By Alison Rice. The bad news just keeps coming for manufactured housing producers. In October, Credit Suisse First Boston (CSFB) analyst Ivy Zelman announced CSFB would no longer cover public manufactured home builders Champion Enterprises (NYSE: CHB) and Oakwood Homes (NYSE: OH) because of their limited liquidity and shrinking market capitalization--$115.04 million and $6.68 million, respectively. As a result, Clayton Homes (NYSE: CMH), which did post a profitable quarter in September, also was dropped as coverage of the group ended.
Such developments can affect investor interest and the stock's liquidity, but these issues barely reacted--perhaps because investors have already responded to the financial challenges the industry is facing. "In my opinion, investor interest is at an all-time low in these companies," says Steve Hullibarger, a manufactured housing industry consultant in Sacramento, Calif.
In September, floor plan lender Deutsche Financial Services announced its exit from manufactured home inventory financing after being acquired by GE Commercial Finance. That same month, Oakwood Homes announced it would close 40 retail centers and five "factory-certified stores," following the path of Champion Enterprises, which said in August that it planned to close 64 retail stores and seven home building factories.
While analysts believe Champion's restructuring should allow it to continue operating, even at low demand, other operators face more serious challenges. "There's a lot of uncertainty about whether Oakwood will survive," says Hullibarger. "At 60 cents per share--and that's after a one-for-five reverse split to keep from being delisted from the NYSE--the former $245 stock (adjusted for the reverse split) looks like it's headed for oblivion."