SUI - Embedded Expectations Analysis - 2019 04 29
Sun Communities, Inc. (SUI:USA) currently trades at historical highs relative to UAFRS-based (Uniform) Assets, with a 2.4x Uniform P/B. At these levels, the market has bullish expectations for the firm, but management appears concerned about their acquisition pipeline, ability to maintain resident satisfaction, and the potential of greenfield development projects.Specifically, management may lack confidence in their ability to finance growth initiatives, sustain their acquisition pipeline, and maintain resident satisfaction levels, despite rent increases. Moreover, they may be concerned about their debt levels, the potential of their Florida housing community developments and acquisitions, and their joint venture with Australian firm, Sungenia. In addition, they may be concerned about their ability to sustain greenfield development rates, manage risk, and improve their cap rates.
Sun Communities is a self-administered and self-managed real estate investment trust. The company is engaged in acquiring, operating, developing manufactured housing (MH) and recreational vehicle (RV) communities. An MH community is a residential subdivision designed and improved with sites for the placement of manufactured homes, related improvements, and amenities. Modern MH communities contain improvements similar to other garden style residential developments, including centralized entrances, paved streets, curbs, gutters, and parkways.An RV community is a resort or park designed and improved with sites for the placement of RVs for varied lengths of time.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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