SLJB,
From knobias.com
Page One: Parting the Red Sea
Tuesday , August 22, 2006 17:01 ET
Today's Page One feature in the Knobias, Inc. (otcbb: KNBS) Small-cap ClipReport highlights Sulja Brothers Building Supplies Ltd (SLJB) and its recent movement. To receive the Small-Cap ClipReport Daily, please visit: knobias.com
Parting the Red Sea
The housing market has been a hot topic for almost a year as many analysts have been calling for a burst of the bubble after a lucrative rally in past years. A soft landing call has also been tossed into the ring as another possible outcome. Either way, analysts are calling for a slow down in the climbing valuations of housing.
One main indicator will be the Fed’s next decision regarding interest rates. With the Fed’s Moskow and Guynn both speaking during Tuesday’s market, their impending decision will most certainly be affected by what they feel will happen to the housing area, and some are calling for a good deal of softening.
In any event, one company reported earnings that normally can provide a glimpse into the sector. Toll Brothers Inc (TOL) beat the street by 12c (ex-items) reporting $1.16 vs. $1.28 before write-downs. Revenue was (3.4%) below expectations at $1.53B versus a $1.585B estimate. The company also cut their EPS outlook for the fourth quarter to between $1.33 and $1.53 per share compared to their previous guidance of between $1.65 and $1.93 per shares. The updated guidance, however, was still above the $1.31 consensus estimate for the same period.
Robert I. Toll, chairman and CEO of TOL, cited, "An oversupply of inventory... a decline in confidence... speculative buyers of 2004 and 2005 (who) are now sellers... builders that built speculative homes... and anxious buyers (who) are canceling contracts for homes already being built" for the continuing malaise in the housing market.
But on the other hand, Coldwell Banker CEO, Jim Gillespie noted in an interview with the Wall Street Journal that home sales were going to be down around 7% versus last year which was the highest ever but that this quarter was expected to be the third highest market in history with an appreciation across the board of 5%. In what Gillespie described as a buyer’s market, an increased inventory of homes is now available.
What it seems to amount to is a slowing of new home construction and also a slowing of home sales, but not as much slowdown as the home construction industry might be seeing.
In any event, another set of brothers are trying to personally thwart the slowdown in the domestic real estate market by capitalizing on international growth while allowing domestic investment by forming a public company. Sulja Brothers Buidling Supplies Ltd (SLJB) The Company carries pressure treated lumber of only an excellent quality. For roofing excellence they also carry CRC shingles. CRC has successfully combined technology and beauty, to create and innovative line-up of traditional 3-tab and architectural organic asphalt shingles. Quality raw materials, leading edge technology and impressive designs guarantee CRC customers the very best roofing products available.
The company’s domestic supply business is not what is moving the stock lately. The company has released 2006 numbers on its website and also has 2007 guidance that is quite interesting.
The company’s Middle Eastern top line growth seems to be the main driver of the trading volume which has reached an average of 25 million shares a day making SLJB one of the top In dollar volume trading each day (an important factor for investors concerned with liquidity). Knobias spoke with Chad A. Curtis from Marquee Asset Management who also serves an IR function for SLJB. He confirmed the financial guidance and also confirmed that filings will be released in a few weeks. But the pessimistic thought still exists that an 8c over the counter stock represents a company that has guided for over $300M in total revenue for 2007.
Attaching a simple multiple for the industry has this stock potentially trading much higher than where it does currently. If the company can remotely execute on its plan and produce pro forma numbers close to what they guided, refrain from diluting current shareholders with additional offerings, and provide an avenue for domestic investors to participate in the specific growth in the middle east instead of the domestic alternative and this name is definitely one to watch for longer term holders. We will certainly be watching closely. |
