|Shares Out. (in M):||0||P/E|
|Market Cap (in $M):||240||P/FCF|
|Net Debt (in $M):||0||EBIT||0||0|
Sign up for free guest access to view investment idea with a 45 days delay.
Company / Investment Overview:
We originally wrote up Genesis in April of this year. In the meantime, while its net asset value has increased, the stock has traded down along with everything exposed to residential real estate, regardless of the fact that the
Since the Company’s inception in 1992, Genesis has accumulated one of the largest land portfolios in Western Canada, including ~4,000 net acres in the greater Calgary area, as well as ~2,800 net acres in British Columbia (for a more detailed description of Genesis’ land holdings, please review our original write-up dated April 5, 2007). Because of the particularly attractive economics in the
Alberta & Calgary Macroeconomic Background:
In recent years,
What has changed since our last write-up:
Although transaction volumes have come off their peak in
As mentioned in our previous write-up, Genesis is in the process of ramping up their homebuilding and lot sales operations. Over the last twelve months, the Company has sold ~135 SF homes and ~265 SF lots (separate from the SF homes), up from just 33 SF homes and 18 SF lots in the first nine months of 2006. Although the Company has fallen short of their volume targets in 2007 due to tightness in the labor markets for land servicing, this has been more than offset by higher than expected average selling prices and margins. In particular, single family lots have been selling for ~C$200k, and the Company has realized gross margins of nearly 70% on each sale. This compares to our projections of C$150k and 50% gross margins. As a result, the Company will most likely still earn C$0.50+ per share, which is in line with the estimate by Desjardin’s Securities, the only sell side firm that covers them.
Genesis also purchased additional land since our original write-up. These purchases were made just outside of Airdrie and in the Hamlet of Delacour, and consist of large tracts of undeveloped land near the Company’s existing land holdings, but outside of the currently annexed boundaries of Airdrie and
Given that approximately 20% of Genesis’s land holdings are slated for commercial use, it is also important to provide an update in this area. The commercial market in
Our analysis suggests that at conservative estimates for current land valuation, Genesis has over C$10 per share of net asset value.
|Calgary||Acreage||Value per Acre (C$)||Value (C$MM)|
|Symons Valley (Residential)||600||$400,000||$240.0|
|Symons Valley (Commercial)||85||$750,000||$63.8|
|Taravista and Taralake||205||$350,000||$71.8|
|Buena Vista Ranches||1,623||$16,000||$26.0|
|Current Share Price||$5.16|
|After Tax NAV of Property||471.7|
|Other Assets, net||-5.5|
|Current NAV per share||$10.10|
We believe the above estimates include enough of a discount to account for the inherent illiquidity of land holdings. It is worth pointing out that in the majority of the Company’s locations, the land is zoned for at least 5 lots per acre, and individual lots have been selling for ~C$200,000, implying a value of C$1,000,000 per acre. This value is well north of any of the values ascribed to residential tracts in the NAV analysis above.
Furthermore, our NAV analysis gives no credit to value that will be added to the land values from the Company’s commercial development and homebuilding operations. Of the two, we are particularly excited about the roughly 280 acres that the Company has designated for commercial development, most notably the 85 acre Sage Hill Crossing project. Although still a couple years away from opening, the valuation metrics of the project are extremely compelling, as evidenced by the recent Wal-Mart transaction, as well as the expected Lowe’s sale. In addition, as outlined in our original write-up, the Company is planning to retain ownership of the remaining ~500,000 square feet of commercial space and leasing out this property to a variety of retailers. Given the Wal-Mart purchase price and expected price from the second big box sale, we believe our value per acre of C$750,000 is well on the conservative side. This value is further validated by an offer the Company received in 2005 to sell all 85 acres at the same price.
Risks and uncertainties:
See April write up
We believe that Genesis represents an attractive long term investment, and believe that our NAV estimate of C$10 per share is well on the conservative side, providing considerable downside protection to our investment. We are also confident that as the Company continues to aggressively pursue a strategy of asset sales and internal homebuilding and commercial development, the net asset value should prove to be quite a bit higher, perhaps even by multiples. We believe that investors with a long term orientation will be rewarded by investing in
Genesis is a thin
|show sort by|
Are you sure you want to close this position Genesis Land Development?
By closing position, I’m notifying VIC Members that at today’s market price, I no longer am recommending this position.
Are you sure you want to Flag this idea Genesis Land Development for removal?
Flagging an idea indicates that the idea does not meet the standards of the club and you believe it should be removed from the site. Once a threshold has been reached the idea will be removed.
You currently do not have message posting privilages, there are 1 way you can get the privilage.
Apply for or reactivate your full membership
You can apply for full membership by submitting an investment idea of your own. Or if you are in reactivation status, you need to reactivate your full membership.
What is wrong with message, "".