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The New Home Company LLC (NYSE:NWHM), focused on the design, construction and sale of homes in metropolitan California, plans to raise $125 million in its upcoming IPO on Friday, January 31st, 2014.

The Alison Viejo, California-based firm will offer 7.8 million shares at an expected price range of $15-$17 per share. If the IPO can reach the midpoint of that range at $16 per share, NWHM will command a market value of $265 million.

NWHM filed on June 14, 2013.

Lead Underwriters: Citigroup Global Markets Inc., Credit Suisse Securities LLC, J.P. Morgan Securities LLC

Underwriters: Zelman Partners LLC

What is The New Home Company?

NWHM is a home builder, focused on the design, construction and sale of homes in major metropolitan areas in California, particularly coastal Southern California, the San Francisco Bay Area, and metro Sacramento. The firm creates both stand-alone and master-planned communities, developed by third parties, and builds homes designed for a wide variety of customers; prices range from approximately $300,000 to $3.2 million. NWHM places strong emphasis on customizing its communities, as well as marketing for individual consumers. In addition, NWHM centers on "high-touch" customer service.

The firm utilizes a joint venture strategy, in which it contributes a minority share of capital and in turn receives distributions exceeding its percentage capital interest, plus management fees. This allows NWHM to maintain swift profitability and establish a homebuilding platform focused on the high-growth, land constrained markets of metropolitan California.

Valuation

NWHM offers the following figures in its S-1 balance sheet for the nine months ending September 30, 2013:

Revenue: $58,424,943.00

Net Income: $2,916,131.00

Total Assets: $89,288,873.00

Total Liabilities: $28,841,778.00

Stockholders' Equity: $60,447,095.00

The Competition

NWHM is by no means the only firm engaged in home building in California, and its competitors face few barriers to entering the market.

Some established competitors, such as KB Home (NYSE:KBH), Lennar (NYSE:LEN), and PulteGroup (NYSEARCA:PGM), have access to significantly greater financial resources than NWHM. However NWHM has the advantage of being relatively unaffected by the housing collapse (The firm was founded in 2009.)-leaving it free of these sore losses.

Top-Notch Management

NWHM benefits strongly from the experience of its four founders, who also serve as its top executives. CEO Larry Webb, CFO Wayne Stelmar, CIO Joseph Davis, and COO Tom Redwitz have worked together for decades, making for a strongly synthetic team, with extensive experience in home building and with critical relationships with key land sellers in each of NWHM's local markets.

Mr. Webb and Mr. Stelmar previously served together in similar capacities at John Laing Homes, overseeing the growth and eventual sale of that business. Mr. Davis previously served as President of Irvine Community Development company and has held senior management positions with Amfac Inc., Watt Group Inc., and Chevron Land and Development. Mr. Redwitz previously served as the President of Laing Luxury Homes and as Division President at Taylor Woodrow. He also worked as an executive for the Irvine company for nearly ten years.

We Rate The NWHM IPO A Buy In The $15 To $17 Range

The firm has attained profitability and should be able to take advantage of the continued recovery of the housing market, especially in the extremely high-growth areas where it works. NWHM's joint venture strategy has proven extremely effective thus far, and we believe its high-quality management team is more than competent to continue to pick and choose the right opportunities to take full advantage of this methodology.

The firm's commitment to a strong customer experience, through its on-site design studios and wide variety of structural and design options, is innovative and promising. Finally, in the post-housing crash environment, customer care will be vital in closing sales for those, who may be hesitant to invest. For these reasons, we rate NWHM a Buy.

Source: A New Home For New Home Company: Favorable Horizons For This IPO