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alstry (35.36)

SPF Inflating Asset Values?

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March 06, 2008 – Comments (2)

SPF reports the value of homebuilding assets on its books at approximately $2 billion dollars.  Most of that value is owned land much of which is located the very challenged markets of CA and FL.  We know that owned land has recently been selling for around $0.30 on the dollar.  Land values have generally continued to decline since those reported sales.

On slide 11 of SPF's recent Wachovia presentation, SPF indicates that it reduced its owned lots over the past year by 40%.  But on the CC, the CEO Steven Scarborough goes out of his way to say that over the past 18 months, SPF has been "we think dilligent in taking impairments on our inventory" impairing about 70% of owned lots.

Why would Mr. Scarborough use an 18 month time frame when on the slide it uses a 12 month bracket.  Further, over the past 18 months, hasn't SPF sold 70% of its owned lots.  Is it possible that little if any of SPF's current land positions have been impaired? 

A similar analysis can be applied to SPF's well over $1 Billion dollars of JV assets on the same slide and Mr. Scarborough comments.

Is potentially failing to impair current owned lots "diligent in taking impairments?"  If Mr. Scarborough didn't go out of his way to point out how diligent he was, this wouldn't be an issue.  Why is Mr. Scarborogh and the CFO being sued in a class action suit alleging providing false and misleading guidance?

Just to be fair, don't forget a bunch of Wall Street analysts upgraded SPF following its recent quarterly report.  Many are using a price to book metrix.  Are these guys in a class by themselves, maybe the class action will give us an answer?

 

2 Comments – Post Your Own

#1) On March 06, 2008 at 1:35 AM, DemonDoug (85.04) wrote:

alstry, i love you man.  you bring numbers and data and reasoning to the table.  not only that, but i've felt the same about spf myself; actually it's worse. Because, while i usually keep my emotions out of investing and even in caps investing, there is a small place in my heart (not just my brain) that really wants to see SPF management thrown to the wolves and this company to go belly-up.  The whole operation just reeks.

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#2) On March 06, 2008 at 7:55 AM, alstry (35.36) wrote:

The joke Demon is that the true life book value of this company is potentially $2 Billion LESS than they are currently reporting if you factor JVs into the equation.

Then you have the comical Scarboroughisms such as his sly comment about impairing 70% of lots and the following:

Absent impairments we would have made money. 

How about a straightforward interpretation of above:

If you weren't such a fool and borrowed billions to speculate on OWNED land in some of the most challenged markets in the country, you wouldn't have fricken lost so much of your shareholders money. 

There ain't another public company who levereged themselves up relatively into owned dirt as much as SPF yet they keep patting themselves on the back as they slowly reveal the pain to the shareholders.

Here is another:

We have a plan to be cash flow positive in 2008 and make our $125 debt payment due in October.

Yeah, you may have such a plan, by why don't you tell shareholders that you are basically going to have to liquidate most of the company do accomplish that, lose hundreds and hundreds of millions, and at the end of the day you are still going to have billions in debt and payables.

Sorta like, honey I think we can make the credit card payments for the next two months but we are going to have to sell the house, the dog and the kids to accomplish it.  Not only that if we are a little short, we may have to sell you for a few nights.

At the end of the, there may not be another public builder who is going to stiff the creditors to the extent of SPF.  If the creditors are going to get stiffed big time, how much do you think the shareholders are going to get?

All the while these guys are slapping themselves on the back giving themselves fantastic bonuses boasting about their misleading plans.

Wouldn't it be nice if they simply told shareholder how much ALL the land on the books was actually worth?  Does that seem unreasonable?

 

 

 

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