SUM - Summerset Group

[Harvey Specter]

Re boomers etc, remember that retirement villages aren't targeting everyone. Due to huge numbers of them, they are only targeting the wealthiest 20% (excluding the top 5% who will pay to continue living in their mansions). These will own their own freehold, and have investments on the side.

Those with only their own home or those living in multigenerational living are not the target.

[percy]

All market wanes and waxes respond to economic cycles, including the property and share markets, and are mostly all correlated anyway. The secret of a long term hold is to stick with outperforming stocks.

The retirement sector has some degree of immunity also, the respectful elderly when they purchase are not buying property, they are buying aged care and security in knowing they will actually be taken care of in the twilight years, or, they are buying some degree of access to this security in advance anticipating requiring it in a few years.

You can’t take your wealth with you but you can end your days with dignity and respect, and your kids would probably just buy a sport’s car or go on an OE.

Just ten reasons why Summerset will continue to outperform;

1. Accelerating growth (an additional 200 units/yr in 2014 to 300 units/yr in 2015).
2. The aging demographic driving sector growth.
3. Baby boomers the wealthiest generation in human history.
4. Increasing net margins.
5. Award winning operational performance.
6. A sales and marketing premium for being the best in breed.
7. The highest ratio of villages within the lucrative Auckland region.
8. The highest land bank, also in key areas.
9. Revenue funded growth with only cashflow debt requirements.
10. Proven growth and goal focused management

Not to mention that SUM is undervalued at present.

Great post.!!

[Beagle]

I concurr with Mac's ten points above.
$500m investing in Auckland creating 1300 units = circa $385,000 average price inclusive of other village amenities.
On the subject of affordability and future house price movements isn't the average Auckland house now somewhere over $600,000 ?
Pretty comfortable margin of safety there I would have thought.

[skid]

Does your ''revenue funded growth with only cash flow debt requirements" mean that their properties are basically free hold so they are not to tied to raising interest rates?
(Just trying to get an idea of their debt levels)

Disc. Still in the research stage --good points Mac

[winner69]

Does your ''revenue funded growth with only cash flow debt requirements" mean that their properties are basically free hold so they are not to tied to raising interest rates?
(Just trying to get an idea of their debt levels)

Disc. Still in the research stage --good points Mac

Last financials has $79m odd borrowings (not counting the complicated stuff they owe residents which has no impact on interest cost anyway)

[MAC]

Does your ''revenue funded growth with only cash flow debt requirements" mean that their properties are basically free hold so they are not to tied to raising interest rates?
(Just trying to get an idea of their debt levels)

Disc. Still in the research stage --good points Mac

I’m not an accountant Skid but I do know construction, this is my humble understanding to share;

Summerset are as much a construction company as a village operator, they have access to 180M in available debt facilities as working capital if so required. Although it does not appear that they typically have utilised this facility fully over the last few years with borrowings typically closer to $80M.

They secured an increase in debt facilities in 2012 from $150M to $180M which allowed them to more comfortably accelerate and manage a planned increase in their build rate target from 250 units/yr by 2016 to 300 units/yr by 2015.

In 2012 they constructed $72M in new village assets with borrowings of $78M. This seems to be an annual reconciliation with working capital quickly paid down from revenues.

IMO it is a sign of a pretty good business model when your construction working capital is paid off annually from revenues in only twelve months or thereabouts.

http://www.summerset.co.nz/assets/In...h-site.sml.pdf

Summerset presently have $706M in assets under management.

Borrowings.jpg

[couta1]

So Couta, Id be interested to hear what you did in these firms and what motivated you to make your prediction.
They both obviously have lots of villages and working in one is not always an indication of the business overall,but having said that,often workers get a relatively good feel of how things are going--Do Share

Skid I can't say exactly what I do in these companies for various reasons including having contracts to work in competing companies and not biting off the hand that feeds you, I have worked in 18 different retirement complexes over the years including 2 Summerset and 2 Ryman facilities,others include Bupa,Oceania,Presbyterian support,Terra Nova and various small private operators,never worked in a Met home to date though, so I've done a thorough study of the different continuum of care models,management structures,management operating styles,staffing operations including staff-management interactions and delivery of care standards etc, I have observed various changes over the last 2-3 years in certain companies in a negative way and others in an increasing positive way,so with my position on Sum I think you can draw your own conclusions,my wife also has extensive experience in the sector.

[Beagle]

I take a bit of comfort from that Couta1, thanks for sharing. After seeing how my Dad was "cared for" in a dementia unit in Ryman's Orewa facility, I no longer own Ryman shares. In terms of SUM it certainly has the feel good factor investing in a company that's confirmed best of breed by independent awards at looking after its residents. Two days to go to the annual result, anyone else feeling a little excitable, or is it just me

[gv1]

I take a bit of comfort from that Couta1, thanks for sharing. After seeing how my Dad was "cared for" in a dementia unit in Ryman's Orewa facility, I no longer own Ryman shares. In terms of SUM it certainly has the feel good factor investing in a company that's confirmed best of breed by independent awards at looking after its residents. Two days to go to the annual result, anyone else feeling a little excitable, or is it just me

Count me in, already have bought lots was thinking whether to buy in more as sp quite low before the announcement.

[Vaygor1]

In terms of SUM it certainly has the feel good factor investing in a company that's confirmed best of breed by independent awards at looking after its residents.

According to Summerset's website, "Summerset has been named Best Retirement Village Operator in New Zealand and Australia at the Australasian Over 50s Housing Awards for four years running".

I have nothing against SUM at all and I am currently invested heavily in New Zealand's retirement sector. I am however sceptical about just how independent these awards are.

The awards come from an Australian based publication called Housing Care Aged Weekly. Refer http://www.seniors-housing.net/ They market themselves as a "Reuters level service" and this is their "Australian Edition", although I can't find any other edition in existence. A sample of one of their publications is here http://www.seniors-housing.net/core/...CHW-Sample.pdf

Looking at the awards on the 1st link above, there was a 2010 and 2011 award, both won by Summerset. But only nominations were called for for 2012 (with a closing date of 10 Aug 2012 for the nominations) with no winner yet, and there is no mention at all of 2013 or 2014 at all. Despite the sample in the 2nd link above, I didn't get the feeling this is a very big publication.

Around July last year, Housing Care Aged Weekly wrote an article besmirching RYM's proposed Wheelers Hill Village in Melbourne. They called it a 'Foray' and went so far as to call it a 'financial suicide mission'. The article also went a long way to misinterpret MorningStars comment on RYM's Wheeler's Hill village. Refer http://www.sharetrader.co.nz/showthr...l=1#post414737

Due to this article, I dug a bit deeper and found what I believe to be an undisclosed tie-up between Housing Care Aged Weekly and New Zealand's Summerset Group. I can't remember exactly what I came across but the tie-up seemed pretty clear to me at the time and I was not surprised to find it. I would be astonished to see any Australian based publication in any sector recognising New Zealand in front of itself for even one year let alone four. There are hundreds of aged care companies around Melbourne alone let alone the rest of Australia yet little known Summerset keeps winning? Ask any Australian in any Australian City if they have heard of Summerset. I can tell you what the answer will be, especially with no Summerset presence there yet.

In any event, due to my findings the credibility of this award, in my mind anyway, went out the window.