SUM - Summerset Group

[Jinx]

10.55 am the price will be $4.02,and at 4.35pm the price will be $3.98.

So you predict the "Summerset preliminary 2015 full year financial results will be released pre-market on Wednesday 24 February 2016" will not effect the price at all?

[trader_jackson]

So you predict the "Summerset preliminary 2015 full year financial results will be released pre-market on Wednesday 24 February 2016" will not effect the price at all?

I think a good result is already fully priced in, an average result will result in a fall, and a great result may help the share price to hold up above $4

[TFA]

Another site acquisition, this time in Hamilton. This is the 4th acquisition in the last 8 months after Warkworth extention (2.4Ha), St Johns (2.5Ha), Parnell (2.3) and now Hamilton (6.3Ha). Impressive growth to continue

[drcjp]

Bit of action this morning. Mainly off markets though.

[iceman]

Interesting ponderings from the Finance Minister. I wonder if the likes of RYM and SUM may even be directly interested in this idea ??http://www.stuff.co.nz/business/76936550/retirement-village-type-companies-will-enter-social-housing-in-5-years-english

[Hoop]

Interesting ponderings from the Finance Minister. I wonder if the likes of RYM and SUM may even be directly interested in this idea ??http://www.stuff.co.nz/business/76936550/retirement-village-type-companies-will-enter-social-housing-in-5-years-english
I hope not..
State Housing is not a viable business and will always need taxpayers funding.. Dependance on Govt funding can be tied up in a flood of R's... red tape, registration, restrictions, rules and regulations....Child day care businesses found this out when the 20hrs free care child funding came into being...

Also...
https://www.tvnz.co.nz/one-news/new-zealand/suspicious-fires-destroy-brand-new-christchurch-homes.html
http://www.newstalkzb.co.nz/news/national/hundreds-of-state-houses-empty-because-of-p-contamination/

[BlackPeter]

I hope not..
State Housing is not a viable business and will always need taxpayers funding.. Dependance on Govt funding can be tied up in a flood of R's... red tape, registration, restrictions, rules and regulations....Child day care businesses found this out when the 20hrs free care child funding came into being...

Also...
https://www.tvnz.co.nz/one-news/new-zealand/suspicious-fires-destroy-brand-new-christchurch-homes.html
http://www.newstalkzb.co.nz/news/national/hundreds-of-state-houses-empty-because-of-p-contamination/

Agreed, for some some state house tenants it might be more appropriate get Serco to house them.

However - they are a public company as well. On a second thought - Sercos trend chart (http://www.4-traders.com/SERCO-GROUP-PLC-9590148/charts/) looks similar but much worse than the CEN chart you have published on the other thread ... so you are probably right: while it is possible to make money in dealing with the state (military equipment springs to mind) - it seems to be in the long run hard (or impossible) to make money by providing privatised social services ...

So - lets put this idea into the nutty basket and leave this thread better for the profitable housing of better-of retired people ...

[artemis]

Actually not a bad idea. Some potential tenants, nope. But if you look at the Social Housing Register applicant stats nearly a quarter are over 55 and some 40% of all applicants are singles or couples (ie eligible for 1 bedroom).

Those over 55 would often be OK tenants, just with low incomes or health issues. If SUM or RYM, say, were to create complexes for the older age group - a demographic they certainly understand - it could work. However I see potential problems if MSD allocates tenants and the provider has to accept them no matter what, or the provider is expected to deal with or coordinate help for individual tenant issues. Either of those scenarios could soak up that subsidy in a heartbeat.

Many state house applicants have, shall we say, issues. (I have worked quite extensively in this area. Trust me on this!)

[Beagle]

Pretty good result and I see Norah Barlow is stepping down from the board in April. Now we have half way reasonable internal controls over when insiders can buy and sell and with this board change I might put this one back on my watch list now.

[blackcap]

Pretty good result and I see Norah Barlow is stepping down from the board in April. Might put this one back on my watch list now.

HI Roger, I inherited a few of these a while back so they are also on my watchlist now. Are you saying Norah Barlow stepping down is a good thing? Not sure whether to sell or hold but the announcement today reads well at face value.

[Beagle]

See my comments in 2014 regarding this matter, sorry its probably best I don't repeat them in the circumstances.

[blackcap]

Cheers will do and understand.

[JayRiggs]

10.55 am the price will be $4.02,and at 4.35pm the price will be $3.98.

Hey you weren't too far off with your prediction percy.
At 10:55am, the price was $4.01 and at 4:35pm, the price was $3.99.

[percy]

Hey you weren't too far off with your prediction percy.
At 10:55am, the price was $4.01 and at 4:35pm, the price was $3.99.

I am just as surprised as you are.!!!!..lol.
A very pleasing result.
This is a very well directed and managed business, in a sector with increasing tailwinds.
The stand out for me was the big increase in developments margin,up to 20% from 15.7%.

[James108]

I am just as surprised as you are.!!!!..lol.
A very pleasing result.
This is a very well directed and managed business, in a sector with increasing tailwinds.
The stand out for me was the big increase in developments margin,up to 20% from 15.7%.

I would assume (without doing any research into the matter) that this is largely due to the overall increase in house price Auckland has experienced between when summerset started developing the land and when they sold the occupation rights i.e. you will have a high 'development margin' when overall land values are increasing quickly. I would be surprised if this doesnt normalize. Don't really care though.. I am pretty lazy with analyzing SUM, would only look at it closely if prices dropped significantly enough to present a chance to further top up. It is def a 'bottom draw' investment for me.

[percy]

I would assume (without doing any research into the matter) that this is largely due to the overall increase in house price Auckland has experienced between when summerset started developing the land and when they sold the occupation rights i.e. you will have a high 'development margin' when overall land values are increasing quickly. I would be surprised if this doesnt normalize. Don't really care though.. I am pretty lazy with analyzing SUM, would only look at it closely if prices dropped significantly enough to present a chance to further top up. It is def a 'bottom draw' investment for me.

No I don't see it that way.
I see it as a result of bringing their development "in house," and their team benefitting from experience.

[Beagle]

The answer probably lies somewhere in the middle of these two factors IMO. No question the Auckland market has been on fire in the last 12 months so blind freddy could have got a premium price for a reasonable development in CY 2015, (since cooled a little in early 2016) and with the lag time from commencement to completion the booming Auckland market has played into SUM's hands.
That said credit where's its due and overall a good result and with build rate going up to 400 units this year the outlook is pretty good too. Based on underlying profit the stock is trading on a historic PE of 23 which for the first time in years seems pretty reasonable to me. I am pleased Mrs Barlow is stepping down. On my radar again but I don't feel a sense of compulsion or hurry.

[Food4Thought]

Glad to see a positive result like this. I still believe that this company has certainly not reached the capacity it will, and the demand will be very steady in the next 10 years. There is a large number of people choosing NZ as a retirement destination, even if for only part of the year. Speaking with a lot of foreigners who have parents eyeing up New Zealand. Topped up, long term. Some good decisions and company movements. Happy holder.

[Lewylewylewy]

I wonder how much the retirement property sector is at risk from government intervention or policy?

[Lewylewylewy]

Does anyone know how retirement homes work, in terms of paying for the stay?

[percy]

I wonder how much the retirement property sector is at risk from government intervention or policy?

Very little risk as it is in the government's interest for the private sector to build retirement units.
I understand future projections are there are not enough units being built.

[macduffy]

Does anyone know how retirement homes work, in terms of paying for the stay?

The short answer is that residents buy a right to occupy which is refunded, less an amount calculated on a pre-determined formula, when the occupant ceases to occupy! A monthly management fee is also payable by the occupant - to cover "common" outgoings such as insurance on the buildings, maintenance, gardening etc. Occupants pay their own utilities - electricity, phone and insurance on contents. Ryman, for one, guarantee that the management fee is fixed for the full term of occupation.

E and OE

[Baa_Baa]

The short answer is that residents buy a right to occupy which is refunded, less an amount calculated on a pre-determined formula, when the occupant ceases to occupy! A monthly management fee is also payable by the occupant - to cover "common" outgoings such as insurance on the buildings, maintenance, gardening etc. Occupants pay their own utilities - electricity, phone and insurance on contents. Ryman, for one, guarantee that the management fee is fixed for the full term of occupation.

E and OE

Then after 'retirement' in the owner occupied 'rest homes' the inevitable follows, it is in the interest of the 'rest homes' to provide for the full pathway to gods waiting room, as it maximises revenue. Despite the reverse correlation to feebleness, revenue is maximised by longevity. This involves not gutting the retirees equity completely if it is avoidable, as that is required to fund the early subsequent stages. The next step on the pathway being the move from the 'retirement home' to the 'communal' rest home, which is expensive, unlike though analogous to a backpackers for old or in-firmed folks. When that equity is gone which it will be for many of the long lived, the state chips in, which is fortunate as many have nothing left, but not all. Still, the rest home provider prospers. Most but not all will have lost their marbles as they progress to high-needs then to hospital care, the fortunate few have family or trustees minding their care. Still, the rest home provider prospers. After that it's gods waiting room, just waiting for the time until they ride the gurney to the exit. End of prosperity, end of life. Still, the rest home providers prosper, until it's over and done with. What a great investment.

[trader_jackson]

Very little risk as it is in the government's interest for the private sector to build retirement units.
I understand future projections are there are not enough units being built.

I think I saw somewhere that in the short supply was expected to meet demand quite well, if not slightly exceed it, mainly due to SUM (and others) going on a 'building spree', what SUM does have in its favor is that its villages are generally good quality (position wise and build wise).., those that are not that great, or are not "needs based" will suffer a little short term. The big boom will also be those needing care, not just going to live in apartments (where I know the big money is)... perceptions towards destroying wealth by going to live in a retirement village apartment are changing slightly in the older population, with some even preferring in-home care

[trader_jackson]

Share price has barely moved around since the results... no surprise for me, even with the results being slightly better than expected... we all know it was already fully priced in

[Lewylewylewy]

Thanks for the info. I read an article saying that govt paid about $800-$900pw per person, then the retiree can to up further to get extras to make their stay nicer.

[fungus pudding]

Thanks for the info. I read an article saying that govt paid about $800-$900pw per person, then the retiree can to up further to get extras to make their stay nicer.

I thought the govt, subsidy only kicked in once personal funds are exhausted. But I could be way off beam there. It's a long time since I was involved with anyone requiring rest home care.

[percy]

I thought the govt, subsidy only kicked in once personal funds are exhausted. But I could be way off beam there. It's a long time since I was involved with anyone requiring rest home care.

That's the way it is.
Trader Jackson.SP has not factored in the fact SUM have laid the foundations for increased build rate,or the growth in development margin,or increasing resales.I expect we will see SUM rerated upwards shortly.
Lewylewylewy.I am sorry I can't find or remember where I saw it but the article did say if RYM,MET,SUM upped their build rate considerably there would still be a massive under supply of retirement units.We must also remember these companies could stop building in NZ and concentrate in Australia should the NZ government change the rules.

[Baa_Baa]

I thought the govt, subsidy only kicked in once personal funds are exhausted. But I could be way off beam there. It's a long time since I was involved with anyone requiring rest home care.

It's not quite that simple as there are a number of variables associated with; an individuals needs; their age; whether they have a partner relationship (or not); dependents; their assets and financial means. For retirement/rest home/high needs/hospital care, the good news for investors is that at all stages of the pathway to exit, the funding be it from individuals or the government is channeled to the provider. This of course is about funding needs and care, it is not the other aspect of aged care homes being the property portfolio. It is explained here: http://www.workandincome.govt.nz/documents/brochures/residential-care-subsidy.pdf

[Bjauck]

I thought the govt, subsidy only kicked in once personal funds are exhausted. But I could be way off beam there. It's a long time since I was involved with anyone requiring rest home care.
Yep your right...but only a small percent actually have enough assets - or rather, assessable assets and income - not to be able to get any rest home subsidy apparently. The full unsubsidised cost that people have to pay for Hospital level care is capped at the same amount for the full cost for rest home care. The government (Hospital Boards) then pays the extra (top up) cost for hospital level care for all rest home hospital residents.

[Beagle]

Real shame we don't have Couta1 here to comment any more with all his expertise in the retirement sector. Come back Couta1, many of us miss you !!!!!!

[777]

Below are the maximums payable in the different board areas.

http://www.adhb.govt.nz/SeniorLine/docs/MaximumContribution.pdf

[Beagle]

SUM, (sorry couldn't help myself) at the recent Auckland ST meetings are pondering if SUM hasn't worked its way back into contention and I'm one of them.
Since selling in early 2014 for about $3.60, (mainly a result of both the now infamous "Norah Barlow sale") and over-valuation a number of things have occurred.
1. First and foremost after some heated shareholder activism and assistance from the Shareholder Association SUM now have a half way reasonable policy providing some reasonable safeguards around when insiders can buy and sell securities.
2. Underlying earnings have grown by 10% in Fy14 and 55% in Fy15, a compound total growth in underlying earnings of 70% against an increase in SP of just over only 10%.
3. The relative under-performance compared to the NZX50 has been exacerbated by the very low unimputed dividend yield.
4. Development margins have expanded from just over 15% to 20% so the company has clearly nurtured and grown its abilities as a developer
And now last, but certainly not least as far as I am concerned anyway, Mrs Barlow is stepping down from the board.
I see they are even trialling a dementia ward this year, wonder if Couta1 thinks this is good news ?

I ran the ruler over this when I heard that Norah Barlow is standing down and have been reflecting on the fact that it now appears SUM is trading on its lowest historical underlying PE for many years, (now 23). That and they're confirmed their current year build target is to grow the number of new units constructed from 300 last year to 400 in 2016, 33% forward growth.

Further, for the TA enthusiasts amongst us, we now have a clear break-out above the 100 day MA.

To SUM up, maybe its time to have another look at this one from a long term growth perspective ?

[sb9]

SUM, (sorry couldn't help myself) at the recent Auckland ST meetings are pondering if SUM hasn't worked its way back into contention and I'm one of them.
To SUM up, maybe its time to have another look at this one from a long term growth perspective ?

So, I guess its one of the picks of ST members Auckland meeting then eh Roger ;)

Could you spill the beans on other picks pls.

[Beagle]

Oh all rightee then

Looking at Forest's hyrogliphics and deciphering them as best I can I can make out 11 picks from the dozen there plus my somewhat left field SUM theory. I asked everyone for their top pick for the next 6 months, one stock only
2 x AIR
2X THL
2 x ATM
RYM
SCL
VGL
FPH
SAN

Actually I think my left field SUM theory might have been as an adjunct to this discussion, yes it was because I'm pretty sure I was one of the ones that picked...you know what :D
That's right I remember now, KW had here sister there and she's not into shares so that's why there was only 11 picks.

[sb9]

Oh all rightee then

Looking at Forest's hyrogliphics and deciphering them as best I can I can make out 11 picks from the dozen there plus my somewhat left field SUM theory. I asked everyone for their top pick for the next 6 months, one stock only
2 x AIR - HOLD
2X THL - HOLD
2 x ATM - HOLD
RYM
SCL - HOLD
VGL
FPH
SAN

Actually I think my left field SUM theory might have been as an adjunct to this discussion, yes it was because I'm pretty sure I was one of the ones that picked...you know what :D
That's right I remember now, KW had here sister there and she's not into shares so that's why there was only 11 picks.

Appreciate that greatly Roger.

I'm not too far out then with their picks as highlighted of my current holding as above.

[skid]

Both VGL and SAN have only one sale today between them:scared:

And what was the general goss on Gold-silver

unless its gold co shares I suppose its almost an inverse relationship to equities

[Beagle]

KW keen on gold and silver...have to follow her up on what vehicle's she's using for that.

[Beagle]

https://nzx.com/companies/SUM/announcements/279130

Director purchasing on market. I suspect Dr Marie Bismark with her background is the one driving the new dementia care unit too and obviously thinks this will be earnings accretive going forward.

[trader_jackson]

Over on the Arvida thread I was repetitively told that care based facilities (such as dementia care, which Arvida also have) was extremely low margin and that "the only way to make lots of money" was to keep building (which I do understand)?

But now that SUM are venturing more into the "care business", and it sounds like its suddenly a great thing?

Disclosure: I am probably missing something here...

[Beagle]

You are probably right that it doesn't drive earnings much per se but what it does do is make any new village more attractive to incoming residents as they feel comfortable that SUM can provide the full continuum of care model that RYM do and by doing that they can probably ask another $20,000 per unit sold and people will pay it because they feel all their future healthcare needs will be met and they're completely looked after... pretty cunning eh :) Now that we have them sorted on that matter and the insider trading policy all Couta1 and I need to do is to help them understand that if they offer a fixed weekly fee for life, (that's jacked up to include the first 7 years expected inflation) so costs them nothing, they can add another $20,000 per unit because the old folks feel they're really being looked after financially as well,...now that would be as cunning as......Ryman :)

[trader_jackson]

You are probably right that it doesn't drive earnings much per se but what it does do is make any new village more attractive to incoming residents as they feel comfortable that SUM can provide the full continuum of care model that RYM do and by doing that they can probably ask another $20,000 per unit sold and people will pay it because they feel all their future healthcare needs will be met and they're completely looked after... pretty cunning eh :) Now that we have them sorted on that matter and the insider trading policy all Couta1 and I need to do is to help them understand that if they offer a fixed weekly fee for life, (that's jacked up to include the first 7 years expected inflation) so costs them nothing, they can add another $20,000 per unit because the old folks feel they're really being looked after financially as well,...now that would be as cunning as......Ryman :)

I do see where you are coming from, "the one stop shop", thanks for the explanation. I believe Arvida has a similar (ish) model, but of course much smaller (as the market cap would also indicate), and more skewed to the care side of things.

[Ggcc]

I spoke to someone within Ryman who sells the units. They told me they make no money on dementia patients, they do it as a service and not to make money. I think it is a great concept, as the elderly need to be looked after when they can't do it for themselves. Life unfortunately is not always about making money. Maybe Summerset may follow suit....?

[trader_jackson]

I spoke to someone within Ryman who sells the units. They told me they make no money on dementia patients, they do it as a service and not to make money. I think it is a great concept, as the elderly need to be looked after when they can't do it for themselves. Life unfortunately is not always about making money. Maybe Summerset may follow suit....?

"They make no money", that does make me laugh... before he moved to Ryman, did that someone use to be a car salesman? He probably meant they made 'no money' in comparison to their apartment sales... I doubt Summerset will follow a model of foregoing profits to do something for the good of the elderly (as unfortunate as it sounds)

[Beagle]

No such thing as an ongoing free lunch, RYM, MET, SUM...it's all built into the up front price and yes agreed there is little money to be made from dementia care. That said there are some not for profit retirement homes around the country.

At least SUM are really pet friendly, unlike many others. I know my mother would dearly love a small dog now that Dad has passed on but isn't allowed at her retirement village.

[skid]

im holding physical,but my guess is she would be going through a company(shares)

disc--for me its been more of an insurance than quick profits--its certainly had its ups and downs .

[skid]

I spoke to someone within Ryman who sells the units. They told me they make no money on dementia patients, they do it as a service and not to make money. I think it is a great concept, as the elderly need to be looked after when they can't do it for themselves. Life unfortunately is not always about making money. Maybe Summerset may follow suit....?

the fact they make no money (or little)on the Dementia wards ,does not mean that including them does not make money for the rest of the system--call it a ''loss leader''---Its the one thing i used to hate about SUM--(they were more property speculators ,than care providers----this is a move in the right direction iMO

[Bjauck]

No such thing as an ongoing free lunch, RYM, MET, SUM...it's all built into the up front price and yes agreed there is little money to be made from dementia care. That said there are some not for profit retirement homes around the country.

At least SUM are really pet friendly, unlike many others. I know my mother would dearly love a small dog now that Dad has passed on but isn't allowed at her retirement village. A real shame about blanket ban on having dogs. A relative's rest home even has a Afghan hound that is brought in on a regular basis. Great therapy for the residents. However, I can understand about a ban on Rottweilers and their ilk. Even some smaller terriers can be incredibly annoying for neighbours with their constant yapping (and pooping if there is no fencing!) Plus some dogs can cause damage by scratching and digging.

[Food4Thought]

Good morning. Anyone able to find SUMs buy policy for DRIP? When do they purchase the shares on market? Or do they issue additional? Cheers

[Food4Thought]

Good morning. Anyone able to find SUMs buy policy for DRIP? When do they purchase the shares on market? Or do they issue additional? Cheers

:D

DRP - Page 26 - Summerset Results Enging December 2015 -Issued 24 February 2016. Record date for DRP was 9th March. :t_up:

[Ggcc]

It was a she and she seemed very sincere. She mentioned there were loads of extra costs involved in housing dementia patients. She also mentioned Australia was really taking off for Ryman.

[Ggcc]

I am not unhappy about this share going up up and away, but is this not at the upper end of analysts forecasts?

[winner69]

I am not unhappy about this share going up up and away, but is this not at the upper end of analysts forecasts?

Do you believe analyst forecasts actually mean anything?

[Beagle]

Analysts haven't upgraded for Norah leaving.

[winner69]

Analysts haven't upgraded for Norah leaving.

If cgcc is worried about the price getting close to analyst forecasts he might be thinking of selling and locking in profits.

[Ggcc]

Exactly correct winner. If it gets too high I may consider selling. We all saw what happened to Ryman when it went to $9+ per share. I bet plenty of people wished they sold then in hindsight.

[Beagle]

Ryman at over $9 at the time, over 2 years ago represented a company trading on a forward PE IIRC of 31 based on underlying earnings. SUM trading on a historical underlying PE of only 24 which is the cheapest its been in years and there's the distinct prospect of a substantial uplift in underlying profit this year as development ramps up from 300 units a year to 400, a 33% increase. All things being equal this should lead to a 33% SP increase this year, $4.30 to $5.72 and even then it would be trading on a reasonable PE for the sector.

If one takes the view that these retirement stocks should be based on IFRS reported profits incl of revaluation gains that happen almost without fail every year so there's a good argument that they should be included in normal earnings then SUM is trading on a record low historical PE of 11.2 times.

[winner69]

Exactly correct winner. If it gets too high I may consider selling. We all saw what happened to Ryman when it went to $9+ per share. I bet plenty of people wished they sold then in hindsight.

You going to make heaps more cgcc

Yahoo says guru analyst targets range from 449 to 515

Only one of those figures is anywhere near what will happen

Cgcc - what you reckon it worth?

[winner69]

You going to make heaps more cgcc

Yahoo says guru analyst targets range from 449 to 515

Only one of those figures is anywhere near what will happen

Cgcc - what you reckon it worth?

And roger reckons $5.72

And that's cheap when they make $120m odd this year

[Ggcc]

That is why I am asking I don't know? I am usually a longterm holder, but have found that holding long term without considering selling ends in lost profits. I am happy holding on what you have and Roger have mentioned. I realise that Summerset is in a growth stage and is developing well. I prefer capital gain over dividends as I am still working. When You look at the charts I see a snake slithering along the sand and potential profits that could have been made. That is why I think I need to consider a sell price

[Beagle]

And roger reckons $5.72

And that's cheap when they make $120m odd this year

That's before we start talking about the fact that their development margin has been tracking up every time they release a set of half year results and this can only improve with the extra efficiency and economies of scale as they continue to ramp up the level of their development activity. The efficiencies of buying building products in serious bulk are often overlooked by the market and its looks like the new procurement manager they appointed a while back really knows their stuff.

[Food4Thought]

I would comfortably predict SUM will get to $4.75 before mid year (July 2nd). What SUM share price does by year end is anyone's guess. Currently looking even more attractive as interest rates decrease as well recent decreased exchange rate. The model is in place for growth with this enterprise. I have made predictions I wish I kept to when GFC hit 2008 wasn't a nice year for me at all. How ever, each share I held then, is now XYZ + to my selling value. One of the issues of being a broke student who needs the cash to pay some unexpected bills. Great learning lessons with some serious losses. How ever... smiling a lot with my NZX decisions the last 6 years. Would like to say, I told you so, how ever, that may be foresight? Couta told us so too - come back

[Beagle]

Yeah come on Couta1 I know you are lurking, the moderators seem more moderate now and lots of us miss you mate.

[OldGuy]

Well hasn't SUM had a nice SP run, lately?

Yay for positive market sentiment!

:)

[percy]

Well hasn't SUM had a nice SP run, lately?

Yay for positive market sentiment!

:)

No surprises here.
Good directors.
Good management.
Good sector with huge tailwinds.
Must say I think we remain "well positioned,."

[silu]

Together with MEL my biggest NZX holding..... and I feel fine (with thanks to R.E.M.)

[Beagle]

Well hasn't SUM had a nice SP run, lately?

Yay for positive market sentiment!

:)


No surprises here.
Good directors.
Good management.
Good sector with huge tailwinds.
Must say I think we remain "well positioned,."

Is it a coincidence that the SP has really taken off since Mrs Barlow said she was retiring as a director...

[percy]

The short answer is No.!

[macduffy]

Now, now, Roger!

Remember, you promised to stop scratching that particular itch!

;)

[Food4Thought]

Anyone want to make a guess to where the S.P will be in 5 weeks? This isn't a result of Mrs Barlow resigning. That clouded peoples vision and feelings for this company. Don't get so emotional guys. Especially Couta1 :p

[Beagle]

Now, now, Roger!

Remember, you promised to stop scratching that particular itch!

;)

Pretty sure part of my DNA is being a naughty dog...must stop chewing on old buried bones :)

[winner69]

Anyone want to make a guess to where the S.P will be in 5 weeks? This isn't a result of Mrs Barlow resigning. That clouded peoples vision and feelings for this company. Don't get so emotional guys. Especially Couta1 :p

Guru Ben Graham said 'Buy not on optimism, but on arithmetic.'

The arithmetic is -

Share price end of year $6 - 40 weeks to go - so 4 cents a week - so in 5 weeks sUM about $4.65

The optimism is -

Over $5.00 as the market realises this years earnings will be in excess of $120m

[Beagle]

I reckon the retirement sector is one of the VERY few where you can reliably predict long term earnings growth. Must apply Ben Graham's formula to SUM and see what valuation that gives us.

What long term 7-10 year average growth rate you guys reckon I should use. Same as RYM 15%, a little more or less ?

Here's how it looks with 15%

v = previous years EPS..he didn't have fancy terms like revaluations so we'll be nice and conservative and stick with underlying EPS which was 37.8m / 220.26m shares = 17.16 cps x (8.5 + 2G) where g = 15% per annum long term average growth, we get $6.61

Here's how it looks at 17%
If it can grow a little faster than RYM because its relatively small and nimble and we assume 17% average underlying profit growth we get $7.29

Here's how it looks at 13%
If average growth not quite as good as Ryman then we get $5.92.

I reckon that Ben Graham knew a thing or two.

Of course if earnings growth is something like 40 - 50% this year because of the big jump in build rate and further efficiencies and economies of scale we might have to revisit these numbers next year.

[Gunny]

I know where Mum and Dad are (Summerset) the minimum age for entry is now 70 and the price for a 3 bedroom in the complex is now over 500K. So turn rates may increase over time with older age entry point. Although Dad did say money talks as well to getting in.

Gunny

[winner69]

I reckon the retirement sector is one of the VERY few where you can reliably predict long term earnings growth. Must apply Ben Graham's formula to SUM and see what valuation that gives us.

What long term 7-10 year average growth rate you guys reckon I should use. Same as RYM 15%, a little more or less ?

Here's how it looks with 15%

v = previous years EPS..he didn't have fancy terms like revaluations so we'll be nice and conservative and stick with underlying EPS which was 37.8m / 220.26m shares = 17.16 cps x (8.5 + 2G) where g = 15% per annum long term average growth, we get $6.61

Here's how it looks at 17%
If it can grow a little faster than RYM because its relatively small and nimble and we assume 17% average underlying profit growth we get $7.29

Here's how it looks at 13%
If average growth not quite as good as Ryman then we get $5.92.

I reckon that Ben Graham knew a thing or two.

Of course if earnings growth is something like 40 - 50% this year because of the big jump in build rate and further efficiencies and economies of scale we might have to revisit these numbers next year.

Scary stuff - whichever you look at Summerset you get a valuation in excess of $6

My simple arithmetic is f16 earnings of 55 cents a share ($120m) and a conservative PE of 11 gives value of $6.06 as a bare minimim. Thats not a target price - thats what it should be now.

[winner69]

Hey Roger - do that sum this time next year with 30 c/s earnings and 15% growth you will get $11.50

Even if that seems outrageous it does highlight how cheapSUM is at the moment.

[Beagle]

Hey Roger - do that sum this time next year with 30 c/s earnings and 15% growth you will get $11.50

Even if that seems outrageous it does highlight how cheapSUM is at the moment.

Yeap, all the risk is to the upside when its clear the current year increase in build rate is growing from 300 units per annum to 400. Looks cheap to me, might have to get some more...reckon it'll be the Easter bunny that keeps on bringing joy. At some stage soon once the word is properly out we might even see it do a RYM where its gaps up more than 100% over a 18-24 month period.

[winner69]

Yeap, all the risk is to the upside when its clear the current year increase in build rate is growing from 300 units per annum to 400. Looks cheap to me, might have to get some more...reckon it'll be the Easter bunny that keeps on bringing joy. At some stage soon once the word is properly out we might even see it do a RYM where its gaps up more than 100% over a 18-24 month period.

Punters should do their own arithmetic (Ben's word) to see what Summerset might make next year. Better than these rule of thumb formulae.

Estimate how many sales of new units and resales of existing units and multiply it by how much you reckon they make (essentially the realised fair value adjustment figure) on average from each sale.

Thats the underlying profit and don't forget that all the other properties will be revalued up as well. There is nothing on the horizon to suggest that revaluations over the next few years wont be pretty healthy

Then what's Summerset worth?
.

Easter homework - its meant to rain a couple of days..

[winner69]

Couldn't but help notice on NZX website SUM up 39% ver last 52 weeks while RYM is still the same price.

SUM the preferred stock in retirement sector and seen to have greater medium term potential?

...or just the Norah effect

[Beagle]

Uncle Percy reckons SP follows earnings so underlying EPS up 55% last year and looking at 40-50% this year and only a 39% increase in SP means heaps of room for this puppy to run....but wait there's more...look at it since I sold 2 years ago at $3.60. Combined FY14 and Fy15 EPS growth since then has been 70% so 3.60 x 1.7 = $6.12 now (not a price target in 12 months time with another 40-50 growth). Freaky how that $6 figure keeps cropping up isn't it !!

[percy]

Uncle Percy reckons SP follows earnings so underlying EPS up 55% last year and looking at 40-50% this year and only a 39% increase in SP means heaps of room for this puppy to run....but wait there's more...look at it since I sold 2 years ago at $3.60. Combined FY14 and Fy15 EPS growth since then has been 70% so 3.60 x 1.7 = $6.12 now (not a price target in 12 months time with another 40-50 growth). Freaky how that $6 figure keeps cropping up isn't it !!

Even more enjoyable when you have a "free ride".

[Beagle]

https://nzx.com/companies/SUM/announcements/279812 Annual report out. On a really quick 5 minute skim read so far I've seen Lots of talk about best practice, milestones, growth and lots of very strong and attractive bar graphs with exceptional growth over time...even a picture of an attractive grey dog. Well worth a good read.


As previously mentioned, a development margin uplift to 20% in 2015 is a strong measure of the model’s success. It has also resulted in an increased rate at which we can expand. We believe there could be further gains to come from ongoing improved procurement and forward planning of how we develop our sites.

I especially liked this bit seeing as most of their underlying profit comes from development and the build rate is increasing to 400 units per annum from 300 last year. Also worth noting that the development margin while 20% overall last year, itself a fantastic result, it was 20.5% in the second half, quite an improvement from the first half so that's a pointer on how the development margin is going to track for 2016.

[Food4Thought]

Wondering about who is buying up these smaller parcels of shares. Normal story, increase of 20-30%, average short term investor sells up. Looking forward to seeing some big investors stakes increase by compulsory disclosure. Don't sell too early, unless you need the cash and can make better investments, this one is worth a lot more than money in the bank long term. Hopefully there are no sell recommendations around on this one. SUM $4.50 by the end of next week? Follow the trend

[macduffy]

. Hopefully there are no sell recommendations around on this one.

FWIW, Craigs Investment Partners have a "Neutral" on SUM. (And on RYM and Metlifecare.)

[Food4Thought]

What is this "game"of end of day HIGH buy prices and LOW sell prices? Watching from ASB securities this is like some kind of play? How does it work

[Lewylewylewy]

It's an ASB f up, they seem to get the buys and sells the song way around if you look at the depth. People do put fake buys and sell orders in after close though

[Snow Leopard]

What is this "game"of end of day HIGH buy prices and LOW sell prices? Watching from ASB securities this is like some kind of play? How does it work

It is called the pre-close and ends in a price & volume matching 'auction' in the same way as the pre-open and the beginning of trading.


It's an ASB f up, they seem to get the buys and sells the song way around if you look at the depth. People do put fake buys and sell orders in after close though

The f up is not the ASB. You are making ill-informed comments. :t_down:

Best Wishes
Paper Tiger

[limmy]

How does this pre-close work? I've often wondered why this is done and how it's carried out.

[777]

How does this pre-close work? I've often wondered why this is done and how it's carried out.

It also happens at the opening. Pick a stock and work through it. It is a relatively simple process. There are no fake bids.

[BlackPeter]

How does this pre-close work? I've often wondered why this is done and how it's carried out.

Google and you shall find an answer. However - if your search engine is broken, try this:

https://www.anzsecurities.co.nz/directtrade/static/depthtutorial.aspx


Pre-open and pre-close
The time periods either side of an open market are referred to as "pre-open" and "pre-close".

During pre-open and pre-close, Bid and Ask prices can be entered into the market but trades will not occur until the market actually opens for trading.

Refer to the timetable below:

NZX pre-open: 9:00am ASX pre-open: 9:00am (NZT)
NZX open: 10:00am ASX open: 12:00pm (NZT)
NZX pre-close: 4:45pm ASX pre-close: 6:00pm (NZT)
NZX close: 5:00pm ASX close: 6:15pm (NZT)


Pre-open period

During the pre-open period, investors may examine the quantities and prices on either side of the market to predict the potential trading sentiment for the day ahead.

In a situation where the Bid price exceeds the Ask price during pre-open, the opening price is found by a rule-based algorithm used by the relevant stock exchange.

When the market opens, the algorithm takes into consideration the volume and prices on each side of the market and uses four sequentially-applied steps to determine the open price. If a result cannot be found when the first rule is applied, the second rule will also be applied and so on until a price is created.

If you wish to view more information about the algorithm, an explanation can be found on the Australian Stock Exchange website.

Pre-close period

The same logic applies during the pre-close period, where investors have a 15 minute window to enter an order into the market for it to be potentially "matched off" at the specified close time, according to the price and volume on the Bid and Ask sides of the market. If the order is not matched, based on Bid/Ask price and volume, the order remains in the market queue until the following trading day when it can then be altered, removed completely or left unchanged.

[Bjauck]

Couldn't but help notice on NZX website SUM up 39% ver last 52 weeks while RYM is still the same price.

SUM the preferred stock in retirement sector and seen to have greater medium term potential?

...or just the Norah effect Maybe SUM has/had? been playing catchup to RYM?

Over 2 years: RYM SP down 4%; SUM up 22%; MET up 27%, NZX50 (gross) up 30%
NB resigned as CEO Sept 2013
Over 3 years: RYM up 67%; SUM up 67%; MET up 62%, NZX50 up 52%

[BlackPeter]

Couldn't but help notice on NZX website SUM up 39% ver last 52 weeks while RYM is still the same price.

SUM the preferred stock in retirement sector and seen to have greater medium term potential?

...or just the Norah effect

Well yes - you are correct as long as you discount the real winner of the race! If you take MET into the selection than you will find that SUM is only second best (and RYM on place 3 out of 3) ...

check: http://www.sharetrader.co.nz/showthread.php?6914-MET-Metlifecare-one-for-the-fundies&p=614241#post614241

[percy]

Well yes - you are correct as long as you discount the real winner of the race! If you take MET into the selection than you will find that SUM is only second best (and RYM on place 3 out of 3) ...

check: http://www.sharetrader.co.nz/showthread.php?6914-MET-Metlifecare-one-for-the-fundies&p=614241#post614241


I guess we could agree MET,RYM,SUM are great investments in a sector that has great growth prospects.
I am enjoying a "free ride" with both RYM and SUM.

[Beagle]

I guess we could agree MET,RYM,SUM are great investments in a sector that has great growth prospects.
I am enjoying a "free ride" with both RYM and SUM.

You must be pleased with yourself that you sold down given their previous highly stretched valuations. Far more cunning, (legendary even), would have been to exit the sector completely after making a bold and controversial call it was over-priced about two years ago like some of us did and completely avoided the woeful under-performance of the last two years especially from Ryman and until the last 6 weeks or so from SUM as well.

One thing I will agree with you on is the sector overall has strong growth prospects and if you hold anything long enough in a sector with strong tailwinds you'll do well eventually... even if you have to endure sometimes lengthy periods of relative under-performance.

When will RYM break out of its protracted period of lacklustre SP performance ???, who can say for sure.

[percy]

You must be pleased with yourself that you sold down given their previous highly stretched valuations. Far more cunning, (legendary even), would have been to exit the sector completely after making a bold and controversial call it was over-priced about two years ago like some of us did and completely avoided the woeful under-performance of the last two years especially from Ryman and until the last 6 weeks or so from SUM as well.

One thing I will agree with you on is the sector overall has strong growth prospects and if you hold anything long enough in a sector with strong tailwinds you'll do well eventually... even if you have to endure sometimes lengthy periods of relative under-performance.

When will RYM break out of its protracted period of lacklustre SP performance ???, who can say for sure.

I am more than happy with my way of doing things.
May not be perfect,but neither am I .
But it really works well enough for me.
In fact I can add AIA,EBO,FPH,SCL and TIL to the list of either "free" shares, or shares that owe me very little ,by just taking a little "off the top" when I have felt like it.

[Beagle]

I am more than happy with my way of doing things.
May not be perfect,but neither am I .
But it really works well enough for me.

Happy for you if you're happy Percy and think it works. No question there's good money to be made in property, ask any Auckland property investor how they've done in recent years !!
Doing some year end valuation yesterday what really surprised me was how well some of the quiet property shares have done compared to the once extremely glamorous retirement sector stocks.
I flicked out of RYM and into GMT at 96 cents in early 2014. That REIT which is hardly ever discussed on here has gone from 96 cents to $1.34 a 39.6% gain in the period RYM has gone backwards 4% and further it has paid a net 7% return each year in dividends so all up including dividends a 53.6% gain ! Not too shabby for a boring old REIT is it !

I think the moral of the story is that sometimes shares simply get ahead of themselves and RYM has been a classic case in point after exponential gains grossly in excess of EPS growth leading up to early 2014.

[percy]

Shares do overshoot and undershoot.
We have seen some posters fall in love with a share,only to fall out of love.
It does happen.
Fun to watch.

[Food4Thought]

Bit of a drop going on today. She'll be right

[winner69]

Bit of a drop going on today. She'll be right


Of course we'll be right

Next week after the March quarter sales are released the share price will step up

I reckon the sales report will be a boomer

[Lewylewylewy]

We don't call it a drop of, we call it an opportunity lol

When's the next SUM report due, anyone know?

[winner69]

We don't call it a drop of, we call it an opportunity lol

When's the next SUM report due, anyone know?

Any day soon ....might even be Friday

Summerset say: Quarterly metrics on occupation right sales are provided by the 10th of the month following the end of each quarter

[limmy]

Google and you shall find an answer. However - if your search engine is broken, try this:

https://www.anzsecurities.co.nz/directtrade/static/depthtutorial.aspx

Thanks BlackPeter, useful link. I'm better informed now about pre-open and pre-close.

Cheers, limmy

[Beagle]

On track to build 400 units this year and 33% increase on last year. Q1 broadly in line with last year's sales.
Happy to hold for growth.

[couta1]

On track to build 400 units this year and 33% increase on last year. Q1 broadly in line with last year's sales.
Happy to hold for growth. Hey Roger there's no mention by Julian about that lovely Boulcott site aye, looks like Ryman got the jump on them with that 440 resident Bob Scott facility now up and running just down the road in Petone:cool:

[Beagle]

Yes there's a fly in the ointment somewhere in most business operations mate...everyone makes mistakes, for example the correct emoji for such a cheeky post from you would have been would have been :p and right back at ya mate...I suppose your much admired mate Norah can start buying or selling now that the Q1 results are actually out :p

[couta1]

Yes there's a fly in the ointment somewhere in most business operations mate...everyone makes mistakes, for example the correct emoji for such a cheeky post from you would have been would have been :p and right back at ya mate...I suppose your mate Norah can start buying or selling now that the Q1 results are actually out :p Couldn't bring myself to be so smug mate so I chose a more humble looking face.

[NZSilver]

Share price in the late 3's here we come. Underwhelming result and do not hold sum

[Beagle]

Share price in the late 3's here we come. Underwhelming result and do not hold sum

Quarterly results vary depending on the amount of new units completed in the quarter and how many people move on. The most important thing is after last years 55% increase in underlying profit which was a huge jump, early sales are tracking in line with last year and they confirmed that overall for the year they are on track to deliver 400 new units, (compared to 300 last year), 33% growth this year in new build which is where make most of their underlying profit. I also expect to see some further improvement in development margins so we look set for a substantial uplift in underlying profit for 2016 even on the back of last year's 55% increase. I guess you can either focus on a single quarter or have some vision, (really not that difficult), and see where the company is headed.

[Bjauck]

Share price in the late 3's here we come. Underwhelming result and do not hold sum If you look through past metrics, sales of occupation rights are "lumpy" through the year. A slow quarter can happen from time to time.

[Jinx]

Still a reasonably happy holder, my concern is that even if there is "lumpy" sales stats, with a 16% increase next quarter we will still be looking at a worse sales result then 2Q2015

[Food4Thought]

Sub $4 share price? Not likely, it may plataue a little, for a short while. I think fear will cause a few smaller holders to bail and the big boys will keep chewing up what ever the market will feed them. Seems to be the common story here. Not disappointing at all IMO. Very happy holder

[TFA]

If you look through past metrics, sales of occupation rights are "lumpy" through the year. A slow quarter can happen from time to time.
The quarter metrics are definitely less than one may have hoped, but if you read the statement they have affirmed the 400 guidance and make reference to expected increase as the year goes on when more stock comes online.
New sales will have to average 108 for the next 3 quarters to hit the target they have affirmed compared to this quarters 75

[OldGuy]

Quarterly results vary depending on the amount of new units completed in the quarter and how many people move on. The most important thing is after last years 55% increase in underlying profit which was a huge jump, early sales are tracking in line with last year and they confirmed that overall for the year they are on track to deliver 400 new units, (compared to 300 last year), 33% growth this year in new build which is where make most of their underlying profit. I also expect to see some further improvement in development margins so we look set for a substantial uplift in underlying profit for 2016 even on the back of last year's 55% increase. I guess you can either focus on a single quarter or have some vision, (really not that difficult), and see where the company is headed.

Are you regurgitating some of my old post near-verbatim?

[Beagle]

They will already have heaps of pre-sales for the new Ellerslie site which will open in the last quarter so rather than expecting some sort of linear result I think people would be well advised to simply trust that they're going to deliver 400 newly built units this year. To the best of my knowledge they have never failed to meet previous build guidance.

[Beagle]

Are you regurgitating some of my old post near-verbatim?

LOL...the truth doesn't change eh :p..just have to keep educating the young ones who won't read anything other than the last few pages

[BlackPeter]

Actually - reasonably pleased with the results and happy with the outlook. Decided to trust my spreadsheet more than market sentiment and bought some more at a price I consider as good value ...

[NZSilver]

I'd say there will a bit of weakness in sp, I'm out and prepared to wait for a better buying opportunity. Each to there own.

[couta1]

I'd say there will a bit of weakness in sp, I'm out and prepared to wait for a better buying opportunity. Each to there own. You'll get it once the NZX has a wee correction, too dear currently IMO.

[NZSilver]

You'll get it once the NZX has a wee correction, too dear currently IMO.

Yep so so report + market weakness and its going to be all go. Going to have a bit of cash ready for a few stocks i have m eye on.

[Beagle]

You'll get it once the NZX has a wee correction, too dear currently IMO.

You could be right about the market overall mate but I remain of the view that based on relative valuation to MET and RYM and based on consensus forecasted earnings and growth rates SUM is the best investment in this high growth sector.

[Food4Thought]

Hi Couta1, any idea of where you see the share price dropping to and a rough estimate of the timing for this correction?

[OldGuy]

Hi Couta1, any idea of where you see the share price dropping to and a rough estimate of the timing for this correction?

Noah fence, but Couta hasn't exactly outperformed in his entry/exit timings on this stock.

Personally, I don't think the market will be too worried about the latest metrics, and most astute followers have confidence that this year's build target will be met.

Therefore, either exit now for the small possibility of cheaper re-entry over the next month or so, OR just hold tight like the rest of us

:)

[Beagle]

Thing is when a company is growing underlying profit at 55% per annum sitting out that growth for any meaningful length of time when the call account interest rate is a whopping 2% per annum is a brave call in my opinion but good luck to those that are trying to use that strategy with this stock.

[OldGuy]

Thing is when a company is growing underlying profit at 55% per annum sitting out that growth for any meaningful length of time when the call account interest rate is a whopping 2% per annum is a brave call in my opinion but good luck to those that are trying to use that strategy with this stock.

agreed, Roger. Timing the market is pretty hard, and the opportunity cost of holding is small.

[macduffy]

agreed, Roger. Timing the market is pretty hard, and the opportunity cost of holding is small.

So true. "Time in the market" not "Timing the market" is the key. (See EBO thread.)

:cool:

[couta1]

Hi Couta1, any idea of where you see the share price dropping to and a rough estimate of the timing for this correction? I reckon $4 is fair value and I don't think anyone can give a fixed timing for any whole market correction but stocks can have their own micro correction, so anytime for that, look at Spark currently as an example. Not entirely true Old Guy re entry as my original holding was purchased at $1.40 but yes last year my itchy fingers jumped the gun on exit, but then I guess you can relate to poor entry and exits aye(Does Peb ring any large bells):eek2:

[Beagle]

I reckon $4 is fair value and I don't think anyone can give a fixed timing for any whole market correction but stocks can have their own micro correction, so anytime for that, look at Spark currently as an example. Not entirely true Old Guy re entry as my original holding was purchased at $1.40 but yes last year my itchy fingers jumped the gun on exit, but then I guess you can relate to poor entry and exits aye(Does Peb ring any large bells):eek2:

Okay, so in the two years I sat out this stock for reasons previously articulated in went from $3.60 to $4.00 a 10% gain and only about a 1.5% annual dividend rate and during those two years underlying profits grew 70%. Yes it was probably over-priced a bit when I sold for matters of principle but I think the current price is more than reasonable for this high growth sector. Some people are obviously disappointed by Q1 sales metrics but those with a long memory have seen this before...it drifts down and as soon as they announce better quarterly metrics off she goes. You could be right about your $4 but I reckon it would be a bargain at that price for this high growth sector so I'd be inclined to back your mate Julian Cook even more.

[couta1]

I will put up a post tonight as to why i dont believe Sum is better buying than Ryman at current prices, no time to do it justice right now.

[NZSilver]

yep I see 3.80-4.00 Soon

[BlackPeter]

yep I see 3.80-4.00 Soon

You mean you hope for this range? Different thing, but we will see ...;)

[Lewylewylewy]

NTA/SP looks a bit nicer with SUM, but I have no idea which can get better leverage and locations (which is what property is about) or ROI / upsell / services (which i think is what returned villages are about, but I know little of the subject).

I'd be very interested to hear people's ideas about which they think is better out of all the villages. Also what the merits of each one are in your opinion..

[Beagle]

Share price in the late 3's here we come. Underwhelming result and do not hold sum 5/4/16


I'd say there will a bit of weakness in sp, I'm out and prepared to wait for a better buying opportunity. Each to there own 5/4/16.


yep I see 3.80-4.00 Soon 6/4/16


Seeing as you're so keen to so thoroughly articulate your viewpoint have you got any analysis you'd care to share on the relative valuation of SUM compared to RYM and MET ?

[Food4Thought]

I don't see SUM dropping 10%

[OldGuy]

Seeing as you're so keen to so thoroughly articulate your viewpoint have you got any analysis you'd care to share on the relative valuation of SUM compared to RYM and MET ?

LOL, yeah right (Tui)

[Food4Thought]

LOL, yeah right (Tui)


:t_up:
Analysis would be great

P.s, my 10% drop is from the value of $4.40 btw.
It could happen, I just don't find it that likely, how ever I will still hold if this happens.

[couta1]

I will put up a post tonight as to why i dont believe Sum is better buying than Ryman at current prices, no time to do it justice right now. Okay so here we go, first can I say you won't go wrong investing in any of the big three although I think Met has run ahead of itself at around $5.30 due to it being demographically challenged plus owning an older stock of buildings on average than the other two. Basically Sum is a junior Ryman with Ryman being the pack leader and I believe this will always be the case. Sum and Met have had good runs over the last year while Rymans price has been basically stagnant for the last couple of years but remember before that it had a relatively quick run from $4 to over $9. Roger asks when is Ryman due for its next run? and my answer is soon and I predict it will go over $9 over the next while . Let me quote Simon Challies from the latest Ryman Times "We've got a busy year ahead and we are already off to a flying start.I can't remember a busier period in the history of the company with four new villages in Petone,Pukekohe,Rangiora and Birkenhead opening this year. Hang on to your hats folks because it's going to be a great year" So there we have it from the horse's mouth, add to that the compounding effect from Aussie and some may be able to understand why I'm bullish plus don't forget those four villages are all big at around 440 resident capacity. For those astute day watchers you will have noticed that $8.30 has become a solid support level having been challenged a few times over the last few weeks including today yet holding. So you see I don't believe right now that Sum is better buying, in fact I think the opposite due to Rymans overdue runup, bring it on I say:cool:

[Beagle]

Thanks for sharing mate. For people who are fairly new on here or don't know already, Couta1 has an in depth understanding of the retirement sector because he and his wife consult / work in it.

Agree that Ryman is the premier stock without any question but I am unsure as to when it will break out of its trading range to the upside. It was just on $9.00 two years ago so the last couple of years have certainly tested loyal holders patience a little.

[oldtech]

Agreed, thanks couta1.

I am fairly new to Sharetrader, have small holdings in seven different NZ companies, and looking to the possibility of adding either SUM or RYM as I have no holdings in this sector. So very interested to learn from far more experienced investors and understand your reasonings as to why one company might be preferable to another before I make any decisions.

[Food4Thought]

Agreed, thanks couta1.

I am fairly new to Sharetrader, have small holdings in seven different NZ companies, and looking to the possibility of adding either SUM or RYM as I have no holdings in this sector. So very interested to learn from far more experienced investors and understand your reasoning as to why one company might be preferable to another before I make any decisions.

Have been following Shares since I was at College 15+ years ago with a keen eye on performance and future potential. I didn't enjoy reading the posts on SUM with a high buy in and a unfortunate exit (too early) when the fan was hit and it all went belly up for a brief moment for a what I would class as a long term approach. RYM needs to make some impressive gains to make a big run, and it could do it. More likely that SUM (which I hold and follow with keen interest) will get more buy in, and interest from over the Tasman (Australia) is also growing at a healthy pace.

Your decision will be best done by looking at the performance of the companies and their value vs the risk/reward. SWOT analysis will be helpful and also considering the business and how they operate. Market sentiment was damaged by SUM CEO actions, seems this was a observed and taken on board mistake by the company.

Best of luck in making your decision, there are certainly good solid long term opportunities here, which for me, seem a lot more probable than money in the bank with current interest rates etc

[Bjauck]

And thanks too from me to couta and Roger.

I refer again to the 4.5 yr Rym Met and Sum SP chart I posted previously. SP charts always vary depending on arbitrary start points. I chose that period because it was when SUM listed. Since then, RYM and SUM have increased in price by the same percent. So if RYM is the premier stock, has the longer track history of consistent performance, with Aus putting it another nose ahead of SUM and some investors' psyche thinking it's due for another run-up, are the stars aligning for RYM?

[troyvdh]

As I have often stated before me thinks that in all probability the RYM SP will be around the $3 dollar mark in 2 or 3 years....

That is after another share split....the last one occurred about a decade ago when the SP was around $11.30.

In the past there has been debate about same either agin or for....troy.

[Beagle]

What's that a 3:1 split :D sorry mate couldn't resist. Well overdue that we compared underlying PE of SUM and RYM me thinks. Too tired tonight, will do some analysis tomorrow.

Interesting that SUM and RYM are level pegging as leaders, (and MET an also ran) in the most relevant chart, being the one since all three have been listed.

[Baa_Baa]

What's that a 3:1 split :D sorry mate couldn't resist. Well overdue that we compared underlying PE of SUM and RYM me thinks. Too tired tonight, will do some analysis tomorrow.

Interesting that SUM and RYM are level pegging as leaders, (and MET an also ran) in the most relevant chart, being the one since all three have been listed.

Roger, does it really matter, if one just buys the sector, puts it away in the long hold drawer.? Seems a lot of effort is required to analyse the situational circumstance of relative strengths that is sure to change a few iota here or there month by month whereas in toto the sector is sure to perform overall. Perhaps this sector warrants diversifying across the sector itself, as has been noted with REIT's, rather than agonising over picking winners.

[Jinx]

Roger, does it really matter, if one just buys the sector, puts it away in the long hold drawer.? Seems a lot of effort is required to analyse the situational circumstance of relative strengths that is sure to change a few iota here or there month by month whereas in toto the sector is sure to perform overall. Perhaps this sector warrants diversifying across the sector itself, as has been noted with REIT's, rather than agonising over picking winners.

I can assure you that it does matte for those who can only afford one with scarcely small amounts of money invested, every little bit matters

[Beagle]

Hey Winner,

Mate can you cut and paste that e.mail you sent me in March comparing the underlying EPS e.t.c....I inadvertently deleted it from my system. That SUM's it up pretty well and then people can decide for themselves which one is growing faster going forward.

Yeah fair point Baa Baa but it is fun eh trying to pick the best performer in the sector...any excuse to exercise the grey matter and try and get outperformance :)

[Baa_Baa]

I can assure you that it does matte for those who can only afford one with scarcely small amounts of money invested, every little bit matters

Your assurance is welcome but mis-placed. In a burgeoning sector, pick winners at your peril. Better to spread ones meagre resources across the sector itself and enjoy the swings and roundabouts of all boats rising on the incoming tide, rather than one that 'might' rise faster than that others. Think about it ... are you so clever that you can literally pick the winner, back it with even a meagre punt, and be certain you got it right in 5, 10 or 20 years time? I don't think so.

[percy]

Okay so here we go, first can I say you won't go wrong investing in any of the big three although I think Met has run ahead of itself at around $5.30 due to it being demographically challenged plus owning an older stock of buildings on average than the other two. Basically Sum is a junior Ryman with Ryman being the pack leader and I believe this will always be the case. Sum and Met have had good runs over the last year while Rymans price has been basically stagnant for the last couple of years but remember before that it had a relatively quick run from $4 to over $9. Roger asks when is Ryman due for its next run? and my answer is soon and I predict it will go over $9 over the next while . Let me quote Simon Challies from the latest Ryman Times "We've got a busy year ahead and we are already off to a flying start.I can't remember a busier period in the history of the company with four new villages in Petone,Pukekohe,Rangiora and Birkenhead opening this year. Hang on to your hats folks because it's going to be a great year" So there we have it from the horse's mouth, add to that the compounding effect from Aussie and some may be able to understand why I'm bullish plus don't forget those four villages are all big at around 440 resident capacity. For those astute day watchers you will have noticed that $8.30 has become a solid support level having been challenged a few times over the last few weeks including today yet holding. So you see I don't believe right now that Sum is better buying, in fact I think the opposite due to Rymans overdue runup, bring it on I say:cool:

Excellent post,thank you.
Jinx.This post should help you decide whether to buy RYM or SUM.
RYM outlook, as pointed out by Couta1, is extremely positive.
SUM latest announcement was a little flat.
Also we must remember, all the others in this sector are trying to emulate the best of breed, RYM.

[Nasi Goreng]

Some good stuff here, I'm going to comment on Baa Baas post who refers to buying the sector over an individual stock.

There is nothing wrong with this approach, your investment return will reflect the overall performance of the sector.

A point I want to make is that when a sector consists of 3 companies, it is not too hard to consider which company you think will be the most successful over the long term. We can look at which management team you like or what assets are held and where plus ongoing performance.

Investing can be incredibly boring so picking an individual company over a sector can add some excitement as each company reports. This is probably more important to some than others depending on your personality type.

In larger sectors, I agree with buying a sector. I believe healthcare is on an overall upward trend and will grow over the next 20-30 years. I don't have the time or knowledge to pick the next biotech stock or which of the current top 20 global healthcare stocks are going to be on top in 10 years time, so I bought the IXJ healthcare ETF which is on ASX and plan to hold it for a long time. It pays a reasonable divi and its boring as hell but over the long term, I can live with boring if it turns out to be a good investment.

For me, it's good to have my basket of stocks that I can keep a close eye on and then sectors that I can keep at more of an arms length.

[Beagle]

Sector investment a good idea in one with such strong tailwinds that will continue unabated for the foreseeable future and a great set and forget approach BUT will lead to mediocrity and periods of relative under-performance.

From Winner69 and my discussion in mid March, he must be busy this morning but I am sure he wouldn't mind me sharing - this based on actual underlying earnings for SUM for YE Dec 15 and forecast RYM earnings for March 16 based on 15% growth for the year, (recall that their growth in the first half was less than 15% but they reiterated guidance of 15% for the year so that's the best info we have), and this most closely aligns the two companies in terms of their different balance dates.

Ryman at the time $8.35, Price to Book 3.2, Reported EPS IFRS incl all revaluation gains 13.8 PE Underlying 26.6
SUM at the time $4.28 Price to Book 2.3 Reported EPS IFRS incl all revaluation gains 11.2 PE Underlying 24.9

Worth noting that SUM are on record as saying they're further evolving their development model so we can expect some further gains in development margins whereas I think we can all agree that RYM perfected their development model a long time ago.

Also worth noting is that SUM recently confirmed they're on track to build 400 units this year, a 33% increase on 2015.

The game is if we fast forward a year from now we could see SUM's underlying EPS, (still my preferred valuation methodology) rise by circa 40% because of their substantial increase in build rate and RYM plug in another 15% rise in EPS so the relative valuation could be even further skewed in SUM's favour.

Is RYM's size working against it...harder to grow a really big company than a smaller one ? Will SUM's more pet friendly approach win it more friends over the long haul ? I know I'd have a very short and unequivocal answer to any retirement facility that didn't' allow me to have my dogs and replace them when they died.

Yes RYM a great company but after the truly massive run up in the year's leading up to early 2014 when they hit $9, they ran too fast and too far in terms of valuation and have gone backwards since.
Both Winner69 and I were the ones that called this right and we both think SUM is the preferred stock in this sector at present. My 2 cents.

[couta1]

Good post Roger but I'm still going to disagree with you, this will be Rymans year not Sums. PS-Be sure to watch those Q2 sales metrics from Sum to confirm they are indeed on track for their 400 units.:cool:

[OldGuy]

Good post Roger but I'm still going to disagree with you, this will be Rymans year not Sums. PS-Be sure to watch those Q2 sales metrics from Sum to confirm they are indeed on track for their 400 units.:cool:


LOL Couta. We ALL know that Sum's mediocre last quarter is not unusual given the lumpy nature of the industry and Sum's relative infancy. It will almost invariably be offset by one or two massive quarters later this year. Personally, I am waiting for one of those big upswings before I sell-down a bit.

Been a great ride so far, though! :)

And yes, I've probably been one of Sum's staunchest supporters on here since 2013. Others come and go, eh Roger? :)

[Banksie]

Will SUM's more pet friendly approach win it more friends over the long haul ?

I like it, picking a share based on pet-friendliness. I'm gonna bang out an email to all the power-gens and see which ones have "bring a dog to work" days :t_up:

[Beagle]

Fair enough mate. If we disagree over fundamentals perhaps we should start to look at the technical aspects ? RYM still firmly range bound and unable to break out of its previous high of $9 and SUM trading cleanly above its 100 day MA and nothing but blue sky above. I have huge respect for RYM as a company and it is somewhere about fair value now but I am not so sure its due for a meaningful increase in the short term...happy to be proven wrong and would revisit this if it can demonstrate it can break out of its trading range and go over $9.

[stoploss]

Roger , SUM your preferred stock . However I still believe RYM is the best in the sector so the better long term play . When you say you called it right , your posts were of the the " value of these are $ 6.50" as I have pointed out they never got there. Fully expecting the 3 developments in Melbourne to be a great success , and we can roll out 20 .....
Hopefully we can both make money here ..rising tide , but a bigger market in Aussie and I would expect more margin . So RYM is where I am happy to be parked.

[Beagle]

LOL Couta. We ALL know that Sum's mediocre last quarter is not unusual given the lumpy nature of the industry and Sum's relative infancy. It will almost invariably be offset by one or two massive quarters later this year. Personally, I am waiting for one of those big upswings before I sell-down a bit.

Been a great ride so far, though! :)

And yes, I've probably been one of Sum's staunchest supporters on here since 2013. Others come and go, eh Roger? :)

Good reasons for that mate and didn't miss much in my two year absence (10% rise)...someone had to do the hard yards and get them to have a half decent governance policy eh :)

[couta1]

LOL Couta. We ALL know that Sum's mediocre last quarter is not unusual given the lumpy nature of the industry and Sum's relative infancy. It will almost invariably be offset by one or two massive quarters later this year. Personally, I am waiting for one of those big upswings before I sell-down a bit.

Been a great ride so far, though! :)

And yes, I've probably been one of Sum's staunchest supporters on here since 2013. Others come and go, eh Roger? :) They haven't got as much coming on tap this year so I'd be watching the next 2 sales metrics closely. I'm well aware of the uneven nature of the sales Mate, after all i see the empty or full units on an almost daily basis.:cool:

[Beagle]

Roger , SUM your preferred stock . However I still believe RYM is the best in the sector so the better long term play . When you say you called it right , your posts were of the the " value of these are $ 6.50" as I have pointed out they never got there. Fully expecting the 3 developments in Melbourne to be a great success , and we can roll out 20 .....
Hopefully we can both make money here ..rising tide , but a bigger market in Aussie and I would expect more margin . So RYM is where I am happy to be parked.

Let us be clear. I called RYM as being worth $6.50 two years ago to ME. That is based on a fair underlying PE of 23.5, which is what I want to see for this sector for a fast growing company. I use 23.5 because I like to buy companies that are good value for the growth. Ben Grahame's model is last years EPS x (8.5 + 2g). Remember he uses 8.5 as the PE for a no growth company.

Growth in this sector is something you can count on because of the extremely favourable sector tailwinds but I still prefer to buy stocks valuing them using 1g so for Ryman this is 8.5 + 15 = 23.5. Doing this I know I am buying value.

Sure RYM never got to $6.50 and by making my own assessment of fair value I avoided two years of investment where it went backwards by 4% and I enjoyed a 60% return on reinvested capital in my sector favourite REIT, GMT. (Not a bad alternative I am sure you would agree).

The main thrust of what W69 and I were saying was that the growth in the SP of RYM had vastly outstripped its EPS growth in the lead up to early 2014 and that it was due for either a long period of under-performance, (which is what has happened), or a correction. If a correction had of occurred to my buy price I would bought back in and have enjoyed a modest return between then and now.

I therefore still maintain the best way to value these companies is to look for opportunities to buy on the cheap and in a sector where well managed companies such as RYM and SUM, (some will note I have deliberately left MET out), where earnings should comfortably grow at a minimum of 15% for the foreseeable future the best stock is one you can buy on a PE of as close as possible to 23.5, which was SUM when I was buying at $4.00 recently.

RYM has a great name though and management are highly respected so a rising tide will lift all boats over time there's no question about that.

[couta1]

I like it, picking a share based on pet-friendliness. I'm gonna bang out an email to all the power-gens and see which ones have "bring a dog to work" days :t_up: Ryman also allow pets by arrangement, oh and I almost forgot to mention those fixed service fees for life. PS-Great debate people but must get some work done. PPS- I did put my money where my mouth is by buying 20k Ryman shares at $8.30 yesterday.

[OldGuy]

Nice one, Couta. I'm currently in with 25,000 RYM and 120,000 SUM.

Let's go, boys!

Anyone else going to the SUM AGM later this month??

[Nasi Goreng]

Hi Roger, have you adjusted your PE of 23.5 strategy since rates have been falling? I'm not quite sure right now where they were 2 years ago but equity values have increased in this environment which should push up the values of growth companies. The market should be willing to pay for growth in this environment because there is not a lot of it so maybe we are prepared to pay higher rates now than we were back then. I'm not trying to answer the question for you, just putting some of my thoughts down to. I don't have a number in mind of what I'm prepared to pay for a growth company, it depends on many things but in this case, I believe SUM is valued appropriately right now with further upside over the next year.

[Beagle]

Yes good debate. What I see with RYM is that if they grow earnings by 15% to 31 March 2016, (and affirm guidance for ongoing 15% earnings growth) they will be on a historical underlying PE of 26.6 to March 2016 and on a forward PE of 23.1 for FY17. That would make it the lowest forward PE they've been on for several years and is within the 23.5 PE target I have for well managed companies in this sector so I am inclined to buy into RYM as well sometime this year but I would prefer to see them break their long established trading range first. I guess the other relevant factor here is that money on call waiting to buy is only earning 2% before tax so the opportunity cost of holding is very low and not materially dissimilar to this sector's dividend yield.

[Beagle]

Hi Roger, have you adjusted your PE of 23.5 strategy since rates have been falling? I'm not quite sure right now where they were 2 years ago but equity values have increased in this environment which should push up the values of growth companies. The market should be willing to pay for growth in this environment because there is not a lot of it so maybe we are prepared to pay higher rates now than we were back then. I'm not trying to answer the question for you, just putting some of my thoughts down to. I don't have a number in mind of what I'm prepared to pay for a growth company, it depends on many things but in this case, I believe SUM is valued appropriately right now with further upside over the next year.

Thank you, good post and fair comment. Ben Graham's formula was based on a long term risk free rate of 4% and presently the long term N.Z. Govt stock is trading at 2.5% so that does change the implied formula to EPS x (10 + 2g) and for this sector that implies for good companies which one is confident of ongoing long term growth of 15% per annum a PE of 25 is good value. In theory then we should see at some stage over the next year RYM's SP start tracking up in line with their long term earnings growth of 15% per annum but technical's and range trading are a funny thing and sorry to have a bob each way so too speak but as long as you have another profitable home for your money at present I don't think waiting until there's a clear break-out above $9 is a silly idea either...however long that might take ?

On the other hand we have SUM which grew EPS last year 55% and a build rate increase this year of 33% trading on Dec 2015 historical underlying earnings PE of 24.7 at $4.25. If their underlying profit expansion this year is commensurate with their build rate guidance they are currently trading on a forward PE of 4.25 / .2289 = 18.6 !

[Jinx]

Someone is willing to put their money where there mouth is with a 100,000 parcel of shares coming though off-market

[Beagle]

Ryman also allow pets by arrangement, oh and I almost forgot to mention those fixed service fees for life. PS-Great debate people but must get some work done. PPS- I did put my money where my mouth is by buying 20k Ryman shares at $8.30 yesterday.

So let me ask you a theoretical question mate. We have 3 Terrier sized dogs and they do get a bit yappy when there's something to get excited over and they're coming up 10 years old, please don't ask me about the vet bills as that's a sore point right now.. Now suppose I was 75 and my wife and I wanted to shift into a Ryman unit. Would we be allowed ? What about if my personal favourite Basil who's having an operation next week died, would I be allowed to replace him ?

What about later when they all died, think average life expectancy is about 15. I know three dogs is a pretty unusual situation and I know the village manager has to juggle other people's right to peace and quiet with residents own rights to enjoy life. Do you think at either SUM or RYM we'd have a any hope of buying an occupation licence with 3 dogs ? Dogs are in many ways better than kids, opps did I really say that out loud :D I guess the real short version of this question is are SUM or RYM more pet friendly ?

[couta1]

Short answer Mate is no to the 3 dogs and no to replacing your allowed dog by arrangement once it dies. PS- Have you thought about taking an interest in fish or turtles?:cool: PPS- I love dogs too, never cried so much than when my long term running companion died last year.

[stoploss]

So let me ask you a theoretical question mate. We have 3 Terrier sized dogs and they do get a bit yappy when there's something to get excited over and they're coming up 10 years old, please don't ask me about the vet bills as that's a sore point right now.. Now suppose I was 75 and my wife and I wanted to shift into a Ryman unit. Would we be allowed ? What about if my personal favourite Basil who's having an operation next week died, would I be allowed to replace him ?

What about later when they all died, think average life expectancy is about 15. I know three dogs is a pretty unusual situation and I know the village manager has to juggle other people's right to peace and quiet with residents own rights to enjoy life. Do you think at either SUM or RYM we'd have a any hope of buying an occupation licence with 3 dogs ? Dogs are in many ways better than kids, opps did I really say that out loud :D I guess the real short version of this question is are SUM or RYM more pet friendly ?

Sounds like you need some EBOS Roger to hedge up the pet costs . I did find my mothers independent unit at Rita Angus had pretty good sound protection .. also the neighbour was pretty hard of hearing not an uncommon thing at that age ... so you might just be able to slip a couple of dogs in come the time .....

[Beagle]

Short answer Mate is no to the 3 dogs and no to replacing your allowed dog by arrangement once it dies. PS- Have you thought about taking an interest in fish or turtles?:cool: PPS- I love dogs too, never cried so much than when my long term running companion died last year.

The little buggers do have a way of "worming" hopefully not literally :) their way into your heart don't they !! So the strategy on moving into a SUM or RYM facility is to have one extremely cute young puppy that will hopefully live a long life and his / her sibling on standby with the breeder in case something goes wrong...they'd never know if you did a sly switch if you had too would they :D

LOL Stoploss, Keep it between us but I have dreams of EBOS floating their pet division off as a separate entity :)

[stoploss]

The little buggers do have a way of "worming" hopefully not literally :) their way into your heart don't they !! So the strategy on moving into a SUM or RYM facility is to have one extremely cute young puppy that will hopefully live a long life and his / her sibling on standby with the breeder in case something goes wrong...they'd never know if you did a sly switch if you had too would they :D

LOL Stoploss, Keep it between us but I have dreams of EBOS floating their pet division off as a separate entity :)

Roger it is healthy to have some interests outside of the markets , so in terms of dreams my differ a little, apologies for hijacking SUM thread, this is my last word for the day :)

https://www.facebook.com/Officialemilyratajkowski/photos/a.281506981960803.62894.281505075294327/858069540971208/?type=3&theater

[Grunter]

First time poster here, have been following this thread for a while since I became interested in Summerset.

Just want to say I believe a lot of you worry about a lot of things that don't matter in the long run to the performance of this company.

The guy with the best ideas on this company is Roger - he's hit the nail on the head on how to value retirement villages - it's all to do with underlying earnings. The drivers for underlying earnings growth are:

1) house price growth
2) the number of units that can be built, sold and resold

Everything else to do with this company is just noise.

Looking at Summerset, I see it as grossly undervalued - Summerset should be a similar performer to Ryman in terms of earnings growth in the long term, and I believe their P/E should converge to a similar level. For a growth company, a P/E of 11 is low, therefore RYM's 15 is more sensible in this climate of inflated P/E ratios. Given this, the value of SUM should be $5.85 at their current earning level.

I'm working on building a DCF model for SUM, but a year ago, their DCF valuation was $4.30. Since then they have had significant increases in underlying earnings as well as increased build rates, so this points to even better than predicted underlying earnings growth than originally modelled.

[Beagle]

Welcome to the forum Grunter and thank you for your vote of confidence.

Agree with what you've said as basically these centres from an operational perspective make very little money.

There remains a lot of confusion regarding reported earnings so i'll very briefly recap those seeing as its getting late, (feels even later with daylight savings having finished).

The International Financial Reporting Standards (IFRS) require property companies including companies to include in their annual earnings the full change in the value of all properties, as though they could all be sold at current market value at balance date. A lot of people use this figure as let's be honest, the vast majority of the time property goes up mostly because good land is scarce and the cost of construction generally goes up at the very least in line with inflation.

The PE for SUM of 11 is the IFRS earnings.

Underlying earnings are lower and are those actually earned by the company in the year, (cash earnings), actual profit on new builds plus profit on resale's and some minor noise from other operations.
Underlying earnings for SUM were 17.2 cps for 2015 so the historic PE based on underlying earnings as at today's closing price is 24.65.

The company has clearly grown underlying earnings on average at more than 15% per annum since listing but if we are to use RYM's long term average at around 15% then using Ben Graham's valuation formula modified for the lowest interest rates in 60 years and headed lower where V = historic EPS x (10 + 2g) where G = 15% long term growth we get 17.2 x 40 = $6.88.

Given the company is growing its development book by 33% this year and if we assume that earnings grow in line with this and then tail off to the agreed 15% per annum, this time next year using the famous Ben Graham valuation model would give us fair value of $6.88 x 1.33 = $9.15 !

Its harder for bigger companies to grow so fast as younger smaller ones and this probably counts against RYM to some extent.

Quite aside from the valuation, and something I don't talk about often on here is that Retirement companies have an extremely favourable tax situation In N.Z. They have a binding ruling from the IRd that they don't pay tax on the profits of occupation licence resale...don't ask me how they got that ruling but it exists and explains why none of them pay much tax.

Provided Julian Cook can keep the wheels on straight as the company grows I think we are in for a very good ride in the years ahead. I also think RYM will do exceptionally well in the long run...probably a little bit more of a hiatus before their SP resumes tracking up in line with EPS growth again.

[winner69]

All i know is that at guided build rates and expected resales and ongoing property inflation Summerset will make close to $120m (rea earnings, ieIFRS) this year

Thats about 55 cents/share so at a PE of 11 (low but thats what Roger says) gives a valuation of $5.55 .....but should be over $6 this time next year.

That's good enough for me - i trust my financial model

[Beagle]

Stock is cheap now at $4.24 so 33% earnings growth in line with build rate increase means the stock would be cheap at $5.64 this time next year so yeah I agree that $5.50 is really the minimum 12 month price target. That Ben Graham formula kicks out some really interesting numbers though doesn't it !!

[Grunter]

That and if you subscribe to the momentum phenomenom, SUM is up 32% over the last 12 months.

Value AND Momentum = outperformer

[James108]

I don't think using a 33% long term growth rate is very appropriate.

[limmy]

15% growth rate will make more sense.

[Grunter]

Long term terminal growth rate might be closer to 2%. 15% is still excess growth. 33% is a very short term growth rate - I think the consensus over the next 5 years is for a 20% rate

[Bjauck]

Long term terminal growth rate might be closer to 2%. ... Is that 2% real (after inflation) growth. I really don't know anything about "terminal" growth rates. What figures and assumptions are you using? As demographics seem to be blowing in favour of the retirement industry and despite long-term forecasting subject to uncertainties, 2% sounds low even 30 years in the future.

[OldGuy]

First time poster here, have been following this thread for a while since I became interested in Summerset.

Just want to say I believe a lot of you worry about a lot of things that don't matter in the long run to the performance of this company.

The guy with the best ideas on this company is Roger
.

LOL Grunter. Roger has also been the most vocal opponent of SUM on this thread!

Funny how Roger is now repeating all those things that Newguy was telling him during his bout of despair...:cool:

[BlackPeter]

I don't think using a 33% long term growth rate is very appropriate.

for what its worth ...CAGR 2009 to 2015 was 18.2% ... and analysts consensus (check 4traders) predicts CAGR to slightly increase (to 20%) for the years to come.

[Beagle]

LOL Grunter. Roger has also been the most vocal opponent of SUM on this thread!

Funny how Roger is now repeating all those things that Newguy was telling him during his bout of despair...:cool:

I took issue with a directors share transaction that occurred two days before a disappointing quarterly sales announcement in early 2014 and in association with the shareholders association subsequently got their governance policy around staff share transactions significantly improved for the benefit of all shareholders.

Further, while in self enforced exile for two years as a matter of principle while said director remained on the board I predominantly channelled the funds into the REIT GMT which gave a 60% total shareholder return while SUM went up 10%.

I think we can say quite comfortably that sometimes mate its really rewarding to stick to your principles in more ways than one :)

In response to other posts above...just to clarify, I am expecting a 33% growth rate in underlying profit this year followed by ongoing growth at 15% per annum for the foreseeable future, (same as RYM's long term growth rate).

[Beagle]

Fisher funds just announced they'd become a substantial shareholder. Obviously they can see growth ahead and good value at the current level.

[winner69]

Fisher funds just announced they'd become a substantial shareholder. Obviously they can see growth ahead and good value at the current level.


Just as well Balance is on holiday as this cold be a bad sign

He'd be saying time to sell - buy when Carmel is selling, sell when Carmel is buying and all that

[Beagle]

Just as well Balance is on holiday as this cold be a bad sign

He'd be saying time to sell - buy when Carmel is selling, sell when Carmel is buying and all that

Nikko asset management fund manager talking about his big position in SUM behind the pay wall as well. With the strength of the demographic tailwinds in this sector just hoist the spinnaker, put your feet up and and enjoy the cruise :)

[couta1]

Nikko asset management fund manager talking about his big position in SUM behind the pay wall as well. With the strength of the demographic tailwinds in this sector just hoist the spinnaker, put your feet up and and enjoy the cruise :) I remember you using that spinnaker analogy back in 2013 Mate, hope you manage to stay on the boat for a bit longer this time and no nasty Norahwesterlies arrive and damage those sails.:cool: PS-I did jump back on board at 5pm as someone was keen to dispatch a good number but not sure how long I'll stay aboard, may end up disembarking at the first port of call or not.PPS-No I haven't changed my opinion on it being Ryman's year.

[Grunter]

Is that 2% real (after inflation) growth. I really don't know anything about "terminal" growth rates. What figures and assumptions are you using? As demographics seem to be blowing in favour of the retirement industry and despite long-term forecasting subject to uncertainties, 2% sounds low even 30 years in the future.

Terminal growth rate is by definition the state of nil real growth, so the 2% value is selected as an approximation to the long-term inflation rate.

You need to have this assumption in a DCF otherwise you are modelling infinite growth into the future, which of course is impossible!

[Beagle]

I remember you using that spinnaker analogy back in 2013 Mate, hope you manage to stay on the boat for a bit longer this time and no nasty Norahwesterlies arrive and damage those sails.:cool: PS-I did jump back on board at 5pm as someone was keen to dispatch a good number but not sure how long I'll stay aboard, may end up disembarking at the first port of call or not.PPS-No I haven't changed my opinion on it being Ryman's year.

LOL Great post mate and great humour and welcome on board for the cruise. Lets set the autopilot and kick back and relax as after the next annual meeting later this month I have it on expert authority from an impeccable weather forecaster there is no possibility whatsoever of those wind conditions ever repeating :)

Luckily for us now the Commodore has been "encouraged into" a fair set of rules for the regatta, and for a refreshing change, this is a stock you can simply relax with now and enjoy the strong following breeze, not one you have to keep your seat belt fastened, tray table folded away and on constant watch for the next bout of turbulence...

Actually speaking of being on board, its a real pleasure having you posting again on a regular basis. Keep it up.

[Beagle]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11620162
Good location that one.

Mr Cook sees market capitalisation doubling in circa 5 years...pretty conservative if you ask me but if that's the result I'll take it and be happy.

[OldGuy]

Yup, that's just under 15% CAGR. I reckon it will double in value in under 4 years.

[OldGuy]

Terminal growth rate is by definition the state of nil real growth, so the 2% value is selected as an approximation to the long-term inflation rate.

You need to have this assumption in a DCF otherwise you are modelling infinite growth into the future, which of course is impossible!

Errr, incorrect. Many DCF's include growth over an infinite period.

[Beagle]

15% annual growth compounded doubles your money in exactly 5 years :cool:

[OldGuy]

Yes, as per my post above :)

[Bjauck]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11620162
Good location that one.

Mr Cook sees market capitalisation doubling in circa 5 years...pretty conservative if you ask me but if that's the result I'll take it and be happy. That works out to be a tad under 15% compounded p.a. If it comes to pass, that is a good forecast.

Incidentally I think 15% was the discount rate applied last year by Infratil in assessing Retire Australia cash flows. I seem to remember, some years ago, Infratil stating 15% pa return was its benchmark for assessing possible investments - and "mentioning" that, at that stage, its return to shareholders was exceeding that level!

[winner69]

15% annual growth compounded doubles your money in exactly 5 years :cool:

.........plus a bit extra for the oysters and chips down on the beach

[Food4Thought]

Couta1, I am also happy to see you back on board and participating. Did not enjoy seeing you get burned when you exited last time. Another lesson in many ways for yourself and others too to learn from other peoples experience. I imagine this post gets followed by a few people directly part of the retirement sector and appreciate all criticism and insight into their enterprises. Can't wait to see how this young SUM grows into he future and to see the development of this sector. Happy sailing, another great day on the ocean

[Beagle]

Hoist an even bigger spinnaker ?...didn't realise Mr Cook was talking 400 retirement units PLUS one hundred care beds until today...

I think we might be able to afford to fly down to Bluff and get em straight off the boat when they're fresh Winner :)

[Zaphod]

SUM has performed very pleasingly of late. In hindsight I bought in too early back in 2013 on the basis of some discussions I had with an operator in the sector and the prerequisite analysis. Still, it's paid off in the long term and late 2014 provided very good (in hindsight) opportunities for top ups. If they can keep raising their build rate margins and steadily increasing sales rates, I'll be very pleased.

[winner69]

Roger (on Ryman thread)

On a positive note it was great to see real estate prices across much of New Zealand continue their upward momentum last month.
What intrigue's me a little is we've seen them absolutely boom in Auckland over the last two years in particular and yet the SP's of RYM in particular and SUM to a lesser extent haven't shown a similar momentum. I'd suggest this augers very well for embedded value and future realisation of same.


Besides building 400 units this year what you have pointed out is the key driver of why Summerset will report real earnings of $120m plus this year,

Thats 55 cents/share - SUM worth heaps more that what it priced at at the moment - even $6 is not overvalued

And these booming house prices (across most of the country) will continue through next year Roger if you get your way and see OCR down to 1.5% soon.

[Beagle]

Yes the house price growth across much of the country and in particular focused on much of the North Island where SUM have the vast majority of their villages has been very strong and augers well for strong valuation gains going forward both realised and unrealised so no matter which profit methodology one uses, (underlying of IFRS), the future looks very bright. I have quite a bit of sympathy for the full IFRS reported profit number when future gains are underpinned by a benign outlook for interest rates. I think SUM copped a bit of selling pressure on the back on a single quarters slightly underwhelming sales result but canny investors (including Old guy) will look through that to a tremendous full year result for 31 Dec 2016 and strong ongoing growth.

[BlackPeter]

5. April 2016:

Share price in the late 3's here we come. Underwhelming result and do not hold sum

5. April 2016:

I'd say there will a bit of weakness in sp, I'm out and prepared to wait for a better buying opportunity. Each to there own.

6. April 2016:

yep I see 3.80-4.00 Soon

Hi NZ Silver, just wondering whether you can help us and define "soon" in your quoted prediction a bit better? Next week? Next month? Next year? Never? Look - we are all waiting to pick up some more SUM shares for the bargain prices you are seeing ... :p

So far it looks like the SP bounced beautifully at the MA 30 and personally am I glad that I bought the shares when I did - and actually even got some more of them, but this is just me. As you said ... "each to their own".

[OldGuy]

Yes the house price growth across much of the country and in particular focused on much of the North Island where SUM have the vast majority of their villages has been very strong and augers well for strong valuation gains going forward both realised and unrealised so no matter which profit methodology one uses, (underlying of IFRS), the future looks very bright. I have quite a bit of sympathy for the full IFRS reported profit number when future gains are underpinned by a benign outlook for interest rates. I think SUM copped a bit of selling pressure on the back on a single quarters slightly underwhelming sales result but canny investors (including Old guy) will look through that to a tremendous full year result for 31 Dec 2016 and strong ongoing growth.

haha, thanks Roger (saves me having to blow my own trumpet every time!)

Are you going to the AGM?

[NZSilver]

Mid May, but maybe never!

[Food4Thought]

I agree, I am also stumped with NZSilver prediction, how ever even more surprised by having having been off. Would have thought SUM would have been past $4.50 by now. Must be some type of calm before a storm. I do want it to head South of $4 as I will be selling my liver to fund another buy in.

[Beagle]

haha, thanks Roger (saves me having to blow my own trumpet every time!)

Are you going to the AGM?

Not this year mate. For the record. I am sure Mrs Barlow has made a wonderful contribution to the company over her many years there and I do appreciate that she made a real difference to a lot of people's lives and she is to be commended for that. In some ways it is more than a little sad that so much shareholder activism was required for the board to have a policy surrounding directors and management dealing in SUM's shares when simple common sense should have been all that was required. My sense is its probably best if I let others farewell her at the forthcoming meeting and thank her for her efforts.

[winner69]

Those house price numbers that REINZ put out the other day were amazing. It looks like he boom is on again back time and spreading across the country. Revaluations this year will probably be at higher rate than last year.

Gives me even more confidence in my $120m plus real earnings forecast for F16

Thats an eps of 55 cents = share price over $5 later in year

[winner69]

Westpac guru economic team have made 'material changes' to their house price forecasts

The 'chunky changes' have seen them upgrade their forecast for house price inflation in 2016 to 11.5% (higher than 2015)

Jeez i almost wet myself reading how the usual dismal pessimistic economists at westpac were Using such exciting words as material and chunky. Wow, and probably they still playing it safe.

So Summerset selling prices and revaluations are certainly on track to be $120m in F16

Thats an eps of 55 cents = share price $5 plus later this year

Footnote: i wont mention the debt thats being taken in a low wage increase environment - that story is for other threads

[Beagle]

Westpac guru economic team have made 'material changes' to their house price forecasts

The 'chunky changes' have seen them upgrade their forecast for house price inflation in 2016 to 11.5% (higher than 2015)

Jeez i almost wet myself reading how the usual dismal pessimistic economists at westpac were Using such exciting words as material and chunky. Wow, and probably they still playing it safe.

So Summerset selling prices and revaluations are certainly on track to be $120m in F16

Thats an eps of 55 cents = share price $5 plus later this year

Footnote: i wont mention the debt thats being taken in a low wage increase environment - that story is for other threads

Interestingly, despite a rampant property market for 2014, 2015 and now looking like 2016 the SP is only just over 20% from its early 2014 level of $3.60 so from an embedded value basis there's a ton of catching up to do. On the other side of the coin they've grown underlying earnings 70% in total in those two years and a further increase in build rate is projected of 33% this year. But that's not all. In that time they've materially grown their development margin which augers extremely well for a robust and highly profitable business model going forward, so any sort of DCF model needs to build in robust development margins of over 20%.

They have a land bank of over 6 years supply at the current higher build rate of 400 units and 100 care beds per annum.

Any way you slice and dice this SUM appears to be a company that's really starting to fire on all cylinders.

[Bjauck]

Yep its a crazy market in Auckland alright. We got a really amazing offer today for another one of our investment properties we've decided to sell into this booming market...so good we didn't bother counter signing...might as well take it and buy really undervalued shares like SUM instead. Late $5's early $6's this time next year mate.

Interestingly, despite a rampant property market for 2014, 2015 and now looking like 2016 the SP is only just over 20% from its early 2014 level of $3.60 so from an embedded value basis there's a ton of catching up to do. On the other side of the coin they've grown underlying earnings 70% in total in those two years and a further increase in build rate is projected of 33% this year. But that's not all. In that time they've materially grown their development margin which augers extremely well for a robust and highly profitable business model going forward, so any sort of DCF model needs to build in robust development margins of over 20%.

Any way you slice and dice this SUM appears to be a company that's really starting to fire on all cylinders. I have shares in the retrement (and real estate Investor) companies including SUM and I am pleased to see them doing well.

However I do think it sad reflection on the NZ investment environment that NZ is losing companies including DIL, which has passed out of NZ hands and MHI which is shifting is shifting its prime listing to Australia - to have access to a wider pool of investors. If NZ investors could be encouraged to invest less in real estate and more into a diversified range of equities, including some based overseas and some with an international focus, then maybe such events would happen less frequently. As it is NZ share capitalisation as a proportion of GDP at less than half, is less than half of the Australian proportion. So with our expensive real estate, is NZ turning into a land where the majority are tenants to landlords, an unknown number of which may be overseas based, and where the majority could end up working for foreign-owned companies? It does not sound like the recipe for a productive economy with a committed population who have skin in the game and a sense of commitment and belonging.

[Beagle]

Plenty of other software start-up's...extremely robust tourism growth, booming agriculture, beef e.t.c. The beauty of SUM is they're solving a real need, a need that's forecast to grow exponentially over the next 30 years as baby boomers in their droves want to enjoy a relaxed, comfortable and supported retirement.

[Bjauck]

Plenty of other software start-up's...extremely robust tourism growth, booming agriculture, beef e.t.c. The beauty of SUM is they're solving a real need, a need that's forecast to grow exponentially over the next 30 years as baby boomers in their droves want to enjoy a relaxed, comfortable and supported retirement. True, the retirement sector has the baby boomers to look forward to - especially perhaps those baby boomers, whose kids have to hold down multiple jobs to afford housing or have had to seek employment opportunities overseas and are not able to help support the old folk and look after the old family home. Let's hope the remaining start-ups stay and develop in NZ hands to give employment to the kids of NZ baby boomers....There are always exceptions and for the time being there are returning younger Kiwis. It would be great to hold onto more companies well beyond the start-up phase and build up well-capitalised NZ owned companies employing a highly productive work force who could afford to buy their own reasonably-priced homes.

[Beagle]

Westpac guru economic team have made 'material changes' to their house price forecasts

The 'chunky changes' have seen them upgrade their forecast for house price inflation in 2016 to 11.5% (higher than 2015)

Jeez i almost wet myself reading how the usual dismal pessimistic economists at westpac were Using such exciting words as material and chunky. Wow, and probably they still playing it safe.

So Summerset selling prices and revaluations are certainly on track to be $120m in F16

Thats an eps of 55 cents = share price $5 plus later this year

Footnote: i wont mention the debt thats being taken in a low wage increase environment - that story is for other threads

Here's the link
http://www.nzherald.co.nz/economy/news/article.cfm?c_id=34&objectid=11623193 People with investment properties look like having another boom year !

[Bjauck]

Here's the link
http://www.nzherald.co.nz/economy/news/article.cfm?c_id=34&objectid=11623193 People with investment properties look like having another boom year !

Median multiple for NZ is heading to 6 and for Auckland it is over 9!
Is it a question of when not if the bubble will be burst? Interest rates will not always be falling...

Bernard Hickey: Social cost in high house prices
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11623826

[winner69]

Median multiple for NZ is heading to 6 and for Auckland it is over 9!
Is it a question of when not if the bubble will be burst? Interest rates will not always be falling...

Bernard Hickey: Social cost in high house prices
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11623826



Thats a future problem - may never happen?

In the meantime summerset will be creaming it - npat his year $120m plus and even more next year

Ride the share price up - only worry about any collapse in property prices when/if it actually starts to happens (or just before)

[OldGuy]

Median multiple for NZ is heading to 6 and for Auckland it is over 9!
Is it a question of when not if the bubble will be burst? Interest rates will not always be falling...

Bernard Hickey: Social cost in high house prices
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11623826

I work very extensively in this sector and politely disagree.

[Bjauck]

Thats a future problem - may never happen?

In the meantime summerset will be creaming it - npat his year $120m plus and even more next year

Ride the share price up - only worry about any collapse in property prices when/if it actually starts to happens (or just before) But when is just before....I know many have been telling Key: she cannae take anymore cap'n but maybe the SS Auckland House Market will come out of warp drive in constellation NeverNever with a horrible shudder. Apologies...I saw an old Star Trek the other day! I prefer to look at underlying profit.

[Bjauck]

I work very extensively in this sector and politely disagree. Disagree with the bubble bursting, the social cost of high house prices, the falling interest rates, or all of it? Is it a shift to a generation of low interest rates? Maybe they will gradually find a new low level and then orderly work their way up a little?

[trader_jackson]

not sure how relevant it is here, but as we are talking about rising property prices and bubbles etc, I saw a 60 minutes article recently where half of all mortgages made last year in Australia were actually interest only, quite alarming when you think that means 1 in 2 people in aussie who brought a house with a mortgage last year, aren't actually paying it off... wouldn't be surprising if the same thing has been happening in NZ, particularly more recently

To me, this means a couple of things: people are struggling to pay off traditional amortizing loans as they have to borrow more to buy a house, but have an income that is barely growing. People are also relying more on capital gains to keep there equity rising... this is dangerous as if things were to move backwards (and there are signs of wobbles in both the "star" property markets of Sydney and Auckland), there is no or little "backstop" (ie equity) to keep them going into negative (and have the banks demand to sell their house, which would increase supply, put downward pressure on prices etc etc)

As we know, summerset, who are very well leveraged, but also "well positioned" (as some like to say) is more exposed than other retirement operators, to this potentially toxic property market, fulled mainly by increased borrowing, where people reply on capital gains, rather than paying off what they borrowed

Disclosure: just some friendly food for thought

[Lewylewylewy]

TD, good comments. However it's worth factoring in that many investors use interest only mortgages as a way to make saving for the next property faster. Also, ~40% of home owners have at least part ownership in more than 1 house (in NZ)... IE, 40% of home owners are investors.

It's really difficult to say whether house prices are unaffordable. Personally I've always used my own income as a gauge because my one income is the same as the average couple. Previously I've always maintained that Auckland house prices are not too expensive as it would take me a couple of years to save a deposit (without existing investments or leveraging, etc), which I think isn't long to save.

I've recently reassessed the situation and am now struggling to make my mind up. On one hand, cheaper Auckland houses (~$600k) are affordable, but houses that would be considered average for the rest of the country are about a million. A deposit would take about 5 years to save... Which makes them expensive (by my scale), however that assumes that the buyer doesn't already have a house to leverage/sell, no dead relatives leaving gifts, no help from parents and doesn't already have existing investments or savings.

Re running the model tells me that the average house owner in Auckland could easily afford another one, while first home buyers without help from parents would probably be saving for 5 years if they wanted something nice or 3 years for something in the budget category. I suppose first home buyers could buy a cheapie and wait a few years to buy the nice one (as they'd them fall I into the home owner model).

I also looked at buying from an investors point of view and worked out that if you were to buy an Auckland house, it would cost you $20k pa. In other words, it would have to appreciate by more than $20k each year or you wouldn't make profit. More importantly, it would restrict you from increasing your portfolio because of the extra cost. You'd be better off buying a bunch of houses in Hamilton (for example).

Conclusion: I think Auckland house prices are nearing their upper limit, but haven't quite reached it yet. Immigration and policies of foreign governments will remain the major drivers if prices are to increase beyond say 30% more (30% making the budget house take 4 years to save for, which is where I see the roof).

[percy]

Well what happens to SUM/RYM should property prices fall.?
Well I guess it would mean they pay less for their land.
Not being able to sell the units for such a high price will mean reduced development margin.
Profits will be lower on resales.
However both operators recover their capital each time they develop a new village.
So the model remains sound,and will continue while the demand continues to grow.
While we often talk about people having trouble affording a unit in a retirement village,yet there remains a good many who can afford four to ten units.!!
Property prices may vary,but ageing never slow downs,nor does peace of mind or the need for security and care.

[winner69]

Hey t_j, stop being so sensationalist in saying SUM are well leveraged and using words like toxic in referring to the property market

Probably clouds your judgement and you may muss out on a great opportunity.

Summerset et al are fine and not over over indebted - take a sensible view


and on track to make $130m plus his year = share price much much higher than what it is now

[Nasi Goreng]

Am I right to assume that in a declining or flat housing market, Summerset would end up paying little to no tax due to accounting rules. It could end up with a situation of flat underlying profit and getting a great cashflow boost due to no capital gains tax being paid.

I do think that an unhealthy property market is not good for any retirement operators but again aren't they shielded by a win win situation with the way occupants pay those big deposits? While SUM make gains in a rising property market because they get to keep the capital gain, its the occupation rights holder who takes a loss in a declining market... right?

Based on that, its difficult to imagine a retirement operator going bust... but it is quite possible returns could be slashed in a severe declining market.

On a last note, can anyone explain in a simple way what the residents loan liability of $637M is on the financial statement. From what I can see, this is swapped out when new occupants buy the license right? So this would only be a 'real' liability if property prices fell by 25% and it turned out that the $637M could not be recovered by re-sales (but is this not covered by my earlier point by the license holder taking the hit?).

[trader_jackson]

Hey t_j, stop being so sensationalist in saying SUM are well leveraged and using words like toxic in referring to the property market

Probably clouds your judgement and you may muss out on a great opportunity.

Summerset et al are fine and not over over indebted - take a sensible view


and on track to make $130m plus his year = share price much much higher than what it is now

I mostly agree with you that overall that SUM's debt is fine, but that is not to say it can and should be ignored entirely. I also agree that I could be missing out an a great opportunity

I am still of the belief that there are some "serious issues" in the Auckland property market that maybe "exposed" in a couple years time, my hope is things don't turn dramatically bad, and its more of a soft landing.

[winner69]

Nasi - SUM and others don't pay tax

[Lewylewylewy]

I think a drop in property price would effect NTA and therefore the share price. It would also effect leverage, making future development harder. I imagine prices would also drop and therefore profit.

Personally I don't worry about an Auckland price drop, more likely it will stagnate. Though I suppose it could drop under a number of specific scenarios. I just don't think it's likely. It's not something I'm worried about, especially since immigration is so high.

[winner69]

I think a drop in property price would effect NTA and therefore the share price. It would also effect leverage, making future development harder. I imagine prices would also drop and therefore profit.

Personally I don't worry about an Auckland price drop, more likely it will stagnate. Though I suppose it could drop under a number of specific scenarios. I just don't think it's likely. It's not something I'm worried about, especially since immigration is so high.

No need to conjecture - just look at what happens to well run village developer when house prices dont rise - look at this chart linked in context that national median house prices were pretty flat over 2008/2011 (maybe slightly down). Back then was post high net migration and post housing boom driven by be mortgage rates going down - all killed by the RBNZ who started increasing interest rates (RBNZ loves doing boom bust things). Sounds familiar?

RYM and SUM will still OK (more than OK)

The chart - http://www.rymanhealthcare.co.nz/investor-centre/thirteen-years-of-record-results

[Beagle]

Ultra low interest rates right around the globe for the forseeable future. 65,000 people coming to N.Z. every year, the vast majority of which end up in Auckland.

When I bought my first house in 1991 the average Auckland price was 5 times the average family income and I did the sensible thing and bought in a modest suburb so mine was 4.5 times our income. Back then my interest rate was 15%. To the best of my knowledge the banks are using similar debt servicing criteria now as they did 25 years ago so people who are paying a multiple of as much as 8-9 times using finance at 4% probably have payments as a percentage of their income that arn't materially different to what I had 25 years ago.. Its always been hard to buy a decent house in Auckland because its a great place to live !

[Bjauck]

No need to conjecture - just look at what happens to well run village developer when house prices dont rise - look at this chart linked in context that national median house prices were pretty flat over 2008/2011 (maybe slightly down). Back then was post high net migration and post housing boom driven by be mortgage rates going down - all killed by the RBNZ who started increasing interest rates (RBNZ loves doing boom bust things). Sounds familiar?

RYM and SUM will still OK (more than OK)

The chart - http://www.rymanhealthcare.co.nz/investor-centre/thirteen-years-of-record-results
It's why I prefer to look at underlying profit (as in the chart) as opposed to NPAT. However it was not for the faint-hearted as the SP for RYM took until May 2011 to reach the SP it was at in May 2007, having halved in the meantime

[Bjauck]

Ultra low interest rates right around the globe for the forseeable future. 65,000 people coming to N.Z. every year, the vast majority of which end up in Auckland.

When I bought my first house in 1991 the average Auckland price was 5 times the average family income and I did the sensible thing and bought in a modest suburb so mine was 4.5 times our income. Back then my interest rate was 15%. To the best of my knowledge the banks are using similar debt servicing criteria now as they did 25 years ago so people who are paying a multiple of as much as 8-9 times using finance at 4% probably have payments as a percentage of their income that arn't materially different to what I had 25 years ago.. Its always been hard to buy a decent house in Auckland because its a great place to live ! But to get a deposit for a house today takes a higher multiple of income than in 1991 - so today it helps even more to have a wealthy family who are prepared to help. So we end up with more investors dominating the market compared with 1991 AND probably more foreign investors too. If so many immigrants will be snapping up more homes - is it finally time to restrict (at least existing) house purchases to residents or those who intend shortly to be residents and cut out from the market foreigners resident overseas..

[winner69]

It's why I prefer to look at underlying profit (as in the chart) as opposed to NPAT. However it was not for the faint-hearted as the SP for RYM took until May 2011 to reach the SP it was at in May 2007, having halved in the meantime

Good old sharemarket sentiment eh - nothing to do with Ryman performance eh

Those that are more richly valued tend to fall the most (great buying as many found out) - esp when the panic starts.

Summerset has less 'demanding' multiples at the moment is a better 'bet' than Ryman (in my view) ......but keep an eye on those charts

[Beagle]

But to get a deposit for a house today takes a higher multiple of income than in 1991 - so today it helps even more to have a wealthy family who are prepared to help. So we end up with more investors dominating the market compared with 1991 AND probably more foreign investors too. If so many immigrants will be snapping up more homes - is it finally time to restrict (at least existing) house purchases to residents or those who intend shortly to be residents and cut out from the market foreigners resident overseas..

You'd probably know better than I on that front but where there is a will there is a way. Few years back we tried to help our eldest daughter into her first home, a very modest do-up 1960's two bedroom unit with 1960's decor in a very modest suburb and it was only $280,000. Would have required a lot of work and a real roll you sleeves up attitude to add value but it would have been a start and we were prepared to write the deposit cheque. They turned their nose up at it as not being good enough and today they continue to regularly bleat about the rent they have to pay, (at a better place of course), and my wife who's a real softie keeps "lending" them money when they get in trouble. I don't ask how much, if any, she ever gets back. Three main points to this story.
1. People have to have the right attitude if they want to get started. Be prepared to go without all sorts of wants and desires for many years to save your deposit, (just like everyone else did when they got started). Gen Y and X seems to be the "now" generations, they want it right now, it doesn't work that way with houses.
2. You don't buy an average Auckland house in an average Auckland suburb as your first home and neither should you have an expectation that you would. Modest units, apartments and very modest houses in modest suburbs are still out there and that's how most people got started, something young people need to keep in mind.
3. Be prepared to put some work into your home. Has the term "sweat equity" been forgotten ?

Suppose I should sheet all this back to SUM SUMhow to keep it on topic. I noticed the other day that units at their new waterfront location in Hobsonville start from mid $400's. If people don't have mid $400's in equity by the time they're 70 what have they been doing with their lives ? Nobody can tell me SUM's more straightforward units aren't affordable even in Auckland ! Lifestyle doesn't look to bad either.
http://www.summerset.co.nz/hobsonville/about-our-village/video/

[winner69]

It's why I prefer to look at underlying profit (as in the chart) as opposed to NPAT. However it was not for the faint-hearted as the SP for RYM took until May 2011 to reach the SP it was at in May 2007, having halved in the meantime

The reported NPAT chart is more impressive - line going up faster

And the real measure of value is Book Value - heck that chart is really really impressive

[Lewylewylewy]

You'd probably know better than I on that front but where there is a will there is a way. Few years back we tried to help our eldest daughter into her first home, a very modest do-up 1960's two bedroom unit with 1960's décor in a very modest suburb and it was only $280,000. Would have required a lot of work and a real roll you sleeves up attitude to add value but it would have been a start and we were prepared to write the deposit cheque. They turned their nose up at it as not being good enough and today they continue to regularly bleat about the rent they have to pay and my wife who's a real softie keeps "lending" them money when they get in trouble. I don't ask how much if any she ever gets back. Two main points to this story.
1. People have to have the right attitude if they want to get started. Be prepared to go without all sorts of wants and desires for many years to save your deposit, just like everyone else did when they got started.
2. You don't buy an average Auckland house in an average Auckland suburb as your first home and neither should you have an expectation that you would.
3. Be prepared to put some work into your home.

Millennial generation way of thinking. Very common. I blame the parents :D

[Bjauck]

You'd probably know better than I on that front but where there is a will there is a way. Few years back we tried to help our eldest daughter into her first home, a very modest do-up 1960's two bedroom unit with 1960's decor in a very modest suburb and it was only $280,000. Would have required a lot of work and a real roll you sleeves up attitude to add value but it would have been a start and we were prepared to write the deposit cheque. They turned their nose up at it as not being good enough and today they continue to regularly bleat about the rent they have to pay, (at a better place of course), and my wife who's a real softie keeps "lending" them money when they get in trouble. I don't ask how much, if any, she ever gets back. Three main points to this story.
1. People have to have the right attitude if they want to get started. Be prepared to go without all sorts of wants and desires for many years to save your deposit, (just like everyone else did when they got started). Gen Y and X seems to be the "now" generations, they want it right now, it doesn't work that way with houses.
2. You don't buy an average Auckland house in an average Auckland suburb as your first home and neither should you have an expectation that you would. Modest units, apartments and very modest houses in modest suburbs are still out there and that's how most people got started, something young people need to keep in mind.
3. Be prepared to put some work into your home. Has the term "sweat equity" been forgotten ?

Suppose I should sheet all this back to SUM SUMhow to keep it on topic. I noticed the other day that units at their new waterfront location in Hobsonville start from mid $400's. If people don't have mid $400's in equity by the time they're 70 what have they been doing with their lives ? Nobody can tell me SUM's more straightforward units aren't affordable even in Auckland ! Lifestyle doesn't look to bad either.
http://www.summerset.co.nz/hobsonville/about-our-village/video/

SUM is a property owner...so property market and condition is related I guess. Those Hobsonville units sound good value!
Tough Love Dad, softie Mum ;)

Re 1.Agree however with the size of deposits today no doubt requiring even more years of saving than the situation facing buyers in 1991, even more sacrifices (even for a modest starter in Aux these days) are required and perhaps that is over-awing for many. Also more people undertake higher education and are older when they try to get onto the first rung & are saddled with student debt too.

Re 2. Agree, because of the state of the market and increased competition from investors, first home hunters may need to set their sights lower than their parents generation did. Did first home owners in the 80's and 90's have to check their starter house for "P" residue? I have heard of some who do not do due diligence for fear of missing out. Were auctions as common back in the day?

Re 3 It still exists! But I guess for some, if you need to work all hours to cover your mortgage and to pay back parents for help towards the deposit, you could be too exhausted to do much else. Don't affordable blocks of flats have tiny garden areas and body corporate maintenance plans?

[Food4Thought]

Anyone know what SUM does for share splits? What may cause this to happen?

[Beagle]

SUM is a property owner...so property market and condition is related I guess. Those Hobsonville units sound good value!
Tough Love Dad, softie Mum ;)

Re 1.Agree however with the size of deposits today no doubt requiring even more years of saving than the situation facing buyers in 1991, even more sacrifices (even for a modest starter in Aux these days) are required and perhaps that is over-awing for many. Also more people undertake higher education and are older when they try to get onto the first rung & are saddled with student debt too.

Re 2. Agree, because of the state of the market and increased competition from investors, first home hunters may need to set their sights lower than their parents generation did. Did first home owners in the 80's and 90's have to check their starter house for "P" residue? I have heard of some who do not do due diligence for fear of missing out. Were auctions as common back in the day?

Re 3 It still exists! But I guess for some, if you need to work all hours to cover your mortgage and to pay back parents for help towards the deposit, you could be too exhausted to do much else. Don't affordable blocks of flats have tiny garden areas and body corporate maintenance plans?

Yeah those Hobsonville units do sound good value so I set myself a little challenge to see if they're a complete anomaly and to see if there is other affordable housing options in a modest suburb for a young person / couple starting out, circa $450K. It took me less than 2 minutes to find this which looks like a pretty good starter to me. Wooden floors and a nice bathroom would even suit a busy young professional couple. http://www.trademe.co.nz/property/residential-property-for-sale/auction-1048021402.htm

Too expensive ? Why don't people start with an apartment for circa $325K http://www.trademe.co.nz/property/residential-property-for-sale/auction-1034932348.htm

Share split extremely unlikely for SUM at this stage IMO. More likely 3-4 years when they head over $10.00.

[couta1]

Gee Roger, Sum at over $10 in 3-4 years, that will make Ryman shares worth over $20 in the same time frame (Off course they will be back to $2 by then after a share split) so will be real cheap buying compared to Sum aye) PS-Your new bullishness is outstripping all shadows of your former heights. PPS- Winner and yourself weren't Amway salesmen in years gone by were U's. :cool:

[Beagle]

Is that a 5:1 share split mate :D (Sorry mate couldn't help myself). Assuming underlying and IFRS PE stay the same as now for SUM, which are both on the cheap side at present from $4.44 if we see 40% underlying profit growth this year which is quite plausible with a 33% build rate increase and improving development margin, followed by 3 further years at 17% underlying profit growth per annum gives you just on $10. Not out of the question. Compounding growth ahs been described as the eighth wonder of the world for good reasons :cool:

[couta1]

Is that a 5:1 share split mate :D (Sorry mate couldn't help myself). All good mate but I must confess I'm going to get real scared when Winner, yourself or both of you start getting bullish on HBL again.:eek2:

[Beagle]

All good mate but I must confess I'm going to get real scared when Winner, yourself or both of you start getting bullish on HBL again.:eek2:

Fear not mate, no worries on that front on my account. I've been doing some long term visualization this weekend. Wife tells me we need to have a goal and hobbies to work towards in our retirement about ten years away and then visualize a pathway to get there so I've been visualizing 10 years ahead to see where I think shares will be to make sure I can enjoy my goal at the appropriate time.
Check out the quality of the teak, leather and general finish and amenities on this puppy. http://www.boatsales.com.au/boats-for-sale/dealer/used/OAG-AD-12633290/2012-MARITIMO-440-OFFSHORE-CONVERTIBLE?cr=2&psq=%28%28%28Make%3DMaritimo%26%28%28%28SiloType%3 D%5BDemo%20and%20near%20new%20boats%5D%7CSiloType% 3D%5BDealer%20new%20boats%5D%29%7CSiloType%3D%5BDe aler%20used%20boats%5D%29%7CSiloType%3D%5BPrivate% 20used%20boats%5D%29%29%26Price%3Drange%5B420000.. 760000%5D%29%26Service%3DBoatsales%29&pso=0&pss=Premium You think we'll be able to cope with "slumming it" on board this puppy and you can come help me chase some marlin. :)

Got to invest in things that will achieve the end result one is looking for :) SUM one of them and RYM another. Ten years invested in a company growing at 15% per annum gives four times your money :cool:

[winner69]

roger:
Got to invest in things that will achieve the end result one is looking for SUM one of them and RYM another. Ten years invested in a company growing at 15% per annum gives four times your money


.......plus a bit for the oysters and chips for lunch down on the beach

[Lewylewylewy]

Man, in a few years you could save money for parts and build your own. Now there's a hobie and something to work towards ;)

[artemis]

..... is it finally time to restrict (at least existing) house purchases to residents or those who intend shortly to be residents and cut out from the market foreigners resident overseas..

Labour and friends have not announced their housing policy yet, but I would not be surprised to see this when they do. It's not really aligned with National general direction, but since they are more or less Labour Lite anything could happen.

[winner69]

Back on topic

rough and dirty way to estimate/guess/project/forecast Summerset underlying earnings is to take the number of expected sales and multiply that by a realised fair value adjustment number. Method has worked pretty well over the last few half years so must be pretty robust

See a trend in this series of numbers - $43k, $61k, $63k, $70k?

Hint - it reflects improved development margins and rising property prices in general

All part of the reason why Summerset reported NPAT will be ~$120m this year - about 55 cents a share - at a PE of 12 share price over $6 later this year / early next year

[Bjauck]

...If people don't have mid $400's in equity by the time they're 70 what have they been doing with their lives ? Nobody can tell me SUM's more straightforward units aren't affordable even in Auckland ! Lifestyle doesn't look to bad either.
http://www.summerset.co.nz/hobsonville/about-our-village/video/
Although statistics on this are lacking, it has been estimated that 33-38% of residents in long-term care do not receive a subsidy. Presumably that for 62-67% of residents, it means their assets are below the asset threshholds. Some of those residents who may be eligible for subsidies may have spouses, not in care, with equity in a very valuable house but few other assets. Even so, there would be many, perhaps even a majority of seniors, who would not be able to find $400k for a cheap SUM unit- let alone finding extra to supplement Superannuation to pay for the annual village charge.

https://www.nzma.org.nz/journal/read-the-journal/all-issues/2010-2019/2014/vol-127-no-1402/6292

[Beagle]

Back on topic

rough and dirty way to estimate/guess/project/forecast Summerset underlying earnings is to take the number of expected sales and multiply that by a realised fair value adjustment number. Method has worked pretty well over the last few half years so must be pretty robust

See a trend in this series of numbers - $43k, $61k, $63k, $70k? $80K per unit this year mate ?

Hint - it reflects improved development margins and rising property prices in general

All part of the reason why Summerset reported NPAT will be ~$120m this year - about 55 cents a share - at a PE of 12 share price over $6 later this year / early next year

Inflation taking out the last ciggy tax increase was minus 0.1%, wasn't it minus last quarter ? Reserve bank looks set to lower interest rates yet again fueling even more house price increases so maybe $85-90K profit per unit next year ?

[winner69]

Inflation taking out the last ciggy tax increase was minus 0.1%, wasn't it minus last quarter ? Reserve bank looks set to lower interest rates yet again fueling even more house price increases so maybe $85-90K profit per unit next year ?

You sharp witted today Roger

On how many sales then - 400 new ones? plus 250/300 resales?

[Beagle]

You sharp witted today Roger

On how many sales then - 400 new ones? plus 250/300 resales?

Maybe 420 new units next year being conservative. Resales, yeah 250-300 looks about right so what you reckon for December 2017 mate ? $140-$150M ?

[Beagle]

http://www.interest.co.nz/property/81087/head-nzs-largest-real-estate-agency-says-there-may-not-be-slowdown-over-winter-year

All looks good.

How was the fishing at spot X Couta1 ? Fishing no good on the market today...there's always tomorrow.

[Food4Thought]

Good day for getting bites today. Has the boat departed? or is this wharf fishing?

[Ggcc]

Running out on the sell side..... The way this share is going, long term maybe the key. Especially when I hear the mention of an $9 share in three to four years

[silu]

1 billion dollars (sorry couldn't help myself).