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alstry (35.69)

Lies and Analysts' Lies

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April 02, 2008 – Comments (7)

First analysts valued public HBs at price times earnings.  When earnings were gone then analysts started using price to book value. 

Yesterday, CTX reported it sold a portfolio of land on the books for $528(let's not even address that CTX paid over $900 million for the land) million for $161 million.  For those that can't subtract, that is about a $367 million dollar loss or about $3 per share.

Yes, there was a tax refund but it will be offset by a reductin of a tax asset on the balance sheet.

No where in CTX press release does it mention the $3 dollar loss and.or a $3 dollar reduction in bookvalue.  The analysts KNOW this, and as a result, should have adjusted their valuation models by AT LEAST $3 dollars per share.

CTX's land was sold by a well shopped auction.  It sets a value for land.  In addition, other large deals have closed recently at similar valuations.  An established market price has been set for land.  If CTX and the analysts valued CTX's remaining land at this fair market value.....CTX would have a NEGATIVE bookvalue and be practially insolvent.  Other builders would be in a similar boat.

Today CHCI auditors issued  it a going concern warning.  What do you think would happen to CTX and other public builders if they or the analysts simply fairly valued the assets on the books?

 

 

7 Comments – Post Your Own

#1) On April 02, 2008 at 2:33 AM, QualityPicks (32.31) wrote:

Nothing matters anymore. They can go bankrupt and the stock will be up 100% :) Isn't that what happened to BSC? They go bankrupt at $2 and the stock rallies to $10 :) The market often likes to spit on your face.

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#2) On April 02, 2008 at 11:51 AM, EScroogeJr (< 20) wrote:

Market price for land... Try to approach CTX and buy land from them at what you believe is the new market price, and see how  many seconds you'll have to wait before they kick you downstairs.

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#3) On April 02, 2008 at 2:31 PM, DemonDoug (98.84) wrote:

Escrooge, that argument makes no sense (as usual).  The fact is the price is what the price is, and other land deals have also come out showing similar valuations.  I bet if alstry had 150m lying around to overpay for worthless land, the last thing CTX would do is kick him down the stairs.  Why don't you reply to what alstry's blog said, regarding the loss of $3 in book value?

Oh that's right because that would be bearish, and since everyone needs a roof over their head, homebuilders will never go bankrupt and it's too the moon for the next 3 years.

BTW, cities in the Central Valley of CA are already starting to bulldoze abandoned, unoccupied homes because they have become public nuisances.  Even with that small supply reduction, RE is still hosed, way too much supply at way to high a price for consumers who have simply not enough money or income to pay for it.  You have been lucky to this point, riding a wave of analyst and company lies to profits in the HB's, if I were you I'd take my profits and run (but then again I never invest long-term in businesses that show no end of losses in sight with a weakening customer base, high debt, high costs, and decelerating sales).

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#4) On April 02, 2008 at 11:34 PM, thisthatother47 (89.07) wrote:

And now we see what has obviously been leaked recently.  What (as calculated by Reggie Middleton on his blog) amounts to about a $33 Billion bailout of the home-builders. 

 http://latimesblogs.latimes.com/laland/2008/04/the-stealth-bai.html

 This is a joke. These companies NEED to go away now - the oversupply of houses is what is causing all of this mess.  Apparently they want it to get worse.

It was a nice 200-year run in this country.  Such a shame.

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#5) On April 03, 2008 at 3:03 AM, alstry (35.69) wrote:

Actually, the proposal will only effectively add one year to the look back.  It doesn't begin until this year 2008 and looks back to 2004.  Under the old two year look back, 2007 went back to 2005.  Since 2007 was a big loss year, the provision really from a practical standpoint only adds one year for many builders.

Further, it will only really help those builders who are already solvent.  Remember, you still have to lose $1 to get back $0.38 cents in taxes.  For  those builders that have little debt, its a great way to subsidize liquidating unwanted land.  However, if you are a high debt builder, at the end of the day it only  effectively transfers money from the  tax payer to the banks who are owed the money as bookvalue is liquidated  to zero.

Sounds like a stealth bank subsidy to me.

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#6) On April 03, 2008 at 1:36 PM, DemonDoug (98.84) wrote:

alstry, i need some moral support.  SPF is now above 6.  Please remind me why it is going to zero, because my faith in the markets is completely wavering right now.

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#7) On April 03, 2008 at 8:00 PM, alstry (35.69) wrote:

So are a lot of other peoples. 

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