The management of the group of TECHNICAL OLYMPIC announces that on October 24, 2006 UBS Investment Research made the following comments regarding Technical Olympic USA Inc s latest announcement:
1) The 19% reduction on TOUSA s unit orders for the third quarter of 2006 (excluding joint ventures) is ahead of the estimated and anticipated -25% and this is attributed to the company s activities in ΤΕΧΑS, which offsets the continued weakness in Florida. In addition, the research on the cancellation pace of orders suggests a potential plateau in the home building market.
2) The $0.36 - $ 0.49 reduction in earnings per share (EPS) announced by TOUSA for the third quarter of 2006 due to additional land related charges of $35 - $48 million, represents roughly a 1% impact on the company s total assets. UBS views management s focus on liquidity and scrubbing the balance sheet favorably and expects TOUSA to use the free cash flow generated to reduce leverage.
3) UBS reduces its EPS estimate for 2006 to $3.30 from $3.55, excluding the impairment charge from the Transeastern joint venture. UBS sets a target price of $16 per share, with a +48% upside potential versus the share s price of $10,84 in the New York Stock Exchange (NYSE) as at October 24, 2006. In addition, its rating for TOUSA is Buy 1. The above two valuations are in line with UBS s previous ones, despite the adverse situation in USA s homebuilding market.