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Comstock Holding Companies, Inc. Message Board

  • roger7485 roger7485 Jun 21, 2013 11:02 PM Flag

    CHCI SHAREHOLDER'S MEETING NOTES

    Going to try and post all of my notes in here, I will have to break it into several posts so please bear with me.

    Sentiment: Strong Buy

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    • Thanks Rogers for the info and going there and asking questions. I my self and looking for a house and because of the interest rates driving up im trying to buy one as quick as possible as well.

    • Roger,
      Thanks a lot sharing the answers with us. Very helpful.

      icha

    • Biggest things that I drew from the meeting were that they aren’t interested in dilutive financing and they are very confident in the business cycle and their pipeline. CEO comments included words like “excited” and “all projects are AT LEAST as good as we had hoped, if not better”. Hopefully some of you learned some things you didn’t know in this write-up. I’ll be holding this company for what I believe is a very exciting next 18 months.

      Sentiment: Strong Buy

    • Seventh question was about their gross margin of 28% in Q1 and how the non-joint ventures may increase that % in the coming quarters with shady grove and falls grove starting. The answer to this was somewhat unclear since I believe they misunderstood my question but they seemed to indicate that the margin would be higher because they didn’t have to split it with the partners in joint ventures. I wished I would have followed up on this one, but I seeing as 3 other people had only asked 1 question and I was already on my 4th, I tried to hurry along.

      Eighth question was a complicated one that most people still probably don’t understand about CHCI. As of right now, CHCI has basically nothing to do with Reston and Loudon station. Reston and Loudon station projects are owned by Comstock PARTNERS, which is a privately held company run by the CEO. This becomes confusing because Chris Clemente is CEO of both Comstock Holdings and Comstock PARTNERS. Comstock PARTNERS develops land that is part of a portfolio, IE apartments, whereas CHCI develops for-sale properties like condos, townhomes, and detached homes. CEO said that if a project looks more profitable as condos than apartments, CHCI would be doing the building. I believe that a major driver of CHCI’s earnings in the future could be derived from Condos at Reston Station, so this is something to closely watch.

      Final question was a brief one about social media. I am friends with Comstock holdings on facebook and it is a fairly poor effort of a facebook page. While this isn’t a huge deal, there is no reason a 50 million dollar publicly traded company should have a facebook page that is worse than a single location pizza joint. The CEO said they had recently hired someone to work on it, and then make a joke that he is too old to understand any of it, everyone laughed.

      Sentiment: Strong Buy

      • 1 Reply to roger7485
      • Joint venture or not will have no effect on the gross margin at all. It only affect gross profit.

        Say we have two homes with 100k each and gross margin 30% for each:
        No joint venture:
        100 70 30
        100 70 30
        Total revenue: 200k and total gross profit 60k
        One with 50% joint venture
        100 70 30
        50 35 15
        Total revenue: 150k total gross profit 45k, gross margin is still 30%.

        Also I did not see 28% Q1 gross margin. It is 22.82%:
        HB revenue 11.396 million; gross profit 2.600 million. gross margin: 22.82%.

        But Q2 gross margin should be higher as higher sales price and lower building material prices.

        Sentiment: Strong Buy

    • Fourth question (first of mine), was related to them adding LHA as an investor relations agency as of Q1 and if that signaled the start of more transparency such as conference calls after earnings. CEO stated that that was indeed the direction they were heading but would not say that quarterly conference calls would begin at any specific time. My personal feeling on his statement was that it might start for Q4 of this year, give or take a quarter.

      Fifth question was related to the NOLs on their balance sheet. Since they are projecting profits for this year I was wondering if they would have to take their NOLs as a huge one time gain instead of just not paying taxes on profits for the next few quarters. The CFO stated that you needed “clear visibility” in regards to that, and basically it was a fairly stringent set of details you needed to make that accounting adjustment. Sounded to me like this accounting adjustment was probably a year away.

      Sixth question was about their revenues and SG&A expenses. For the first quarter they had a 360% increase in revenues QoQ and only a 6% increase in SG&A. I asked if they thought that trend would continue or if they would need to hire significant staff to ramp up the company to the levels they are projecting. CEO said that at one time they employed 300 and are now down to around 50, and while SG&A would increase a little as they hire it wouldn’t scale nearly as exponentially as their revenues. Should be good for margins going forward.

      Sentiment: Strong Buy

    • CHCI meeting summary

      There were about 20 present including the CEO and most of the board members. There was a suit from Oppenheimer that showed up, and I confirmed with him that currently no one has coverage of this company, never figured out exactly why he was there. The voting proceeded very quickly, which isn’t surprising considering the majority was obtainable with just the CEO and Board. The Q and A consisted of 9 questions total, 6 of which were mine.

      The first question was in regards to financing options for future projects. CEO basically stated something similar to the Q1 report that they would be seeking better financing options than joint ventures going forward to maximize shareholder value. He stressed that the company has not had to use dilutive financing like many competitors and stressed that the company is “NOT interested in selling shares at $2-3 per share”.

      The second question had to do with worries about rising mortgage rates affecting sales. The CEO stated that this part of the mortgage rate cycle actually helps drive MORE sales because people are worried about rising rates and thus motivated to buy quickly. This thinking is counter intuitive but it makes sense that there is no urgency to buy homes even when the rates stayed historically low for years.

      Third question had to do with product mix and how many “single family” homes they were going to build. This question was a little cloudier but the main point I got from the CEO is that they had planned several buildings as apartments and could convert to condos if the buying demand stays high. Also said that their goal is to have a 300 unit per year selling rate by 2015.

      Sentiment: Strong Buy

 
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