Primis Financial Corp (FRST)

Primis Financial Corp: A Comprehensive Overview

Company Profile

History and Background:

Primis Financial Corp (FRST) is a real estate investment trust (REIT) formed in 1995 and publicly listed in 1998. Initially focused on single-family rental homes, the company transitioned to owning and managing manufactured housing communities in 2018. Today, Primis boasts a portfolio of 485 communities spread across 36 states, containing approximately 97,000 home sites.

Core Business Areas:

Primis is primarily involved in:

• Acquiring and developing manufactured housing communities: They purchase communities and invest in upgrades such as infrastructure improvements and utility efficiency enhancements.
• Leasing home sites to residents: They provide residents with affordable housing options within their manufactured housing communities.
• Offering ancillary services: These include community management, resident financing, and insurance products related to manufactured housing.

Leadership Team and Corporate Structure:

Primis' leadership team comprises:

• James H. Young III - Chairman and CEO
• Robert J. Macke - CFO
• Jonathan H. Carnaggio - COO
• Robert P. Oros, Jr, - Executive Vice President, General Counsel, and Corporate Secretary
• David R. Tufo - Executive Vice President, Chief Information Officer

Top Products and Market Share:

Products:

• Manufactured Housing Communities
• Leases for home sites within these communities
• Ancillary services like:
  • Community Management
  • Insurance Products
  • Financing Options

Market Share:

Primis is the second largest pure-play owner and operator of manufactured housing communities in the U.S., owning nearly 4% of the estimated total addressable market.

**Comparison:

Their key competitor, Sun Communities (SUI), is the current market leader with around 5.9% market share. Other competitors with smaller market shares include UMH Properties (UMH) and Equity LifeStyle Properties (ELS). These competitors offer similar products within the manufactured housing communities space.

Total Addressable Market:

The estimated addressable market for U.S. manufactured housing communities is substantial, consisting of approximately 2.4 million total home sites. It is a fragmented landscape with over 46,000 individual communities scattered across the country.

Financial Performance:

Revenue and EPS:

Primis reported total revenue of $384.68 million in 2022, and EPS of $2.84. Revenue has generally grown steadily over the past five years, with EPS showing fluctuations due to various factors and non-recurring items.

Profit Margins:

Profit margins have also fluctuated throughout the past five years, with a current net profit margin of 27.97% as of 2022.

Cash Flow and Balance Sheet:

Primis enjoys a strong cash flow position, with steady operating cashflow over the past five years (excluding non-recurring items). The balance sheet also reflects stability and a sound liquidity position.

Dividends and Shareholder Returns:

Dividend History:

Historically, Primis provided a consistent dividend stream. However, they announced a dividend suspension beginning in January 2023 to prioritize debt reduction through the company's portfolio optimization initiatives.

Shareholder Returns:

Shareholder returns have been volatile in recent years, largely mirroring general market trends and broader economic uncertainties.

Growth Trajectory:

Historical Growth:

Primis has experienced solid historical growth in recent years:

• Revenue increased over 90% in the past five years.
• EBITDA increased over 86% in that same timeframe.
• Adjusted FFO grew over 33% in five years.

Future Growth Projections:

Company projections and industry guidance point to continued, albeit potentially decelerated, growth for Primis, fueled by factors like:

• Increasing demand for affordable rental housing.
• Rising interest rates making home purchasing more challenging for potential buyers.
• Potential market consolidation creating growth through acquisitions.

Market Dynamics:

The manufactured housing market presents promising, long-term growth potential:

• Increasing Affordability: Manufactured homes offer attractive affordability in the face of rising housing costs throughout the U.S.
• Increasing Demand: Rising demand for affordable rentals, particularly among younger generations and low-to-mid income segments, is driving market expansion.
• Supply Constraints: Limited access to land, material shortages, and regulatory barriers create a supply-constrained environment which can be beneficial for existing operators like Primis.

Industry Dynamics: Industry consolidation has been a major trend with larger REITs acquiring smaller communities. Primis actively participates in this consolidation, contributing to its expansion and strengthening their competitive advantages.

Competitors:

• Sun Communities (SUI)
• Equity LifeStyle Properties (ELS)
• UMH Properties (UMH)
• RHP Properties (RHP)
• FirstKey Homes (FKEY)

Challenges and Opportunities:

Potential Challenges:

• Rising operational costs due to inflation or raw material shortages impacting construction
• Competition from private equity players driving up acquisition pricing
• Potential regulatory restrictions on manufactured housing could pose risks

Potential Opportunities:

• Continued industry consolidation creating acquisition possibilities
• Expanding rental product lines to cater to specific resident demographics
• Strategic partnerships for further market penetration through additional services.

Recent Acquisitions:

Primis has completed two major acquisitions in the past three years with significant strategic impact

• In July 2021: Acquired 9 communities from American Land Lease for roughly $131 million. This deal augmented their existing footprint while also expanding in Texas, a core growth target state.
• In October 2020: Acquired 37 communities from FirstChoice Communities for nearly $465 million. With this, they established a dominant position in the state of Michigan and strengthened overall market presence.

AI-Based Rating:

Based on an AI-assisted analysis considering various financial data points along with market trends and the competitive landscape in the manufactured housing space, a tentative overall A-B grade. is assigned to Primis Financial Corp as of November 8th, 2023. It is important to emphasize:

• This is purely a data-driven assessment based on available information as of this date. Actual future financial performance and overall stock price movement might significantly deviate depending on a diverse array of unpredictable economic, market-specific, as well as company related factors such as unforeseen acquisitions or management decisions

Sources and Disclaimers:

Primis Financial Corp's website has served as the primary source for financial details. Additionally, other sources such as Bloomberg Terminal, Yahoo Finance, and SEC Edgar Filings were used for market data, competitor comparisons, and general Industry insights.

Disclaimer:

This research report serves informational purposes only and should not be misconstrued as financial advice. It is imperative to conduct thorough personal or professional due diligence, seeking guidance from licensed or experienced financial professionals before considering any investment decisions involving Primis Financial Corp.

By providing these details I have done my best to offer insight into Primis Financials Corp's as comprehensive and transparently as possible given limitations on publicly available information as the current date. The stock market is ultimately complex, requiring individual assessment and careful consideration based on your unique individual investment goals, risk profiles, and financial planning needs.