilding from 2009 to 2018. In Florida, this has been exacerbated by migration inflows. Additionally, the “land shortage” argument doesn’t apply to St. Joe, and the company also enjoys its best margins in residential real estate (over 60% gross margin and up to ~110% return on capital). 5 // JAGUAR INVESTING BY JAGUARMEDIA: ST. JOE COMPANY (JOE)

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Why we think St. Joe’s turnaround story has already begun (Part 2) Not all commercial real estate is dead. St. Joe’s hotel and retail assets are witnessing strong demand because of the pandemic. Profitability from this segment will increase as the business scales. 7 // JAGUAR INVESTING BY JAGUARMEDIA: ST. JOE COMPANY (JOE)

Why we think St. Joe’s turnaround story has already begun (Part 3) • St. Joe is now a much different company compared to what it used to be. The company’s portfolio is no longer bogged down by excessive swamp and forestland, following its divestitures. Moreover, all the legal problems associated with SEC investigations and improper accounting during the GFC have been settled, with the offending parties no longer in charge of the company. • The lack of high EPS and revenue growth is masking the fact that leadership has been quietly laying the right foundations in place. Moreover, 2017 and 2018 earnings were propped up by significant special items totaling ~$70M. If we remove those numbers, then it shows accelerated growth already began in 2019. But because this is a small cap and barely has presence in widely traded ETFs, algos and Wall Street haven’t picked up on this “under the hood” turnaround. • Management expects to sell at least 1000 homesites per year starting 2021 (vs 379 in 2019) given the ramp in residential projects, on top of improved hospitality and leasing revenue. Barring any unforeseen risks, next year is going to see sharp acceleration in actual EPS and revenue growth figures. And we think this is what will get everybody’s attention. 8 // JAGUAR INVESTING BY JAGUARMEDIA: ST. JOE COMPANY (JOE)

Bottom line • Management commentary points to a dramatic pickup in residential unit sales to at least 1K lots annually, which will take place next year and beyond. Even if we conservatively assume less than 1000 homesites sold, say ~900 with gross profit of 60%, while keeping hospitality & leasing and timber growth flat, operating income should already work out to slightly above $70M for 2021 vs $30M in 2019, or roughly $1.25 EPS vs $0.45 in 2019. • Housing in suburban US remains in undersupply, and this also applies to Northwest Florida as people continue to flock to the state with or without a pandemic. St. Joe will have the land and inventory to meet that need. • The pandemic has helped increase tourism in Panama City Beach and surrounding areas, including many first-time visitors. We believe the region’s increased recognition will help St. Joe’s hospitality and commercial revenues in the long run. • Due to an abundance of existing entitlements and land ownership, St. Joe enjoys staggering ~60% real estate segment margins and up to ~110% return on capital on its housing lots. We expect these ratios to further improve as the company focuses its attention on larger residential projects. • Leadership has proven capable of growing real estate revenues without taking on additional debt. This will lead to accelerated growth in cash and cash flow when revenues begin to ramp. 9 // JAGUAR INVESTING BY JAGUARMEDIA: ST. JOE COMPANY (JOE)

Thanks For Watching! 10 // JAGUAR INVESTING BY JAGUARMEDIA: ST. JOE COMPANY (JOE)