LGI Homes (LGIH), an entry-level home builder with principal offices in The Woodlands, Texas, plans to raise $126 million in its upcoming IPO on Thursday, November7th. The firm will offer 9 million shares at an expected price range of $13-$15 per share. If the IPO can find the midpoint of that range at $14 per share, LGIH will command a market value of $274 million.
LGIH filed on August 28, 2013.
Lead Underwriters: Deutsche Bank Securities, JP Morgan Securities LLC, JMP Securities LLC
Underwriters: Barclays Capital, BofA Merrill Lynch, BTIG LLC, Builder Advisor Group LLC
LGIH is a fast-growing designer and builder of entry-level homes in Texas, Arizona, Florida and Georgia. The firm is focused on converting renters into homeowners by offering homes at affordable prices in relatively low-cost locations.
The firm has constructed and sold over 4000 homes since it began operation in 2003; incredibly, the firm has posted a profit every year since its inception, despite the brutal housing downturn - Builder magazine identified the firm as the only homebuilder amongst the largest 200 American builders to report revenue growth from 2006 to 2008. The firm expects to own or control in excess of 11,000 lots upon completion of the IPO, which represents approximately seven years' worth of land supply.
LGIH offers the following figures in its S-1 balance sheet for the six months ending June 30, 2013:
Net Income: $7,463,110
Total Assets: $79,803,932
Total Liabilities: $32,526,184
Stockholders' Equity: $32,114,770
LGIH credits much of its success to its differentiated marketing approach targeting the entry-level home buyer. The firm focuses on establishing communication with local renters; each local sales office features a team of sales professionals and an independent on-site loan officer to assist potential buyers through the home buying process.
LGIH must compete with other homebuilders in its various markets. Major competitors include AV Homes (AVHI), DR Horton (DHI), Beazer Homes USA (BZH), Hovnanian Enterprises (HOV), Toll Brothers (TOL), and Standard Pacific Corp (SPF). Some of these competitors are better capitalized than LGIH and have access to superior marketing resources.
Founder, CEO and Chairman Eric Lipar has served as CEO since 2009 and Chairman since July 2013; he previously served as the firm's President between 2003 and 2009. He has been in the residential land development business since the mid-1990s. He serves on the Residential Neighborhood Development Council for the Urban Land Institute and is a member of Vistage Worldwide.
LGIH looks to be an excellent, low risk IPO. We rate this offering a buy.
The firm's consistent generation of profits, and especially its ability to maintain profitability and increase revenues through the worst of the housing crisis, speaks volumes of its strong business model and successful management. LGIH's established supply of land for future building also bodes well for stability. Several of the firm's primary markets, including Dallas/Ft. Worth, San Antonio, Phoenix, Austin, and Houston, ranked among the top 10 markets for fastest population growth between 2000 and 2010, forecasting future increases in entry-level home buyers.