KB Home

KBH Details

KB Home (NYSE: KBH) is one of the largest homebuilders in the U.S. and has built approximately 650,000 homes in its history of more than 60 years. KBH provides homebuilding as well as financial services like mortgage and insurance. KBH's homebuilding operations are in West Coast (California and Washington), Southwest (Arizona and Nevada), Central (Colorado and Texas), and Southeast (North Carolina and Florida). On April 13, 2021, KBH was awarded Partner of the year-Energy Star for the 11th consecutive year by the U.S. Environmental Protection Agency (USEPA). The largest homebuilder has built more than 150,000 Energy Star certified homes that provide long-term savings on utility bills and reduce greenhouse gas emissions. As of June 28, 2021, its market capitalization stood at USD 3.68 billion.

Launched New Home Communities: On June 24, 2021, KBH announced the opening of Tortosa, a new home community in a popular Maricopa, Arizona. This followed the launch of Prairie Village Villas, a home community in the city of Longmont, Colorado, and Indigo at Shadow Mountain, a single-family home community in Menifee, California, on June 18, 2021.

Corporate Credit Ratings Upgrade: Moody's Investors Service upgraded KBH’s corporate credit rating to Ba2 from Ba3 in May 2021. S&P Global Ratings improved the company’s corporate credit rating to BB from BB- in January 2020.

6MFY21 Results: The company reported a 29.78% increase in total revenues to USD 2,582.63 million during 6MFY21 (ending May 31, 2021), including USD 2,574.04 million in homebuilding revenues and USD 8.58 million in financial services revenue, compared to USD 1,989.90 million during 6MFY20 (ending May 31, 2020). As a result, the company's homebuilding pre-tax income increased to USD 278.06 million during 6MFY21 vs USD 123.22 million during 6MFY20. Likewise, KBH's financial services pre-tax income increased to USD 19.14 million during 6MFY21 vs USD 13.41 million in 6MFY20. The homebuilder reported 2.15x YoY increase in net income to USD 240.42 million during 6MFY21 compared to USD 111.74 million during 6MFY20.

Quarterly Key Metrics (Source: Investor Presentation, Q2FY21)

Key Risks: A steady demand for housing since 2013 combined with declining home inventories, reflecting a low supply of new homes compared to historic levels, has helped drive above-average home price appreciation across most markets for the past several years. However, if home selling prices increase faster than the consumer income growth, most homebuyers might not afford to purchase a home, which will negatively impact the company’s operational affairs.

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.

KBH Daily Technical Chart

Stock Recommendation: KBH's share price has declined by 13.24% in the past one month and is currently trading in the mid-band of the 52-week range of USD 27.51 to USD 52.48. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 34.18. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 48.70. On the technical chart, the next support level is USD 34.50. Considering the company's market standing, enhancement in credit rating, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 40.61, up by 1.35% as of June 28, 2021.

*All forecasted figures and Industry Information have been taken from REFINITIV.

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

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.

M.D.C. Holdings, Inc.

MDC Details

M.D.C. Holdings, Inc. (NYSE: MDC) is a holding company that operates in homebuilding operations as well as provides mortgage, insurance, and title company services. The company’s homebuilding operations are in West (Arizona, California, Nevada, Oregon, and Washington), Mountain (Colorado, Idaho, and Utah) and East (Maryland, Virginia, and Florida) regions. MDC also generates revenues from its mortgage operations and insurance services for homebuyers. As of June 28, 2021, its market capitalization stood at USD 3.50 billion.

Land Activity (Source: Q1FY21 Earnings Presentation, April 29, 2021)

Launch of New Communities and Models: On June 24, 2021, Richmond American Homes of Florida, LP, a subsidiary of MDC, announced that it bought 101 homesites in Davenport, and its Seasons at Forest Lake community is now accepting pre-orders. Earlier, on June 03, 2021, Richmond American Homes of Oregon, Inc., another subsidiary of MDC, announced its launch of model homes at Frog Pond in Wilsonville, Oregon, and Magnolia Heights in Washougal, Washington.

Robust Q1FY21 Results: The company reported a sharp uptick of 49.45% in total revenues from the homebuilding operations to USD 1,041.85 million in Q1FY21 (ending March 31, 2021) compared to USD 697.08 million in Q1FY20 (ending March 31, 2020), primarily due to an increase in the number of new orders and average selling prices of those orders. The company’s homebuilding pre-tax income increased to USD 113.50 million in Q1FY21 vs USD 49.67 million reported in Q1FY20. MDC also recorded an increase in revenues from financial services to USD 45.02 million in Q1FY21 compared to USD 21.88 million in Q1FY20. MDC’s financial services pre-tax income increased to USD 30.80 million in Q1FY21 vs the loss incurred of USD 1.10 million reported in Q1FY20. In addition, the company reported a threefold YoY increase in net income to USD 110.69 million in Q1FY21 compared to USD 36.76 million in Q1FY20. MDC acquired 3,231 lots across 60 subdivisions during Q1FY21 and also approved 4,347 lots for purchase, a 108% increase compared to the same quarter the previous year.

New Home Deliveries and Home Sale Revenues (Source: Quarterly Filings, Q1FY21)           

Key Risks: Any increase in the mortgage interest rates or decrease in liquidity extended by Government Sponsored Enterprises (GSEs) such as Fannie Mae, Freddie Mac, and Ginnie Mae could adversely impact the sale of new homes and thus the company’s financial condition. Moreover, MDC's operations are highly dependent on its subsidiaries' ability to obtain land to develop residential communities. Any change in the general availability of land, the willingness of land sellers to sell land at reasonable prices, availability of financing, zoning, and regulations could impact MDC’s ability to acquire land, thus impacting its financial health.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

MDC Daily Technical Chart

Stock Recommendation: MDC’s share price has declined by 12.97% in the past one month and is currently trading in the higher-band of the 52-week range of USD 30.02 to USD 63.86. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 35.24. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 59.72. On the technical chart, the next support level is USD 43.70. Considering the company's strong balance sheet, robust fundamentals, growth potential, dividend yield, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 50.43, up 1.16% as of June 28, 2021.

*All forecasted figures and Industry Information have been taken from REFINITIV.

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

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.

Taylor Morrison Home Corporation

TMHC Details

Taylor Morrison Home Corporation (NYSE: TMHC) is engaged in the construction of residential homes building and development of lifestyle communities with its geographical presence in Arizona, California, Colorado, Florida, Georgia, Nevada, North and South Carolina, Oregon, Texas, and Washington. TMHC operates its homebuilding segments under brand names like Taylor Morrison, Darling Homes, and William Lyon. The company also provides loan origination and insurance facilities through its subsidiaries. As of June 28, 2021, its market capitalization stood at USD 3.34 billion.

Launched Industry-First Reservation System: On June 09, 2021, TMHC announced its new eCommerce reservation platform for to-be-built homes. With the help of this new digital reservation platform, customers can easily choose a floor plan, select a home site using a map, choose a variety of customizable exterior elevation designs, and reserve their home completely online. As a result, the company became the first homebuilder to offer the capability to customize and purchase a new home digitally.

Enhanced Buyback Program: On June 01, 2021, TMHC declared the increment in the amount available for repurchases under its stock repurchase program by up to USD 250 million of its common stock. The repurchases are to be done through open market operations, privately negotiated transactions, or other transactions through December 31, 2022.

Q1FY21 Results: The company reported a 5.35% increase in total revenues to USD 1,417.81 million in Q1FY21 (ending March 31, 2021), including USD 1,363.42 million as home closings revenues, USD 4.88 million as land closings revenue, USD 44.06 million as financial services revenue and USD 5.42 million as an amenity and other revenue, compared to total revenues of USD 1,345.69 million in Q1FY20 (ending March 31, 2020). In addition, the homebuilder reported a net income of USD 102.44 million in Q1FY21 compared to a net loss of USD 29.55 million in Q1FY20.

Key Metrics (Source: Quarterly Filings, Q1FY21)

Key Risks: The homebuilder operates in several states with a concentration on the west coast and a significant presence in California. Any significant shift in weather conditions, change in regulatory policies, or any adverse event in California could negatively impact the company’s financial health.

Outlook:

Q2FY21 and Full Year FY21 Guidance (Source: Investor Presentation, Q1FY21)

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's FY21E 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

Stock Recommendation: TMHC's share price has declined by 13.11% in the past three months and is currently trading at a mid-band of the 52-week range of USD 17.55 to USD 33.06. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 33.64. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 31.34. On the technical chart, the next support level is USD 22.50. Considering the company's robust track record, technological innovation in its products, growing financials, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 26.23, up by 1.16% as of June 28, 2021.

*All forecasted figures and Industry Information have been taken from REFINITIV.

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

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.