Real Estate
Trades at less than half the TOPIX multiple and generates nearly twice the average ROE. OHG has grown sales at a 25% annual clip during the past 5 years, despite declining house starts, because of overwhelming pricing advantages. The consensus believes these advantages have suddenly disappeared and projects earnings to flatline indefinitely. However, Mike Allen sees an inventory correction that may already be completed but will inevitably end without having any long-term impact on the company’s position. He expects cash flows from operations to exceed capital requirements by >¥500bn in the next 5 years - an amount that exceeds current shareholders’ equity. Mike sees fair value at ~¥17,000, nearly 4x the current price!
Edition: 183
- 05 April, 2024