IPO Strategy—The opportunity for U.S. real estate construction company SDHC is here

Plans to raise $150 million in initial public offering of Class A common stock at $1 billion valuation

Scheduled to be released on January 11th

The company develops and sells residential properties throughout the southeastern United States.

I think the U.S. housing sector will improve now that the Fed’s interest rate hikes have peaked

I'm relatively optimistic about pricing the Smith Douglas Homes IPO valuation.

My name is Eastcolumbus. I am good at IPO pricing of new stocks and am keen on discovering good business at the moment. You are welcome to pay more attention to me.

I think when analyzing SDHC, we must know what changes have taken place in the current environment and what positive impacts these changes have on this company. First of all, this is a real estate builder. Simply put, if we analyze this company, From a business analysis alone, we cannot find the key point. We must raise another dimension, that is, what is the changing trend of the environment in which real estate builders live, so here we must first talk about what is happening in the current environment in which they live. What changes have been made.

When researching this company, I noticed some of the company's financial situation and compared it with leading companies in the industry. I found that in the past 2023, due to the impact of high interest rates, almost all real estate builders' performance did not grow.

So this also proves that the company's growth has little to do with these operators. The main factor affecting young buyers today is high interest rates.

In addition, the real estate market in the United States is affected by factors such as immigration, employment numbers, income, age, policies, etc. We quote directly from the agency JBREC's prospectus that in July 2023, seasonally adjusted employment was 4 million, or 2.6%, 2.6% higher than the pre-pandemic peak in February 2020. And JBREC expects to add 3.6 million jobs in 2023 and 300,000 jobs in 2024. These data tell investors that current employment and income can objectively support the deduction of current trading logic. When we look back at this period of history in the future, you will find that interest rates have not actually dropped significantly. In short, the company is listed at this point, and we think the pace has been grasped very well.

The company's current business strategy has selected several cities that are among the top ten for immigrants, because new immigrants do not have much savings.

The company chooses an entry-level strategy. So you will see that the average selling price of the company's houses is about $333,000, which is lower than the industry's mid-priced single-family home of $418,000. It may be the first choice, so you can guess that the company's growth rate in the future may be higher than that of the company at the top of the industry. Be quick, of course this is just a guess.

We also observed the company’s specific products

Figures 1 and 2 show the location differences between the company's houses and those of its competitors. You can clearly see that the company's operation strategy is not to be close to the edge of the core urban area. Take North Carolina as an example. The company's strategy is different, and the price gap with competing products will widen. A house near Charlotte is 1.5 times that of the small city of Sanford. As an entry-level family income, the price-performance ratio is high. .

Picture 1 shows the company’s products

Picture 2 is a product of a competing company.

If the pricing of this IPO is priced at 19.5, the company's market value will be 1 billion. Calculated based on the Q3 quarter PE valuation of 2023, it is close to the lower-line valuation in the same industry.

In addition, it should be noted here that the company's market value in 2022 will reach 1 billion, and in the 2023 report, an acquired company has been merged, so we should pay more attention to this when calculating the company's financials . Overall, we are optimistic about the performance of SDHC after its listing, because seizing subsequent opportunities requires paying close attention to capital trends. The specific opportunities will not be discussed publicly for the time being. If you want to discuss it later, you can join our moomoo group.