Month after month, economic data continues to show that the U.S. housing market found its bottom and is gaining steam. The latest report from the Commerce Department showed that housing starts in October rose to four-year highs to a seasonally adjusted rate of 894,000 units. Existing home sales during the month rose to a 4.79 million annual rate, lending further credence to the recovery “running ahead of our expectations,” according to John Ryding of RDQ Economics. Need more proof? The National Association of Home Builders said that their index of builder sentiment leapt to 46 in October from 41 in September, marking the seventh consecutive month of increases and the highest level since April 2006. The S&P/Case-Shiller Home Price Index showed that the national composite of home prices in the States increased 3.6 percent in the third quarter of 2012, compared to the same period in 2011, including a 2.2 percent climb over prices in the second quarter of 2012.
The recovery has resonated through homebuilders’ valuations with companies such as Lennar Corp. (NYSE: LEN) surging 100 percent across the year. Luxury homebuilder Toll Brothers Inc. (NYSE: TOL) crushed analyst expectations last week with its fourth quarter earnings and a backlog or orders that rose by 54 percent to $1.67 billion.
Investors looking to the small and microcap sectors to capitalize on the strengthening real estate markets should be taking a closer look at LIG Assets, Inc. (Pinksheets: LIGA), a diversified investment company focused on real estate, entertainment, hospitality and other profitable industry opportunities. The Dallas, Texas-based company has a portfolio of approximately 300 residential properties throughout Texas with the majority scooped-up at discounted rates while the broad market was depressed. These properties generate $3.2 million in annualized income for LIG.
The properties give LIG Assets a book value of 10 cents per share based upon their purchase price, but that valuation is a skewed given the appreciation in real estate during the housing market recovery. Should the company decide to liquidate the properties, strong profits would be realized; a fact that the general investment community is still overlooking.
The company is currently expanding its property assets through new construction as well. Construction is slated to be completed in 2013 on both a wholly-owned 80+ unit apartment complex in Royce City, Texas and a senior living project in Burleson, Texas, which the company holds a 50 percent interest. Total investment in these two properties exceeds $21 million and should provide a steady, long-term revenue stream to LIG Assets.
Further, the company recently acquired a 50-percent stake in a profitable, several-hundred-unit storage facility in the metropolitan Dallas area.
While LIG is arguably well undervalued based solely upon its real estate enterprise, the company’s subsidiary, SuiteMagic, adds additional value while providing an opportunity for substantial increases in corporate valuation. SuiteMagic is a technology entertainment services company focused on the hospitality industry to provide Internet-based television, cable programming, interactive games and other services through its patent-pending software.
A new endeavor for LIG, SuiteMagic has already been contracted by two hotels, hired a sales team and says that it is in advanced negotiations with “a number of major hotel chains” to employ its technology.
Management anticipates that sales from SuiteMagic could reach $14 million in 2013 as it believes that its offerings outstrip industry leader LodgeNet Interactive Corp. (NASDAQ: LNET). LodgeNet, whom services about 1.6 million hotel rooms, has been struggling to retain market share, revamping its executive team and posted a net loss of $95.5 million in the second quarter this year, including a large, one-time impairment charge. Shares of LNET have plummeted 95 percent in 2012.
Backed by LIG Assets’ strong financial position, SuiteMagic offers the ability to finance the purchase price of equipment on behalf of hotels at favorable rates; something LodgeNet does not have the capabilities of doing. LIG’s product suite also is a turnkey solution that offers far greater programming, advertising and gaming components utilizing cutting-edge technologies that are superior to LodgeNet’s legacy products.
The combination of higher-end products and financing capacities gives SuiteMagic a competitive advantage over peers and leaves them in a prime position to quickly expand its footprint in the industry.
With expansion coming on many verticals, LIG Assets has recently demonstrated its commitment to shareholder value through a share repurchase program. On October 4, the company said that it intends to buy-back up to 20 million shares (of its 101 million outstanding shares) at purchase prices up to 10 cents across the subsequent six months.
Currently listed as a pinksheet, LIGA has filed its latest financials with OTC Markets and is preparing its past financials to submit to a qualified auditor with the goal of becoming fully reporting to the SEC and uplisting to the OTCBB or a senior exchange.
Technically speaking, the LIGA stock chart is making a strong move and developing an uptrend off lows of one cent per share in October. A thinly traded issue, the stock can move quickly on increases in volume as demonstrated with a one-day rise from 1.6 cents to 2.7 cents late in November that broke a downtrend line when volume surged to over five million shares. Subsequent to the move, the price per share is now holding above the 50 day moving average, a sign of a bullish trend. Shares are taking a pause after a rise on Friday that pushed shares just above a resistance point at 25, which classic t/a says should now serve as support. The dynamic resistance of the 200 day moving average is the next challenge that the stock price faces at 3.5 cents, but static resistance is scarce until 6 cents, a more than 100 percent rise from Monday's closing price of 2.7 cents.
The chart appears to have found a firm bottom in recent months and is now in a six-week uptrend that is supported by the Moving Average Convergence/Divergence (MACD) rising above zero (called the "money line" for its bullish effects after being broken). Further lending credence to the upward pressure is the Relative Strength Index (RSI), a commonly used gauge of momentum for technical traders that is registering a reading of 60, signaling bullish momentum in the play.
The bottom line is that LIG Assets is currently hauling-in net income that exceeds its market capitalization, has assets that are far greater than liabilities, a book value of a minimum of 10 cents per share and a business model dripping with growth potential. Yet, shares are still priced well below that level, although seeing nice appreciation in the past six weeks, suggesting that investors are starting to notice this company that has previously been slipping past their radar.