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Meritage Homes Corporation Message Board

  • sheldon_stein sheldon_stein May 15, 2007 2:11 PM Flag

    was meritage prudent in guiding up?

    F No...

    thanks though for providing shorts an opportunity to reshort, sort of like how KB homes said they were selling the france division and the stock is coming back down...
    think about it... last summer when bad news came out hb's rallied because investors thought we hit bottom... now good news comes out on meritage and kb and both have one day pops and trend down again???? hmmmm..

    why meritage was stupid

    meritage receives have their sales from texas... anyone familiar with texas zoning and entitlement knows its hard to make money in texas...

    meritage had quarterly sales just over 1,000 in texas and their community count was 124... giving you a quarterly pace of 9 or a monthly pace of 3... dude, i have done a crap load of feasibility studies and no one and i mean no one makes money at a pace of 3... meritage i know is very option heavy and not land heavy so that is a bonus, but when you develop a site you don't develop 9 lots at a time... so now if your the developer and your selling to meritage and your paying a bank for a lot of finished lots... how many is meritage taking off your hands??

    if mth is buying quarterly takes they don't have the carry, problem is their competition doesn't do quarterly takes and has the carry and has to lower prices to keep pace high to blow through inventory... mth is going to have to lower pricing in a market (texas) that produces low margins

    again anyone familiar with national building knows that you only go to texas for the volume and not profits....

    if mth guides higher like they did what happens if they miss guidance? again, not too prudent and for those who say they have a great executive staff... ever here of under promise and over deliver, obviously MTH's mr hilton hasn't

    what a moron

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    • your absolutely right... i try not to provide timelines because everything is based on macro events in life.. given the current state of things the hb market probably will not recover until 2009... when i left my company i said the end of 2008.. and i made this prediction back in feb 2006... the one thing i never accounted for was the severity of subprime i knew subprime was a big issue, but i didn't think that a lot of the major banks would actually shut down all their subprime activities (the latest to do so was wells fargo) thus creating virtually no liquidity in this space... this is why all my posts now are focused on cash, irrelevant of all other topics... why is the chrysler buyout deal having problems (can't raise bank debt cash), why do builders go bankrupt (run out of cash and banks call in loans), why can't a subprime buyer buy a home (cause no one is lending cash for these transactions), why did the bear stearns hedge funds invested heavily in mortgage backed securities go under (cause they ran out of cash - lots of hedge funds and investors own mortgaged back securites and have lost their ass, but the ones that go under are the ones who don't have cash)... the overall market is freaked because of this liquidity crisis, it is a downward spiral unless the federal government intervenes

    • I live in Texas and invest in real estate. Housing in many of our markets are actually improving. I'm not knowledgeable enough to comment about the lower margins- however the poster who claims this never gave us any sources or comparisons to demonstrate this.

      Having said all of this - why buy MTH in an unsteady market at best where in most places your assets- housing are depreciating when you can buy energy stocks like EAC and XEC both of which sell at about a 45% discount to the net present value of their oil and gas assets. Those assets will appreciate.

      one of my sources is free mcdep.com

      • 2 Replies to Fish2026
      • Texas, Carolinas, Utah, Idaho, Northwest... are all decent to good markets in the US...

        the problem is that big builders don't have a lot of their assets and sales in Utah, Idaho and the Northwest...

        only about half the publics have assets in the Carolinas...

        pretty much everyone is in Texas... but Texas does not generate a large amount of profits vs. other regions...

        I get this info from my friends that still work at the big builder I left and it hasn't changed... texas is soft when it comes to profitability... and I think you will find other builders also don't do as well in texas vs. other regions they are in...

        however, if you want a breakdown of profits by region... the best source is Credit Suisse... Ivy Zellman's team does a fantastic job of understanding hb's.... I get most of Ivy's stuff from a friend (oh that's right dave I am 10 year old girl) who happens to be pretty close to the Credit Suisse team....

        Here is an interesting way of understanding profitability in the hb market...

        When you have long entitlement periods (NIMBY, hostile planning boards e.g. Loudon County VA, environmental issues e.g. Orlando)... then the land is stuck in the builders portfolio a long time and matures... even if its optioned... after 5 years you have a rare commodity (fully entitled piece of dirt) in an area with a small supply... thus, when you build homes you can charge $$$s.... Its funny how liberals don't get that the stricter the NIMBY policy the more unaffordable housing gets... but I digress... This is why real estate is more expensive in Blue states that are hostile to development or areas that have been 90% developed...

        When you look at TExas it has an abundance of land, the entitlement process is fairly easy, so anyone can get into the building game rather easily... thus supply is always strong even if demand is strong...

        this is a very simple way of looking at things.... but I think you get my point...

        As far as providing links or sources.... for one, most of my sources are people in the industry or publications that are generated from either B of A (Dan Oppenheimer) or Credit Suisse (Ivy Zellman) these are the only 2 analyst that actually understand the market and do an incredible amount of due dilligence... Margaret Whelan would be #3.. all the other analysts are morons regardless if they are long or short hb's.... don't believe me? listen to any conference call and the questions asked...

        I don't see the point of providing links to information that can be generated off an AP wire... anyone can do that... whether or not people want to believe me isn't relevant either... if you know someone that can get you the analyst reports that I mentioned or someone who is at the Division President's level of a big builder... or a VP of Finance at a Division level... they could verify the profitability of different regions

      • Thats it! Every dumbass who mentions Texas on this board is going straight to the fing ignore list from now on.

        If you are so dope smoking stupid that you think a housing boom in McAllen and other border towns has any effect on MTH overall, you aren't someone I ever care to listen to.

        Once and for all, the overall Texas market sucks and will continue to drop in the near future. Sucking less than the rest of the country is of no net benefit to the company. You might as well get it out of your thick head that Texas is somehow immune to tightened lending and a glut of new homes.

    • I don't understand why you think the problem is just "a bad year". The housing cycle will not recover for some time. By then MTH could be BK if they keep borrowing.

    • It is called borrowing.

      They have a good sized credit line which will get them through a bad year if need be.

      Borrowing is not ideal but it is way better than having a fire sale on land to generate cash. Obviously, they need to generate real cash eventually but they can borrow short term. I don't understand why you think reducing book value is better.

    • Actually, Meritage is in pretty bad shape, Dave. Don't you remember that Hilton said they would be converting a lot of their optioned land because they have so much invested in the ground already? Maybe they're revising that plan given their poor cash flow.

      In any case, they are in the unenviable position of having very little inventory they can liquidate to raise money to service their debt. Builders like DH Horton, Centex and KB Home and others have been holding fire sales on existing inventory for precisely that reason -- to raise cash in order to survive. It doesn't matter if someone like Beazer reports losses of 1/2 billion over the past few quarters, cash is the name of the game now.

      I'm not short this stock, but I'm sorry I missed the chance when it moved up to high 30's during the most recent hyping.

    • You're doing two things. You're over-simplifying and you're lumping together every builder.

      Every housing boom ends the same way. They make a lot of money and then they have a bad year or two where they make little or no money. Then they recover and have a reasonably profitable business for 5-8 years with lower margins and so slower growth. Then another boom occurs. The timing is not exactly clockwork but it is on those kind of timescales.

      The market overreacts on the way up and also on the way down. Some of you people act like it is reasonable to assume that most of the major home builders will go bankrupt and the rest will lose half their equity. That's equivilent to assuming that the major banks like Citi and BofA will fail. It is simply over-reaction. They have no clue at all.

      Did they overbuild? Sure. They always do. They don't know when the boom will end. Someone was giving Bob Toll a hard time about this and he told them that if he listened to the bears three years ago and stopped building houses they TOL would be worth less than half of its value today. Just because a boom comes to an end and you end up with too many homes, that doesn't mean you were wrong. It is enevitable. It is the nature of home building. If you can't survive a bad couple of years you are not going to last in this business. Sure some builders might fail just like in the early 1990's but it is unlikely to be MTH. MTH has one of the smallest land positions and one of the best financial situations.

      People that think that anything housing related is going to bankruptcy court need to get a grip and come back to reality.

    • It has taken a while but with the warning this will continue to fold. It really doe not matter how you run the business it will tank!!! More downgrades will move this lower.

    • sorry folks, I just love reposting all my accurate predictions... notice this one.... I told you MTH was full of it... if all their competitors are lowering prices they have to lower to compete... also, how many longs want to argue with me about texas being low margin??? before plenty were telling me that texas was not low margin... however, within one month i was proved right on the 10 year tbill and on mth having to eat its words about guiding up

      i have way too many contacts in the industry at various top 10 builders and texas is low margin compared to other areas around the country... it is a lot easier to get entitlements in texas vs. florida, california or dc... there is no respect for zoning...

      here is another nugget... texas is very latino heavy and they use more alt a and subprime loans vs. white buyers... how many of those cancellations were related to not being able to get mortgages....

      short with caution my friends...

      • 1 Reply to sheldon_stein
      • Man you are so full of it.

        Listen to you. You sound like a 13 year girl trying to convince everyone that is the prettiest girl in school.

        Where to start. Everyone knows that Texas is a low margin state. You think your a genius for figuring that out? Any state that is mostly empty desert is a low margin state.

        Stop bragging about your "way too many contacts in the industry". Talk about childish. How old are you 13? You're probably lying anyway. On a message board you make arguments that need to be self contained. You can't claim to have credentials because no one knows who is who. I could be Bob Toll or a 10 year old for all you know. If your arguments suck than your "contacts" are not going to save you on here. Your arguments just suck.

        As for your nugget about Texas latinos being subprime customers, you're wrong again. Texas is one of the states that has the fewest subprime and option-arms.

        Check out Business Weeks's famous map of misery
        http://wallstreetexaminer.com/blogs/winter/wp-content/uploads/2007/01/map_of_misery.jpg

        If you want to look for hurt go look into the redder states. California and Florida is the worst. Texas is one of the best. Texas is one of the cheapest places to buy in the country. People can easily afford these houses.

        You also need some schooling in how businesses make money. Margin's don't matter by themselves. What matters is return on equity.

        ROE = (assets/equity) * (sales/assets) * (earnings/sales)
        or
        leverage* turnover* profit margin

        Meritage excells in having a faster turnover than most builders. That is why it has been succeeding in Texas where other builders have not. The more you go on about profit margins, the more you demonstrate your ignorance of basic business fundamentals.

 
MTH
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