Taylor Morrison Home Corporation

TMHC Details

Taylor Morrison Home Corporation (NYSE: TMHC) owns and operate a residential homebuilding business and develops lifestyle communities, majorly in Arizona, California, Colorado, Florida, Georgia, Nevada, North and South Carolina, Oregon, Texas, and Washington. Taylor Morrison, Darling Homes, Esplanade, and William Lyon are the company's homebuilding brands. It also provides financial services and homeowner's insurance policies via its wholly-owned subsidiary (Taylor Morrison Home Funding, Inc.). As of December 02, 2021, its market capitalization stood at USD 3.80 billion.

Latest News:

• Strategic Collaborations: On November 17, 2021, TMHC and Värde Partners, a global alternative investment company, have entered into a land banking facility agreement and formed a joint venture that opened USD 1 billion in capacity for new land opportunities. Värde will continue to act as a substantial financial partner in the acquisition and development of residential land and lots across the homebuilder's markets of operation as a result of this strategic agreement. At the same time, THMC will develop and manage the home building projects.

• Appointment of CFO: On October 27, 2021, THMC appointed Lou Steffens as its Chief Financial Officer (CFO), effective January 01, 2022. Mr. Steffens has been associated with TMHC since 2007 and carries experience of more than 30 years in the homebuilding and financial industry. Before he was appointed CFO, he served as the company’s president of Mergers and Acquisitions.

Q3FY21 Results:

• Growth in Topline: The company reported YoY growth of 9.37% in total revenue to USD 1.86 billion in Q3FY21 (ended September 30, 2021) compared to USD 1.70 billion in Q3FY20, driven by YoY growth of 8.04% and 525.04% in Home closings and Land closings revenue.
• Surge in Net Income: Net income for Q3FY21 increased 46.49% YoY and stood at USD 168.13 million compared to USD 114.78 million in Q3FY20.
• Cash and Debt Position: As of September 30, 2021, the company had cash & cash equivalents of USD 373.41 million and total debt (including senior notes payable and borrowings) of USD 3.22bmillion.

Key Risks:

• Geographical Concentration Risk: Most TMHC's operations are located on the west coast, with California having a substantial presence. As a result, any slowdown or disruption in any of these areas could harm the company's financial condition.

Outlook:

• Q4FY21 Guidance: As of Q3FY21, TMHC anticipates its average active community count similar to Q3FY21. It also forecasts its home closings of ~4,600, along with a GAAP gross margin (for home closings) of ~21%.
• FY21 Guidance: the average active community count is estimated to range between ~335 – 340, with home closings of ~14,000. GAAP home closings gross margin is expected to be in the low-20% range. TMHC also expects to incur land and development expenses of ~USD 2.0 billion.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

TMHC Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

TMHC's stock price increased 35.66% in the past twelve months and is currently leaning towards the higher end of its 52-week range of USD 22.64 to USD 34.05. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 60.03. We have valued the stock using the EV/EBITDA multiple-based relative valuation methodology and arrived at a target price of USD 29.39.

Considering the uptick in the stock price and current valuation, we believe the decent business fundamentals are adequately reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the closing price of USD 32.91, up 6.40% as of December 02, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.