Wednesday, May 30, 2012

Strong Texas Economy and New Housing Numbers Benefit LIG Assets (PK: LIGA)

Strong Texas Economy and New Housing Numbers Benefit LIG Assets (PK: LIGA)Shawshank, VA 5/30/12 (StreetBeat) -- Purchases of new homes increased 3.3 percent in April from the previous month to an annual pace of 343,000 according to the Commerce Department. U.S. home builders are reporting their most-improved spring selling season in seven years as record low mortgage rates, job gains, and shrinking inventories draw buyers to sales offices that have been quiet since the property market collapse. After dragging the economy into recession, housing is set to "contribute modestly" to growth, said Vincent Foley, a credit analyst for Barclays in New York.

CNBC's latest report on the American housing market reiterates the strong home sales numbers in the U.S. and their effect on the overall market. As sales continue to rise throughout the county, we're not seeing a significant increase in inventory. These two factors together are causing price stabilization and even pricing increases in some select real estate market.

The Texas housing market also has fared better than many. The mortgage delinquency rate (the portion of borrowers three months behind on payments) is 5.78 percent, compared with 8.78 nationwide, according to First American CoreLogic. That's partly because relaxed zoning codes and abundant land kept both price appreciation and speculation down. "House prices didn't experience a bubble in the same way as the rest of the nation," said Anil Kumar, senior economist at the Federal Reserve Bank of Dallas. But it's also because of two attributes not commonly associated with the Longhorn State: financial restraint and comparatively strong regulation. Unlike many of its neighbors, Texas has state laws that prohibited consumers from using home-equity lines of credit to increase borrowing to more than 80 percent of the value of their homes. The upshot: Dallas housing prices have fallen only 7 percent from their 2007 peak, according to the Case-Shiller index.

LIG Assets, Inc. (Pinksheets: LIGA) headquartered in the downtown Dallas, TX office building at 1700 Pacific Ave. is focused primarily on income producing properties in commercial and residential real estate in stable Texas cities. Properties currently generating cash flow for LIG Assets include nearly 300 residential properties throughout Texas with the vast majority purchased since 2009. The Company says debt is covered two times by revenue from the properties. LIG Assets has plans to construct larger projects that include an apartment building, storage facilities, a retirement living project, and possibly even mobile home parks.

Quarterly earnings posted on Friday continue to show positive net income. CEO Jeff Love stated, "First quarter earnings are typically hampered by our need to pay property taxes during that time of the year. Despite this drain on cash, we were still able to report positive net income, and we anticipate much strong results in the coming quarters."

While demand for existing homes has been on the rise in recent months, the improvement in sales of new homes signals that the growing appetite for residential real estate goes beyond foreclosures and other distress sales targeted by investors. Traditional homebuyers, including those who have to sell another property to upgrade, are coming off the fence, Stan Humphries, Zillow Inc.'s chief economist said.

Mortgage rates for 30-year loans fell to 3.78 percent in the week ended Thursday, the lowest in Freddie Mac records dating back to 1971. The Federal Reserve has pledged to hold interest rates near zero through the end of 2014 and has bought home-loan bonds to lower borrowing costs.

A recent report issued titled "LIGA Inc. Has Home Run Written All Over It" by Rob Goldman of Goldman Small Cap Research ( forecasts $5.0 million in income for 2012 up from $1.3 million in 2011, and could approach $10 million if some portfolio assets are sold. At a multiple of just 7x 2012 EPS, Goldman derives a price target of $0.50. Goldman released an updated report yesterday after the close of trading yesterday and reiterated his forecasted numbers.

It should be noted that LIG Assets also has other divisions that could add to earnings this year. The Company retains ownership of 45% of SuiteMagic, which owns patent-pending software for internet-based television and cable programming, interactive game content, as well as a host of other goods and services for the hospitality industry. This will be sold to hotel and motel chains as a significant upgrade to existing systems largely controlled currently by LodgeNet. LIG Assets believes income from just this division could surpass other income within two years.

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