Lumber Liquidators Holdings

LL : NYSE : US$99.80
BUY 
Target: US$ 120

COMPANY DESCRIPTION:
Lumber Liquidators is the largest specialty retailer of hardwood flooring in the U.S. The company offers premium hardwood
flooring products in a wide variety of domestic and exotic wood, as well as engineered products, laminates, bamboo, cork, and
accessories. Lumber Liquidators assortment is largely comprised of proprietary brands including the flagship Bellawood brand

SSS MOMENTUM PUSHES OUR H2 EPS ESTIMATES HIGHER
Investment recommendation
Very strong sales results at Home Depot (HD : NYSE : $73.73 |HOLD), and Lowe’s (LOW : NYSE : $45.81 | HOLD) this week
points to a rapid recovery in big-ticket home-improvement purchases. On the heels of LL management’s positive
presentation at the Canaccord Genuity Global Growth Conference on August 14, we believe the company’s improved value
proposition will enable it to grow rapidly in this environment, fueled further by a broader advertising message with an
increased focus on the do-it-for-me customer. The new store

Flooring Project - Stairs Landing in Diagonal

Flooring Project – Stairs Landing in Diagonal (Photo credit: 1Sock)

format is in only 8% of LL’s footprint, and we believe it can drive
20% store-level growth as it ramps.
Investment highlights
We are raising our Q3 EPS estimate by $0.05 to $0.66, in line with consensus. Our Q3 SSS forecast increases from +10% to +15% on top of +12%.
 New distribution centers should improve efficiency and support continued top-line growth and margin expansion. LL
is consolidating one of two east coast DCs into a facility 33% larger, and it will open its first west coast location in
California.
 Incorporating our updated projections into our discounted cash flow model raises our price target from $119 to $120.

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Tricon Capital Group Inc. : U.S. Housing Recovery Focus

rodent of unusual size

rodent of unusual size (Photo credit: JamesCalder)

TCN : TSX : C$6.23
BUY 
Target $ 7.15

COMPANY DESCRIPTION:
Tricon Capital Group Inc. is a leading asset manager focused on investing in North American residential real estate development and single family homes. The company has $1.4 billion of assets under management and investments spread across six active funds and a growing single-family homes segment. Tricon’s investments are focused on four markets in Canada (Toronto, Vancouver, Calgary, and Edmonton) and a number of markets in the U.S. including California, Phoenix, Atlanta, Houston, Charlotte, and South Florida

Tricon Capital Group acquires majority stake in one of its funds. Tricon recently acquired a 68.4% limited partnership co-investment interest in one of its funds, Tricon IX, for US$261 million. The 2008-vintage fund is currently managed by Tricon on behalf of its limited partners seeking exposure to the U.S. housing market. Tricon IX has produced an actual IRR of 10% from inception to the transaction date, an attractive return for fund partners. Following the transaction, management of Tricon is
expecting to achieve an IRR of 15-20% for Tricon IX, boosted by the extension of certain investment opportunities in the fund.
U.S. housing exposure essentially doubles.

On completion of the acquisition, Tricon’s exposure to the recovering U.S. housing market increases substantially, providing additional upside potential from land development and homebuilding as fundamentals improve.
Cash flowing assets should avoid substantial drag. The assets held within Tricon IX were acquired between 2008 and 2012, and most projects are currently generating some cash flow. In contrast, if Tricon were to invest significant capital in early stage development assets, we would expect substantial dilution for a number of years.

Maintaining BUY rating but reducing target price to C$7.15. We continue to value Tricon on a sum-of-the-parts basis. Following the closing of the equity offering and Tricon IX investment, we have reduced our estimate of NAV per share from $7.84, to $7.13 currently. We are reducing our target price from C$7.90 to C$7.15 to reflect the decline in our estimate of NAV per share. Our target price, combined with an annual dividend of $0.24 per share (current yield of 3.9%) implies a 12-
month forecast total return of 19%.

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Stock Market Magic: Building Your Apprentice Millionaire Portfolio 2012: All you need to succeed in today’s stock market [Paperback]

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The Need To Succeed – in 500 pages of Investing Strategy and Selections


Stock Market Magic: Building Your Apprentice Millionaire Portfolio 2012: All you need to succeed in today's stock market

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Stock Market Magic: Building Your

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Headwaters

Building construction

Building construction (Photo credit: Toban B.)

HW : NYSE : US$9.34
BUY 
Target: US$12.00

COMPANY DESCRIPTION:
Headwaters Incorporated is a provider of innovative construction materials for use in the light building products and heavy construction industries.

Investment recommendation


We maintain our BUY rating as we expect improving construction market trends to help support P&L momentum. With contribution margins of 40%+, we find HW very well positioned to outperform in a housing/construction market recovery.
Investment highlights
 New residential construction continues to drive improvement in light building products (full impact expected later in ’13 given lagging impact and seasonality), while flyash volumes were softer than expected on weather, outages and lower electricity demand (offset by price).
 Guidance gets tweaked up slightly to incorporate Kleer Lumber and improving end-markets (~$110-125M from $100-115M), while not yet factoring a pick up in repair/remodel activity. We do note difficult comps in Q2 given unusually mild conditions in 2012.
 Our conservative estimates adjust as follows: F2013 rev/EBITDA/ EPS to $702.6M/$111.3M/$0.19 from $688.0M/$105.6M/$0.09; F2014 to $748.0M/$124.3M/$0.27 from $734.0M/$124.5M/$0.27.
Valuation
We apply a multiple of 9.6x EV/FY2014 EBITDA (F2014E EBITDA of $124.5M) to reach our $12.00 target.
Risks
Volatility in residential construction markets, uncertain flyash regulations/demand and a highly leveraged balance sheet.

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Stock Market Magic: Building Your Apprentice Millionaire Portfolio 2012: All you need to succeed in today's stock market

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Stock Market Magic: Building Your Apprentice Millionaire Portfolio :

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The Discilpline To Profit :All You Need To Succeed – in 500 pages of Investing Strategy and Selections

The selections given are all guided by the AMP book.

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Stock Market Magic: Building Your Apprentice Millionaire Portfolio 2012: All you need to succeed in today's stock market

Available at http://www.amazon.com

Stock Market Magic: Building Your

Apprentice Millionaire Portfolio:

All you need to succeed in today’s stock

market [Paperback]

Jack A. Bass (Author)

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