The more youve got-the more youve got to lose---human nature
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The more youve got-the more youve got to lose---human nature
My guess is that unless RYM bounces on Monday it will rub off on SUM
Maybe but of late Ryman has been the more volatile of the two stocks all because of the international index boys pumping and dumping IMO and Sum has its Q1 results due out by April 10th,could give the price a boost.Have an amusing story to tell,yesterday morning I calculated if I was better off if I held Sum or Rym shares by dividing my total purchase price by the entry price of both Ryman and Sum at the time off my buying(I recorded both) well yesterday morning I would have been better off with Ryman shares to the tune of 8k over Sum,I then headed off to work at a Ryman facility and when I come home shock horror seeing the Rym price,I then recalculated the above exercise on the Rym closing price and was 32k better off holding Sum,what a difference a day can make aye:cool:
Isnt it great that you did not have a chance to act on your calculations:) You must be moving some rather large amounts of dosh around.
I find it is helpful sometimes to go back and read the whole thread on each(takes a bit of time but you can skim)
I have just done that with DIL and what a learning experience!
Hi Skid,Was not going to act on my calculation(at this point)but it is one I will be doing periodically to see which stock is performing best and to gather proof that Sum is as I believe on a steeper growth curve than Rym over the next few years,talking about it is one thing but proving with your own calculations is reality,Sum makes up 50% of portfolio total at present so makes amounts large,as I've said before I treat it like a rental property with better return and no tenant hassles
Skid I wouldn't call it a backlash at all, a good healthy debate yes.
In my view and others, people move into a retirement village for a range of reasons other than investment, (nobody would invest in a licence to occupy a unit with no capital gain and a guaranteed 20-30% loss on exit for reasons of it being a good investment).
In effect Reitrement villages in my opinion, are service providers, they provide the service of a good, safe, secure and supportive lifestyle. My view is some decline in the value of homes will have minimal impact on the tidal wave of baby boomers looking for a care free supportive lifestyle in the decades ahead.
Whilst no investment is risk free and its accepted that in a GFC Mk2, (assumming you accept we're out of the first one), a major decline in real estate prices would have some effect, I believe SUM provides the most compelling growth story on the NZX from a risk / reward perspective.
If others have a different view to mine, that's fine as far as I am concerned :)
If there's a major reaction to RYM's SP drop this coming week in terms of its flow on effect to SUM I have plenty of powder dry and the courage of my own convinction to significantly add to my SUM position, in fact I would be thrilled to have the opportunity to buy again at around 5% lower than Friday's closing price. To me that would be a free lunch :)
Looks like its held up well today-
But why buy when you can rent-like some retirement villages?
If one can find a good retirement village that doesnt require a large capital outlay,then they can have their free lunch:)..and eat it too.
If it proves to not be an issue (or no one wakes up to this) then you will do well with your holding.
But if it becomes an issue,and people realize they can stay in a well run village without the large capital outlay...well then you wont.
And if the capital gain(that seems to be a large part of their profits stops or goes down,well...you get the picture.
Sorry --should have said good healthy debate (but alot seemed genuinely surprised it was even brought up):)
Perhaps you'd like to list these quality rental retirement villages and then we can have a little chat about their weekly fees and who can afford them :) No free lunch today...what did the dog in the Toyota add say... bugger.
"Rental" Villages:
Drawbacks from retired tenants point of view would mainly be centred around security of tenure.
Drawbacks from a developer's point of view: (1) Increased capital, by way of share capital or debt, needed for a very much longer period. (2) Pay back periods much extended and not as certain. (3) Extra administration for tanancies (4) More credit control needed with greater uncertainty concerning ability of pensioner tenants to maintain payment of rents rather than the smaller village fees.
There would be more points, but I think these alone may explain why "rental" villages don't already exist.
Edit: In a way, actually some rental villages do exist - they are the council run pensioner flats, normally located close to a town centre.
Your clients keep going 'to that farm in the sky'.
The only difference with SUM style retirement villages is SUM requires, capital upfront and 6 months notice. I wonder if someone could make it work by only taking the deferred management fee component (ie. the ~25% withheld at the end), even if they bumped it up a tad.
Who knows if it would work but I would think the village fee would be the same but rather than paying $400k Licence to Occupy and getting $300k back at the end, you would only pay $100k (or maybe $120k to compensate) but get nothing back unless you move out early (normally it is ~5% per year for the first 5 years). Not riskier as they will get the exact same amount they get now, even more. Its just they dont get the use of the full license to occupy in the mean time which they currently use to fund the development.
Rental villages will eventually come, of that I have no doubt. They'll come in another generation to meet the needs of current Gen Y's who according to the latest census for those undr 40, the home ownership rate is very low. I assume with high Auckland prices many of these Gen Y's will never own a home so they'd better get really serious with their Kiwisaver accounts because they'll probably need to be paying rent and care fees right through their retirement years. Annual report makes for a good and encouraging read.
If the developer gets the same village fee and the same termination amount but does not have the same upfront licence payment, it sounds as though it would be very much less profitable, requiring substantially more borrowings and/or equity invested with greater associated risk. I think either village fees or the non-returnable upfront payment would have to be substantially greater than 25% of the current costs of licences to retain profitability.
Having said that, the potential market size is expanding and maybe there will be room for a greater variety of developments from no frills developments to full amenities luxury (in big cities). Maybe there will be mixed ownership villages too, where the residents have an equity/freehold stake as well. I like the idea of residents moving into a village actually buying a shareholding in the developing company - however that would mean residents taking on more risk (especially with smaller companies) at a time of life when risk-taking normally declines.
I have a friend who has just put his Mum in Selwyn Village.
I was under the impression they just paid a rental fee but on closer inspection it appears it is also a ''buy a unit ''(leasehold) so i stand corrected.
Seems like a pretty sweet deal for operators so unless the housing market falls they should continue to do well.
Well a developer has already planned a 'over 60's' apartment complex in Auckland CBD. It is not a 'retirement village' so it is arguable if it is legal (age discrimination) but I do expect other types of facilities to become more popular.
I had a reasonably thorough read of the Annual report now available on the SUM website and noted comments about strong demand across the country for SUM facilities. I also read between the lines regarding initial demand comments at the new Auckland sites of Karaka and Honsonville and made my own assessment of the interpretation of what's written in the annual report. I interpret what is said there as effectivly saying there has been very strong initial demand for units at these new sites.
I also note last year's PCP (first quarter sales) wern't especially strong so I expect the first quarter's sales this year to show a significant improvement over last year. With this announcement due on or before 10 April and after carefully assessing what's written in the Annual report I added further to my position in SUM today.
Gen Y's parents have high real estate ownership rates. As there are no death duties and a high use of the family trusts liberal regime, Gen Y will inherit and is starting to inherit all their parents' assets. In addition as the large cohorts of baby boomers move into SUM villages :) maybe there will develop a buyers market causing house prices to become more affordable. This will also depend on immigration rates and the rate at which absentee/overseas landlords buy into NZ real estate.
As NZ is increasingly an unequal society, I think the challenge will be to stop the poorest quintile(s) of retirees dropping into poverty. Councils are increasingly withdrawing from Pensioner flats but will there be sufficient profit in cheap rentals (with safe and secure tenure for pensioner occupants) to encourage the private sector to take over?
Good post and good question. I think its inevitable that at some stage the Government, probably a left leaning Govt, will re-introduce some form of death duties, probably under another name, something like transitional inheritance commission, or some such other more PC. term. As you say many people have their homes in a family trust already and I certainly encourage my clients to do so for a number of compelling commerically prudent reasons including the possibility of a change to the current zero rate of death duties. I agree that many Gen Y's will stand to inherit real estate, (the jury is out with my two kids on whether they deserve it LOL).
I think its a sad and inevitable reality that we will see apartment facilities spring up to replace pensioner flats, probably all of which will have standards and facilities vastly inferior to SUM's retirement units. Poeple living in a cramped, crowded and poorly serviced apartments without any meaningful community facilities clinging on too some illusion of independence aided by the on call facility that a ST John medical alarm provides. What a sad way to "enjoy" one's twilight years.
As (perhaps)the majority of wealthy NZers have assets in family trusts, it may be pointless bringing in death duties. Because of their proliferation, the bastion of a trust is already being breached by means assessment agencies and perhaps other inroads into family trusts will occur. They are a victim of their own popularity! Certainly if Australia remains death duty-free, many NZ retirees may decide to set up abode on the Gold Coast to avoid any NZ duties. However, even the UK (with its fiscal issues) is talking about boosting the duty-free estate allowance from 325k to 1m pounds (single person) before death duty (Inheritance Tax or IHT) kicks in at 40%.
Yes, it will be a challenge to have quality rental accommodation for those who cannot currently afford quality such as a SUM units.
A CGT is more likely before a death duty - those houses have to be sold as some point. Except Labour is going to exempt the family home.
Looks like a few others have read the report plus the anticipation of the Q1 results just hit $3.60,I'm expecting it to test $3.75 after Q1 results out
Phew! I feel better already!
I probably shouldn't have read this Jeremy Grantham article.
http://www.smh.com.au/business/marke...325-35f34.html
Even Labour and Greens have said that the family home would be exempt, in other words, the lions share of the market. As there will be no such exemption for those who have invested their capital in businesses or share investments, sometimes instead of investing in the family home, the real estate market will actually be at a comparative advantage under a future Labour govt implementing a cgt! The threat to Sum would only be such as that facing all investments on the stock market. In my opinion.
1/. They do not make 'truck loads of cash' from capital gains.
2/. CGT would probably be payable on the sale of a property
3/. The do not sell their properties generally
4/. The accounts would have a deferred CGT liability on gains that would not need to be paid unless a sale occurred
5/. So everybody would ignore it in their valuations.
6/. Best Wishes
7/. Paper Tiger
Its ok. Warren says to calm down.
http://www.stuff.co.nz/business/worl...n-on-the-cards
Annual Report talks of a land bank of 2116 retirement village units, (more than 7 years supply at projected 2015 build rate), and 595 care beds.
Appears to signal an approach towards more comprehensive facilities going foward...higher recurring earnings from future facilities perhaps ? Thoughts anyone ?
Pleased to see Norah Barlow will be joining the board of Aussie retirement village group INA Ingenia.
Thanks for that Percy.
Interesting from a number of perspectives.
1. Norah serves on the SUM board post her CEO role finishing up. So interesting because it's clearly NOT a conflict with her being involved in SUM, otherwise she wouldn't do it, or at least, remain on the SUM board.
2. This would suggest SUM has little interest in expanding into Australia, if there is no conflict of interest, even though SUM is listed in Australia now.
3. It would also suggest INA is not interested in expanding into NZ, otherwise why would Norah remain on the SUM board if she was headhunted?
4. There may be useful synergies that come from a director being on the board of SUM and INA.AX. The Australians are reputedly far behind the NZ listed companies in terms of a deferred management fee model.
5. Dare we suggest the kind of synergies they might realise? Merger.... cough....
Simon Owen who is the CEO of INA was the very successful CEO of Aveum,before joining INA.Being in the sector for a long time he would be very aware of Norah Barlow's excellent track record. I think she will bring a lot to INA. INA has mainly been "lifestyle" rather than NZ's "total care." What is interesting is that over 30% of INA is held by New Zealanders.I think the list includes Sir Ron Brierley,Fisher Funds, and Pie Funds.
Shane Jones stated at a meeting in Auckland yesterday that "within 100 days of being elected Labour would raise the minimum wage and address the "dreadful conditions" of staff and residents at rest homes."
Has anyone seen any detailed policy from Labour on this ? I've searched and did not find anything.
dear iceman...shouldn't that post have been yesterday....come on..."detailed policy from labour"...do not such (even if indeed they exist) "policies"...vary from day to day..!!!!.
Having said that Shanes comments continue to appear as populist loud generalised ravings as is his way.
Am I wrong.Cheers
Ice, shouldn't your query be on the Ryman thread? We don't have "dreadful conditions" at Summerset......:D
and did he state which election he hoped to be elected at?
Xerof that's a bit of a low call...are you a mate of shane's perhaps
Does anyone really care what that loud mouth says ?
The okes have already been made so I will move on.
Within the first 100 days they will increase it to $15ph. They will then do a further increase in 2015.
- Nat's have just increased to $14.25 so this is not a significant increase
- The assumption is the second raise would be on 1 April 2015 as that is the normal increase date.
- They haven't committed to the 'living wage' other than for government employees.
- They wont be committing to any amount for the second raise. A nice empty promise by Labour.
Dear HS....are you seriously thinking that "they" will cross the line first this year ...like really....really....should "they" do so perhaps in 3 years then surely your figures are meaningless....YES NO
As a significant portion of my wealth is in power company's, no I do not believe they will be in government later this year.
I was just stating the full extent of their policy, that is that it misses the most important detail, since the increase within the first 100 is only minimal. I also point out the double standards as they are setting a different minimum wage for government vs non government employees.
But to answer your question, I like Winston Peters reply:
NO
you're right on both counts - a bit of a laugh, but also agree with your 'shake-up' scenario. I'd be very interested in knowing how widespread, or generalised, you see the sector problem as being. Can you elaborate or rank by Company? My perception is that there are many many small private ones that are disgusting, but only hear sporadic episodes about the listed entities
Dear Iceman..how is BA..ive been there a few times...who did you fly with ...Qantas I assume....
Don't be a plonker...It was the 1st of April yesterday.......cheers
^^You can start your investigation by having a bloody good look at the qulaity of "care" in Ryman's dementia facilities. Don't worry about the patients needs, whether they're adequatly hrdrated, whether they need to see a doctor or whatever other needs they have, just drug them up to the eyeballs so they don't know what planet they're on because there's less work for the staff to do right ? Don't worry about keeping proper files on the patient, the next shift of Phillipino workers, most of whom struggle to speak english, will somwhow magically know what each patients needs are when they start their shift, right ? Still, what would I know, i recently watched my father die a slow cruel death in one of their facilties with his needs not well met by any stretch of the imagination. I am sure this is an extremly isolated case and I know absolutly nothing, (sarcasm intended). I havn't got the stomach to own Ryman's shares after seeing what i saw first hand.
No need to tare the whole sector with the same brush in my opinion.
That is horrible to hear Roger, commiserations.
Whilist we are fairly happy with our mothers care; staff are great and facilities fairly new with every room facing the sun and garden;(none of the big 3 btw) we still take her out 4 days a week for activities and family time as there just isn't enough activities there for her. Having 3 siblings in one city helps.
Thanks for your kind posts Gents, sorry that I get a bit wound-up by the issue of elderly folks care but it means a heck of a lot to me that I'm investing in a company that wins best care awards year after year, (for the personal reason I shared earlier today), the fact that it's also the fastest growing is equally important too.
Yeap Couta1 I'm going mate, (thanks to Forest for the suggestion and invite), we're jetting down and making a day of it, I'm sure there's certain to be a few beers involved.
All welcome to join us. PM me if you'd like more info on our flights schedule.
Already the retirement sector seems to be the journalist's go-to story on slow news days. It's a bit like the credit card spending by public servants a few years back.
I guess aged care has it all...It affects all families and, potentially, everyone. It is "human interest" and involves health, government, finances, and equity.
In relation to the resthome/hospital sector, from my experience as a family member of a resident, an increase in (well trained) staffing ratios would benefit patients/residents. That involves considerable extra expense in staffing and training. Who would bear that expense? Taxpayers or the residents themselves? Either way would be unpopular. After years of reducing the tax burden on higher income earners, would voters now support an increase to support those in need? Should the government look into the widespread use of family trusts and make them ineffective when applying for subsides/rebates so that trustees pay for trust beneficiaries' care costs?
Or, should shareholders/owners bear the expense? Which begs the question, how much profit would be needed to maintain the investment needed in the sector?
If I get a chance i'll ask the hard question but i would speculate at this stage it has a lot too do with Ryman having more existing facilities with the full continuium of care, rest home / hospital / dementia wards.
SUM's development plans appear to be moving in that direction.
More on - and from - Norah Barlow.
http://www.nzherald.co.nz/business/n...ectid=11232597
Percy I think you right also by my calculations the average RYM village has 265 units + care beds while SUM has less then 120 on average.
The bigger villages can more easily support care centres and other facilities think swimming pool, library etc.
I think even if SUM copies everything RYM does, including building larger villages, they still are left with a number of smaller less profitable villages in their portfolio.
Even MET averages over 180 units and care beds per village.
Having the biggest care centers isn't always best,maybe bigger than current when it comes to Sum but very large care centers come with all sorts of logistical problems and profit draining potential plus heaps more potential for a larger number of complaints and media attention,met has an inferior continuum of care model to Sum at this point in time,Sum have the potential to add onto some of their smaller villages such as they are doing at the Trentham site
Agreed Percy and its only this year that they're bringing all development in house and aiming for a development margin of 17% compared to an average development margin of about 12% historically, (from memory). This change, along with the 25% growth rate in the number of units being built and the change in emphasis towards more comprehensive facilities has fantastic potential for profit growth going forward that I still believe is not being properly perceived by the market...that and the fact that they have a very strong established pipeline of developments in the high value Auckland market. I believe we will see real adjusted profit, (before property revaluations), of circa $50m per annum within 3 years for SUM, based on my expectation of at least 35% compounding growth pr annum in operating profit for the next 3 years, ($22m x 1.35 x 1.35 x 1.35). Considering their build rate is growing at 25% per annum and building margins are targetted to substaintially improve I think this should be realisitcally achievable and potentially could be a conservative target.
They are also on record at looking at procurement efficiencies going forward. I believe that this company has only very recently hit critical mass and there's obvious additional economies of scale going forward as the company continues to grow.
I think what you said about "reaching critical mass" sums it up.
What a fabulous business to be looking forward to such a fantastic 3 year [plus] 35% compound growth.We are well positioned!!
Yes, the Auckland market is NZ's biggest and SUM will enjoy great rewards there.Yet there is huge demand in such places as Ashburton.The best operators will have trouble keeping up with the sector demand.
Hi Percy, I hope you are well mate.
Yes, there were hints in the annual report that initial demand for their new developments at Hobsonville and Karaka has been very strong and i'm looking forward to their first quarter sales results this week and the AGM on the 30 April. We are extremly well positioned :)
You got a number of sales for 1Q14 in mind Roger?
Anything less than 130/135 in total would be disappointing and a bit of slowdown in sales momentum
^^ I'm thinking along the same lines as you mate.
FY13 SALES OF OCCUPATION RIGHTS
1Q13
ActualNew sales 64 Resales 25 Total 89
Edit: Ref post #239 by Banksie
That would be nice but surely anything north of 122 would still be a good result (being a 10% increase on 4Q13).
https://www.nzx.com/files/attachments/187858.pdf
But the last 3 quarters have shown increases of 23%, 19% and 50% over pcp
Momentum my friends .... 10% would be slowing down and a disappointment, esp as touting growth growth growth and so on
And don't forget that 1Q13 was a bummer, being less than 1Q12
I'm with winner69 on this for the reason mentioned above. PCP sales are a soft comparison in my opinion. Karaka and Hobsonville are open for sales and there's a strong hint in the 2013 annual report written in late February 2014 of very positive demand in the Auckland area which is known to suffer from an acute housing shortage. I'd be disappointed with anything less than 125 and expect more. Very strong numbers were reported by Barfoot and Thompson late last week for March housing sales, (I didn't post a link last week as i don't see any point in opening up that debate again as its allready had a very fullsome discussion in my opinion), but its an indicator of very strong demand in the greater Auckland area. 140-150 wouldn't surprise me.
Sales numbers aren't the only thing to bear in mind. SUM are improving margins as they build more with in house teams. So sales might be good not brilliant, but earnings look better than good.
Reasonably large off-market trade at 4:31pm for $3.45. Anybody know what's up? Maybe ACC cashing in to buy GEN?
I think what your thinking Goldstein. I have this funny feeling that it will have a big spike in price (GEN), then settle again once the GEN hype is over... good in the short term (for GEN)... I'd rather be in the retirement industry, then the electricity sector... especially as currently (free to change my mind) I don't much like natural disasters/acts of mother nature... (I think a retirement village would be better insured for this type of possibility). I have consulted my tarot cards and consulted with The Moon Man for my DYOR.
I hope it all goes well for the speculators with GEN, in the long run, it will go well for Summerset. Be a good time to top up... good for those with cash... maybe those selling out from XERO (ouch).
92 sales. A bit disappointing really
New sales will obviously be limited by available stock, do we know how many units they are holding unsold?
Im reading that in 2013 they built 209 yet sold 228.
So perhaps with hobby etc now being built we will see sales of new units later in the year.
On a positive note, if Qtrs are to be compares, sales of existing units are up from 25 to 44.............
Q1 sales can be slow for a variety of reasons,it is normally a slower period for resales post festive season talking to the sales reps,though a bit dissapointing nothing to worry about in the grand scheme of things,expect a better Q2 result IMHO
Growth ain't slowing,this steam trains fireboxes are being loaded up for a long profitable train ride:cool:
Hang on, the new sales are up from 25 to 44 comparing 2013 Q1 with 2014 Q1. It's the resales that have dropped from 64 to 48. This could easily be an anomaly (not so many deaths etc). An interesting trend would be if younger residents started buying thses units pushing the time between resales up.
I'm disappointed but have to invest in something for my retirement and despite this hiccup this remains the most compelling long term growth stock on the NZX on a projected risk / reward basis in my opinion.
I wouldn't be too dissappointed. The resales have bearly doubled and there are reasons we can only guess at for the new sales drop.
What is the size of the 'pool' that is actually available for sale?
when is a sale able to be recognised as a sale? Is it when the contract is unconditional, or at settlement?
I had a quick look through the notes to FS's but nothing provided the answer
I had a look too and couldn't see anything either. If you compare new units delivered with new sales for 2012 and 2013
2012 2013
delivered : 160 209
sold: 167 228
So at a guess I would say they can sell them as fast as they can complete them. Unless something has fundamentally changed in the market, it's most likely a supply problem affecting the new sales. As I said previously, resales have gone up well in Q1.
We both disappointed then Roger
Annual sales number increased from 402 to 405 .....wow that some growth.
Couta nearly had me convinced that things were booming, obviously not
Jan and Q1 might br crappy for real estate - just this time it seems crappier than normal
Just like XRO obviously have to believe the dream ....and hope
ACC are happy to pick up some more.
Their stake now over 6%.
https://www.nzx.com/companies/SUM/announcements/249302
Ha ha ......good old Business Desk puts a different slant on a disappointing sales number
. Summerset Group, the retirement village operator asking shareholders to boost directors' fees 50 percent, lifted occupation rights in the first quarter from a year earlier.
http://www.sharechat.co.nz/article/b...-4-percenthtml
Lets hope the directors earn the $200,000 by stirring up the building and selling departments to get the sales rate up ...pretty crappy at the moment
Yeah mate, definitly licking my wounds today after recently adding at $3.58.
Still looking forward to attending the AGM and advancing my understanding of the stock.
Pretty clear I read too much into the implied comment in the annual report that intial sales at the new developments at Karaka and Hobsonville have been strong. Seems clear now that there's timing issues around when the contract is signed and reported as a sale and I suspect as mentioned above by someone else it needs to be unconditional before being reported as a sale.
I think we can agree that SUM and XRO are quite different kettles of fish. One has a good track record of growing earnings, the other has a good track record of growing sales and losses with the future prospect of earnings. One gets quantifiable results, the other is a "story" that may or may not work.
Let's not forget that SUM management are targeting a 17% development margin this year by bringing in all development activities in house, which will be a substaintial increase on previous years and a build rate of 250 units this year up ~ 20% on 2013 and 300 next year which will be another ~20% build increase on 2014, if achieved.
The question is, is all this currently reflected in the SP which is currently trading at 33 times underlying, (not IFRS) 2013 earnings. Classic "HOLD" if you ask me.