Is SPF worth ZERO?
At the end of last year, SPF reported to its shareholders that its bookvalue was $994 million dollars. Now folks, is that really honest behavior from a company whose CEO and CFO are defandants in a class action suit for providing false and/or misleading guidance?
On its books SPF represents that its land holdings are worth North of $1 Billion dollars. Much of that land is located in FL and CA hasn't even been impaired yet. We KNOW that finished lots have been selling for $0.30 cents on the dollar post impairment and still declining. Heck in Florida, some are selling for less than $0.10 in Fort Meyers area.
Let's be charitable and only wipe out an estimated $600 million of book.
Then a material amount SPF's homes under construction are simply not much beyond a finished lot. It is likely that SPF will have to take a 20% haircut there to simply bring WIP to current market value. There goes another potential $200 million (very possible could be even more)?
In addition, SPF lists on its books $293 million for investments in Joint Ventures. Those are very levereged investments primarily in land. It is very unlikely that those investments have any net value after debt. There goes another possible $300 million?
SPF still has the audacity to keep $35 millionGoodwill on the books in this market? Amazing. We can keep it there simply for rewarding effort.
Now, here is where it gets interesting. SPF has about $700 million of recourse JV debt of which $400 million is subject to remargin liability. Must of that debt is secured by land that may not be worth what it is currently booked at. Let's just shave off another potential $300 million to be conservative.
Not only that, SPF is obligated to take down a bunch of land in 2008 at above current market prices that we don't even need to include. Oh did we mention that SPF still keeps about $140 million of deferred assets on the books but maybe that still has a value so let's keep it there.
Just a quick analysis using the above wipes out $1.4 billion of SPF's $994 million of bookvalue. Does that equal zero?
And Wall Street analysts upgraded this company just a few weeks ago? We do live in crazy times my friends.