I must admit Ryman is the one stand out stock in NZ
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I must admit Ryman is the one stand out stock in NZ
Hi Voltage,
Re: RHC - Have had a glance over the years but I don't have any insights
Ramsay did very well with a highly leveraged play, buying the larger Affinity in 2005.
The preference shares sit as equity on the balance sheet, but I think it behaves more like debt leverage in terms of its effect on profitability for common shareholders. Presumably the additional book equity helped them secure the high levels of debt funding they needed to fund Affinity, while not diluting shareholders. It appears to have been a very successful move.
Arguably highly geared, but appears to have great assets and very good management with rare talents when it comes to acquisitions. But these are just guesses from a cursory glance, I really don't understand this business at all.
Cheers
Sauce
I got a very lucky with Austin when I first bought in, as I really didn't understand it then at all, but I feel I have a much better grasp on it after following it closely for 6 or 7 years and researching various questions as they arose. Although I am constantly questioning myself as to whether I really do have any insights.. I think its very important to be cynical about ones understanding of underlying businesses, as I feel the odds are against most outsiders being right a lot of the time, and all sorts of inbuilt biases can lead to terrible decisions.
One thing I have found is that cursory glances at underlying quantitative measures do not tell the whole story. Clearly businesses profits do not always go up in a straight line (RYM may be a rare exception to that!) and so an understanding of Capex programs, how they are funded, and both how high the return is likely to be, plus when it is likely to arrive, is essential to being able to assess the true economics of a business.
Cheers
Sauce
Sauce, you are very clued up how to analyse balance sheets, this is beyond most people. Broking firms have people full time doing this. Any advice for the average punter?
Thanks for the kind words Voltage,
As an average punter myself, my suppositions could be wrong - so please don't take my guesses for gospel and I certainly wouldn't want to lead anyone astray by offering advice :)
I think Charlie Munger is a great person to listen to, and he says the key is continuous learning.. If your wife complains about the lack of quality time because you always have your head in a book, a pen in your hand, are tucked away in your study, or distracted by the annual report on your Ipad, then my guess is that you are on the right track. At least for your investment career, perhaps not your marriage :blink:
Cheers
Sauce
P.s. Sharetrader doesn't count :p
Hi guys, would like to hear people's opinions on how the Metlifecare merger may effect Ryman?
(see NZH article: http://www.nzherald.co.nz/business/n...ectid=10811366)
My thinking would be that with Metlifecare growing substantially, a large increase in there underlying cashflows and investors could see them putting up stiff competition to Ryman and perhaps taking a significant share of the market from Ryman. Opinions would be much appreciated.
My uneducated view is the market is growing as is big enough for the three of them (including summerset) plus all the small players. Rymans offering is very good which is independent of size of the wider group - that is what attracts the old folk.
Hi, fair question im not intimate with all the details(and don't want to be).Ryman is a superior operating model imo ,Metlifes returns aren't nearly as good. Rymans model of building their own villages also far superior to buying existing villages, re pricing ,quality control in-house etc. Plenty of room for both in a growing mkt. Of course the price Metlifecare will pay is int.Buying off Goldman Sachs ,the Cannibal Vampire Squid ,well good luck getting a good deal! Incestuous buying off Retirement Village Group which has 50.1 % of Metlifecare ,will the small guys be looked after? Maybe they will switch to Ryman. Are all the assets in NZ if not my understanding is margins are lower in aus.got a feeling this will ultimately be better for Ryman; now wheres the Sauce? cheers
Percy are we inside your head or did your lips just move:eek2::cool:
Some very good points, yes I definitely think Rymans self-building model is far superior to buying existing as you say, I guess my concern (as a Ryman holder) would be that the merger would provide Metlife with the kind of economies of scale that can generate significant cash-flow (much like Ryman) allowing them to soak up a much bigger share of the impending growing demand. But as you say it does seem there is plenty of room for all. Ahaha yes the sauce insight would be interesting!
Lips just moved.!!!!! All these points,concerns have been answered in previous posts.Just go back a few pages.Still concerns just go back further.Just keep going back,then we all can move forward knowing are the market leader in a growing market.Rymans model is the bench mark.MET will have enough problems of their own to sort out.
Hi Rocketman11
I spent some time analysing the Metlifecare deal after the report came out that included data on the target villages. To be honest, I am convinced the thing is a ghoulish plan for existing Metlifecare shareholders. I will post my thoughts on it soon on the Metlifecare thread to see what others think.
In terms of your interest in RYM; I see no reason for concern. In some ways the opposite - a consolidation of villages (of dubious initial quality) under a single owner with management who have done a terrible job so far; there's an argument it is less threatening.
The competitive landscape won't really change that much. Metlifecare get some land, and possibly some procurement advantages. But the reporters and analysts that state their new size will allow them to "take on their rivals like RYMAN" are missing the point - RYMANs value chain has been built on a long period of constant refinement with an extremely high underlying level of continuity in their business. their experienced in-house design/build team are so far ahead in experience and build program scale. Comparatively, they also hold much better locations. I strongly suspect, while it might help procure better rates in some areas, having more villages doesn't automatically bring your per unit cost down dramatically either; Ryman's individual villages themselves have been increasing in size, and with the build rate increases and ongoing development program in place, their advantages will remain unmatched.
In contrast, Metlifecare as they are now, and their merger targets are a mish-mash of economically unprofitable villages (on a cash-to-owners basis) with no evidence the locations are superior (some evidence of the opposite), many of which offer only independent living, and its a bit hard to tell, but by the looks of it none that offer the full continuity of care (but some with aged care + independent).
There is just no continuity to what they are doing, and no defined strategy. They have no genuine value chain that I can ascertain. If you can't manage your existing business well, then it does not make rational sense to increase the size of it and expect you will be able to manage that any better.
Charlie Munger says it best; "when you mix raisins with turds, they are still turds"
Finally, I think CJ, Joshuatree, and Percy are spot on; Ryman simply do it better, and the wave of demand is likely to make it a moot point anyway - the country has a big problem on its doorstep - What do we do with all the Babyboomers? - and we will need more than RYM, MET, SUM, and the small operators, to take care of it in coming years (next 30 or so).
Regards,
Sauce
P.s. If I was Metlifecare shareholder (no chance in its current or merged form) I would be voting against the merger.
what I mean by continuity is cohesion within in their business model - i.e. Metlifecare are all over the place: buying villages that under different care models, assuming other peoples development programs, buying access to their design teams - etc etc. They needed to have built these skills and processes and profitable village models up organically over time already. In my opinion its risky and stupid to make adhoc attempts to "scale up" when you can't get it right to start with.
Thanks for the response, much appreciated. I have to say I am very unfamiliar with Metlifecare but I guess their performance history relative to Ryman speaks for itself in backing up what you say.
Another question which I would love to get your opinion on is the Euro debt saga and how this may affect Ryman. I have discussed this with friends and seem to get a wide-range of views. One theory is that another 'financial crisis' could spark a fall in property here, similar to what has previously been seen U.S and that this could severely affect Ryman's Asset valuations and could see a drop in the surge of investor support for Ryman.
Personally I think that any fall in property could be advantageous to Ryman, as they would be able to increase their retirement village production much faster whilst riding out the downturn on the back of their strong cashflows (which I can only see getting stronger) and cash assets. Seeing as the euro situation seems to becoming more and more important would be interested to hear your thoughts on the matter? Cheers
Hi Rocketman11,
I think Real Estate in NZ is overvalued, but I would be highly surprised if there was any collapse on the cards. We simply do not have the over supply issues that exist in other heated property markets that have crashed. We have tight supply and low interest rates which will underpin the high prices.
On the other side of the coin, I find it hard it hard to imagine how property could have anything like a decade like the past 10 years, in the next 10 years. In fact I would bet heavily against that. With the majority of the average income going towards paying the average mortgage in NZ, anyone who thinks property prices will double in the next 10 years has a hopeful persuasion indeed.
My best guess is a long period of - possibly mildly volatile - sideways growth for NZ residential property, until wage growth and incomes catchup. Of course, longer term (over our lifetimes), property will still be a great thing to own and provide a good hedge against inflation (especially leveraged real estate) etc etc.
How would another property debacle effect RYM? I totally agree with your assessment that it would probably be good for RYM in the longer run. They require a replenishing landbank of quality sites to continue their expansion. The current environment is ideal for them because development land has been the hardest hit - competition is light and finance is harder - if this continues or gets worse it will be great for RYM.
When it comes to their own sales; RYM have waiting lists for their villages and practically zero vacancy. That tells you something very important about the demand for their villages. In my experience, the elderly moving into retirement villages, and usually their families who are facilitating the process, are the most motivated home sellers. It is a very need driven demand. Older folks, and their families, simply have to do something when they cannot care for themselves. So if property is hard to sell, they will be the first to meet the market prices. And RYM have such strong demand that even if some do not meet the market, or cannot find a buyer, another one will.
Of course, there is some relationship between house prices and profits, because RYM base their initial unit prices on the surrounding suburbs real estate prices, and that also affects the re-sale prices and capital gains that go to RYM, but because the demand side is so strong, I strongly suspect they have more inherent pricing power than people realise (evidenced during recent downturn).
I believe the best way analyse the potential impact is to see how the collapse in housing demand effected them during the lows of 2008/2009 - When they managed to book profitable growth in the worst housing market for decades. They have also increased unit prices since then, even with declining property prices in some areas (Wellington most notably).
Contrastingly Metlifecare got smashed.
I hope this helps
Cheers
Sauce
All that positivity should be balanced of course - RYM surely has its challenges;
Operationally dealing with the ever growing build rate can't be easy, not tripping themselves up I think is probably the biggest risk, and obviously dealing with the different market in Australia and the realities of that. Possibly future regulation (although seems unlikely with problems we face) - but maybe something out of left field could trigger it, like an unscrupulous operator running a ponzi scheme on the "licence to occupy" model or something..
RYM might offer good security and rock solid guarantee to its residents, but to its shareholders its still just a very very good bet.
Cheers
Thanks Sauce, really enjoying the well thought out and backed-up answers that you provide, much appreciated.
Also good point about the regulation, that has been inflated as topic by the media recently (often specifically mentioning Ryman) in my opinion though there are far more targets that need regulation before retirement homes would even be looked at. And even if it did come to that I would expect Ryman to rise to the challenge.
Great to hear and think about a wide range of scenarios,
Cheers
I think you make some good points here Sauce but you need to be careful because you could be accused of rose tinted glasses with some of this well constructed arguement.
The last point you make is for me telling. A competitor got smashed. RYM was fortunate and did not. However to assume that RYM would be fortunate again is not sound IMHO.
I would suggest if a true property market correction took place - 20-30% falls in house prices across the board - RYM would be heavily impacted to the negative and the shareprice the same. You cannot escape the fact RYM is a leveaged property development play to some extent and the rise in house prices over the last 10 years has been a huge tailwind to the performance of the business.
Biggest tailwind is aging population.In fact a force 10 gale is predicted.
While I agree house prices are overpriced, there is no way we will see a correction due to lack of supply. China, US (even Australia to a degree) built more houses than they need. NZ is doing the opposite. And whats more our current housing stock is crap - Old draft villas only sell for millions due to great location and require another few hundy to refurbish, one decade of leaky homes, lots of small old houses that even the poor think are below them.
So to play the devils advocate-what are the things that are most out of the control of RYM
They are obviously very good at running their homes -They seem to have happy workers with above average pay[although the job market is tight which makes it easy for them to keep workers]-They certainly have demographics on their side[plenty of wrinkleys coming along]---That really leaves the 2 biggies-the price of the land,and the cost of building. Building costs are possibly the main hurtle if they keep going North at the present ridiculous rate. Of course rising land and building costs then lead to affordability issues if a large segment of the older population have been walloped financially already, with the downturn.
I guess these are things to keep an eye on ,just to make sure that this overachiever stays that way. Im sure lots wish they'ed jumped on this wagon years ago,but I suppose that is irrelevant if it keeps its steady progression North.
Hi Modandm :)
I was a bit concerned that my post my have appeared biased optimistically. Hence my second post to balance it out a bit, outlining some of the real risks that RYM face.
My comments about Metlifecare getting "smashed" may have appeared flippant, but in 2008/9 I spent a lot of time analysing the effect of the crisis, and property downturn, on RYM and Metlifecare. As a result, I placed a very large (relative to my portfolio size) bet on RYM. Here is an over-simplified summary; I found emperical evidence that Metlifecare's unit pricing was comparitively expensive going into the crisis and Metlifecare had no cost or pricing flexibility. Basically, their villages did not have the same "degree" of demand (due mainly to differences in location, reputation, amenities, levels of care and relative price) and their cost structure does not have the efficiency, enjoyed by RYMAN. In terms of the effect on their respective profitability? well that is obvious isn't it. (in terms of the investment case between them, there a mile of other differences, but these points are in respect to why the crisis effected their underlying profitability so differently)
So my thesis is not that RYMAN were "fortunate", as you put it. Far from it. It is the intrinsic advantages they have, relative to the competition, that helped them fair so well, and would similarly help them in another crisis.
I agree that RYM are not completely immune to house price movements. As I mentioned, their unit pricing and realised capital gains, to some degree, are based upon house prices in each villages catchment area. It really depends on the degree you assume they would suffer in a protracted downturn, but judging by the tone of your post, it is my opinion that their business model is more resiliant than you think. The thing you have to remember is that RYM operates in a unique segment of the property market which has a very large supply and demand imbalance. The supply and demand economics will not change dramatically for RYMAN, even if it does for "residential property" in general.
Regardless of all that, a bet on RYM doesn't necessarily have to assume they are able to withstand a 20% - 30% correction in nominal house prices, as such a scenario is very unlikely.
I note that RYM grew 17% this year and are confident of continuing to grow at their 15% target for some time (I suspect they might beat that by a point or two in the short term, due to the substantial build rate increase). And yes, some of their current and future profitability is indeed due to the "tailwind" of historical price rises.
Your welcome to disagree with some, or all, of these points of course. We couldnt all have the same views or opportunities would not exist :)
With regards,
Sauce
I asbolutely agree CJ. This is exactly why we did not have a collapse like the US.
And also New Zealanders preference for property, shallow capital markets, and mistrust of the sharemarket.
It does seem unlikely that property will be a good investment in real terms for awhile though!
Cheers
Sauce
Hi Skid, their handle on building costs is partly what makes their model so compelling. Their value chain is significantly enhanced by their experienced in-house build team and village designs, and their procurement advantages. They can keep building costs down and deliver on time, build very efficient villages, enhance margins and therefore they have more control over the prices they can charge. It is incredibly hard to replicate this.
Perhaps there is a possibility of them running out of a ready supply of affordable development land in good locations. Although the stars seem aligned for them right now in this regard, it would be good to see them replenishing their landbank.
Cheers
Sauce
A point that I think is worth considering, is that it is inaccurate to compare NZ's residential house-market to the type of unsettled land that Ryman is in the market for. Even if Ryman were to be hit by a property value decrease I am sure that they would easily ride through, if not even be benefited, here's why:
As the age-old teaching goes- property investors only lose money when their portfolio is too negatively geared for a sudden change in the economic environment, however Ryman's 'much hyped' cashflows are what allows them to ride out the lows (much like any good property investor) and make big on the general trends which can only be up.
Sauce has talked about the 'buffer' of money that Ryman has from the lag between incoming and outgoing residents money, much like Insurance companies, however the big difference is that unlike with insurance Ryman never has the risk of a big payout. Hence this large pool of money acts like a huge cushion for Ryman. In fact, arguably I think a property downturn could actually be beneficial in the long-run. The cash reserves would allow them to keep buying land at a cheaper cost and invariably expand their villages at a much faster rate to keep up with demand. I think that it is this very unique cashflow model which forms the core of Ryman. And it looks like the demand side is not going to be a problem. Only today I read an article about Ryman's latest Village opening today and expected to reach capacity by the end of the year. Good sign of the future to come.
This begs the question that surely Metlifecare should be doing far better as they are sharing many of the advantages of the industry like Ryman. That beats me, Sauce has attributed some of this down to operational and managerial issues. I think the big difference with Ryman is the scale, to reach that level of cashflow requires a certain size (just like how insurance only works with a large number of insuree's) which I don't think Metlifecare has. I guess thats why the recent merger commotion has me thinking...
I don't think Sauce has the rose-tinted glasses on, it's just faith in a highly unique cashflow model and also what I hear is a excellent business operational model (which I would admit I know not much about- at least compared to Sauce who seems to have done his homework and more)
Cheers
Some good thoughts there Rocketman11. I love the term "cash cushion" and I like your point that it won't ever require a sudden payout like insurance companies float. Additionally, RYM know exactly where they can safely invest the residents funds at very high returns, which further grows the Cash Cushion. They don't requiring buffett-like skills to get a good return on it, for instance.
Regarding Metlifecare: Yes, Metlifecare should be doing significantly better than they are. It is mostly an issue of execution.
Cheers
Sauce,
At a MET presentation I attended recently the CEO said that retirees have a tendency to go to a retirement village that is in the vicinity of where they lived prior as this is most likely where their friends would be too, rather than have a preference for a particular operator of a village.
Also when a relative of mine recently purchased her RYM unit she was told of an increase in the weekly living expenses to ~$150 said to be occurring soon at RYM villages which she could avoid if she settled before that became effective.
Cheers
Hi Mamos, good to hear from you.
That is absolutely correct. The villages have a very defined "catchment area" That's why location choice is so important. Among other things you want a favorable mix of aging demographics, good house prices, and access to local amenities.
But that doesn't really mean anything if the village is overpriced, is in a poorly chosen location, is not managed well, or has an below average reputation. There are many other factors in the decision making, and the decision making is often a family one.
That's because RYM include a promise never to raise prices on any existing tenants. So if there is a price rise - in cost of unit, or weekly fees - it only effects incoming residents.Quote:
Also when a relative of mine recently purchased her RYM unit she was told of an increase in the weekly living expenses to ~$150 said to be occurring soon at RYM villages which she could avoid if she settled before that became effective.
Sounds like the salesperson was doing their job well also, as that would provide some impetus wouldn't it!
Cheers
Sauce
P.s. You have reminded me I found a document you might find interesting, related to those finance concepts we discussed some time ago - I have been meaning to email to you - will dig it up.
Oh sorry you mean from what prior level...
It's trading at approx 15x earnings which is relatively high for RYM taking into account since I've been watching the stock.
I'll be buying again when RYM is not considered the "market darling" and it is a bit cheaper relative to the value of the company. I'm also a bit concerned about its reduced return on equity and assets and also its profit margins.
It sure has had a great run as of late though.
From a potential residents point of view. What makes RYM different? Why not Metlifecare? Summerset? From an investors point of view is one thing but from a consumers, I'm not one for RYM, so really, what do you all think makes it different?
Half a million went through just before midday. Perhaps part of an order by someone taking a reasonable sized position in the company.
I've been having a look through their annual reports, and I've noticed the miniscule long-term debt. But what has been perplexing me are the current assets and current liabilities figures. How do you have $1billion of current liabilities and $95million of current assets (with only $2.77m in the bank)? Do they fund building with short-term debt and pay it off with up-front sales proceeds?
From page 20 this years [2012]annual report.
Assets.
Cash and cash equivalents $ 2,771,000
Trade and other receivables $ 91,786,000
Liabilities.
Trade and other payables $50,485,000
Employee entitlements $7,436,000.
To better understand liability of occupancy advances and Rymans balance sheet, look at Sauces and Snoopy's discussion on sharetrader thread;owner earnings vs free cash flow.
I havne't looked at the accounts to answer your question but I think you need to understand the funding model of retirement villages. ie. person moves in and pays occupancy advanced which has to be repaid when they "depart". There is a service free paid annual for a fixed number of years 3-7 depending on operator which is not paid per se by the occupant but withheld from the repayment of the occupation advance.
Am pretty sure the high liabilities number just reflects the occupancy advances...
I.e. they need to buy the properties back off the occupants (once they die or decide to sell) therefore the properties with occupancy in them sit as a liability
When they buy the property back it becomes an asset.... you need to look at the two lines together (the liability they need to pay occupant less the total value of all the properties..)
Am pretty sure that it is also the case that the apartments lose for 4% a year for a maximum of five years, so the company buys back at 20% less that it was paid.
The company also does not have to pay the departees (or the estate) for up to 6 months after the vacancy date.
This seems a very good business scheme, but not totally super for people needing to leave.
and then resells them for a higher amount (based on house prices increasing).
Techncially I don't think they have to repay till they have resold, so give the comment above, it they never go into a negative cash position on any unit once constructed.Quote:
The company also does not have to pay the departees (or the estate) for up to 6 months after the vacancy date
The only issue is where a resident ends up staying for a long time as the fee is capped at 20% so no more earned after 5 years (industry average is about 7years for a village unit from memory and shorter for the care units). Note: each villag/operator is different so it may be 5 years at 4%, 4 years at 5%, 3 years at 7% but normally in the 20 - 25% range in a period shorter than the average.
[QUOTE=CJ;377792.
Techncially I don't think they have to repay till they have resold, so give the comment above, it they never go into a negative cash position on any unit once constructed.
Not sure if this is helpful? My mother's unit in a Buderim [Australia] retirement village remained unsold five months after my mother's death.They apologised to my brother about the slow progress in achieving a sale.He replied he was unconcerned as per her conract "the village had to payout should the unit remain unsold 6 months after her death".Appeared they had not read their own contract.
I am sorry I do not know RYM terms.
I am sure that scamper is correct and that Ryman pay out by the end of six months.
I believe that so far they have always resold within the time-frame.
best wishes
Paper Tiger
I read countless occupation licenses a couple of years ago from a number of different providers - most of them didn't have to pay out till they resold. Cant remember which and I think normally they would payout regardless as it helps from a marketing perspective to point to that past action to get new residents over the line, especially if their kids are meddling as they see their inheritance disappearing.
Here under the Ryman Peace Of Mind Guarantees
'7. Repayment ProtectionIt is standard practice for retirement villages to repay your occupancy advance when the unit has been on-sold. However you will want an assurance that in the event the on-sale is delayed for some reason you will be repaid
."We guarantee that if the new resident has not settled within six months of you vacating your unit, then we will pay you interest on your occupancy advance until it is paid in full."
This gives us an incentive to on-sell your unit and repay you promptly. Did you know that in over twenty years the longest time a Ryman resident has ever waited is six months to be repaid their occupancy advance?'
best wishes
Paper Tiger
I am going to the AGM on TUE 31 July and are wondering if their are any Share Traders interested in a catchup before or after the meeting. Would be nice to meet some more people who are posting here.
Cheers Forest
My understanding is that rym is required to pay within 6 months of vacancy 'by law'.
Presumably a delay can be considered a negotiated loan, so with interest being paid (hopefully at commercial rates), there's no problem.
Had trouble explaining to my venerable and ancient parents that probate can take 6 months anyway...
From today's AGM:
Trading in first quarter ahead of last year.
Plans to build their 28th village on site of former Petone High School.
What did they mention about the land they have purchased in Australia at the AGM?
Any facts or figures regarding how fast or big they intend to build in the short and longer term?
Hi Sparky,Quote:
They noted that margins won't be as good as they are here in New Zealand, at least not for the short term, and that they don't have the reputation in Australia they enjoy here.
Us Ryman shareholders might end up owning a Summerset type appendage after all ;)
Cheers
Sauce
Ryman been accelerating uptrend , could be topping out for a while? Have to wait and see, but if the gap closes i will be taking profits on the first blue bar that occurs
Attachment 4117
This seems like an excellent operation but Im always cautious when they start to expand overseas.
Many good operations have come unstuck by doing this to quickly.Might wait and see how this unfolds.
Thats what i like about management they are NOT rushing in, initially building one, NOT buying out other peoples mistakes ; being careful ,despite doing their homework.
Should they get it completely wrong,they will have to right off say approx $30mil.
Should they get it half pie wrong and sell they may loose $10mil.
Either case it is not a lot loose.
However should they get it right,the sky is the limit.
I understand most Aussie villages are more "life style" rather than total care.
If they had n't tried Aussie the market,then I think we would be right to say they should have.
So with little to loose,a lot to gain I think it well worth "going for'.
Hi Percy,
I like to think I am conservative in valuation, but from what I can ascertain, RYM's share price is now building in some success in Australia.
Based on a DCF methodology with roughly 15% growth in underlying profits for the next 5 years (they will probably beat this hurdle this year) and growth declining to zero and ROE declining to the cost of capital in a straight line over the subsequent 5 years, and a terminal cap rate of 8.5% (which sounds about right for a net return from a mature but high quality property play) I get around $3.80 per share.
If RYM can continue their growth period for a lot longer than this, then they are worth considerably more on a NPV basis.
I think it is prudent to assume they will need success in Australia to add impetus to keep the growth rate in double digits past 5 years.
It is a real shame the market has woken up to the extreme undervaluation that existed a couple of years ago. As a net saver for a couple of decades yet, I would like to put more money to work in RYM. But I won't pay the current price.
No way would I sell my holding however, as this is a rare growth story and the potential for a continuing secular growth period, in NZ and AUS is high. AUS could be a game changer over time. Just no margin of safety; buyers now are to starting to pay for perfection which is risky. And in my view some success in AUS is starting to be priced in.
Cheers
Sauce
There is something else is note worthy; RYM is undergoing a strategic change of direction that I believe will further enhance and solidify RYMs competitive position over time.
Don't have time to go into the numbers, but the summary is that RYMs care/dementia units are now being built at a scale which are profitable; in the past the care element provided immense intangible value, but on their own were loss making or break even. Indeed this is still the case for Summerset.
RYM have been building larger and larger villages and with the scale they enjoy, they can, and are, switching the mix of units more towards care beds and can do this profitably now. The reason that this is significant is that it positions them very well for the wave of demand that is coming in the full time care space as more baby boomers crap out totally before wanting to move to a village for lifestyle reasons.
I would be highly suprised if they do not enjoy considerable pricing power in this space as demand grows, which could provide a lot of future profit growth from the villages being built now without any additional capital.
They are so far ahead of the competition (besides MET and Summerset, its all tiny fragmented players with no scale and little profitability) in this regard, that no one will be able to offer the same level of care/service or have the same capacity. And, importantly for shareholders, no one else will have the same profitability per bed.
Perhaps Summerset will get there one day, but I personally doubt they will ever be as profitable by a measure of return on shareholders funds. RYM are able to steer the ship in this strategic direction nice and early, and I think it will lead to even more dominance in the future.
With regards,
Sauce
Sauce,
Thank you for your update and research.
....thanks Sauce...are we/you...implying that this company is trully one of "blue sky"....like a perfect model....gee in this world where can one assume such comfort....constantly in my head i hear "if it sounds like its to good to be true'...blah ...blah....I lost $30k on RJI...in the late 80's.......(..example....we/RJI bought the now Forsyth barr building in CHCH for $40..million in the late 80's).....a mate of mine (and a few mates) bought that building about 10 years ago for $18m......
..what am i saying.....not sure really.....but I am confident that you get my point.
cheers troy
Hi Troyvdh
Totally understand. And the point you make is very a good. Having an optimism bias can be very expensive!
I think you need to balance my comments about the strength of RYMs model with my discussion that I think the market is pricing that strength into the share price and that I would not buy it at current levels.
To me the risk has gone up with the share price. But at $1.90 when I tipped a large portion of my net worth into RYM, I felt the risk was a lot less because the market was not pricing it for perfection, yet the business model was very strong from both a competitive and a demand perspective.
So the decision back then was that the expected value of the investment was, based on my assessment, positive, even when both the downside and upside case were factored. I do not feel as confident of this now because of the change in price vs the more modest increase in intrinsic value.
RYM is not without risks. There is the risk of regulation in the future that could undermine the business model. They could stumble and execute poorly while growing so fast. In the future development land might be too expensive to build their villages profitably. Perhaps someone will find a more outsourced rental model, that generates good returns on lower capex, and use that to compete more effectively with RYM in the future.
These are just some of the potential risks that need to be considered and weighed up with the positive outcomes as described in other posts. I think hard about these scenarios all the time and none of these, at this stage in time, and in my view, significantly alter the investment case for RYM. But from a probability perspective the odds of something coming from left field make a further commitment of funds at current prices to risky for me as my exposure is already large.
Basically what I am getting at (the short version!) is that my optimism for RYM is balanced by the price I am willing to pay for it.
I hope this helps
Cheers
Sauce
cheers and thanks...as an...aside I have an inherent issue ...totally nonsensical i agree ....I should buy more at these prices...I i bought in when you did.....I should and i know it...but i cannot...how pathetic am I !!!...have you bought any more.....?
In all likely hood the SP will assume $10 plus status..again...and again there will be 5/1 split......cheers......
Hi Troyvdh
I know how you feel. Consider this:
RYM trades on a PE of about 27 x underlying cash earnings. That is a very hefty multiple, even if there is unrealised cash generation locked into the portfolio.
Last time it traded this high (relative to earnings) was at the peak of the market in 2007. From memory the all time high was about 2.70 and, if I am not mistaken, it was also on a multiple of underlying cash earnings of about 27. If you had paid that peak price you would have, until recently, been feeling pretty silly with yourself; taking about four years just to break even. But if you had not capitulated at any time and stayed the course, you would now, just 5 years later, be sitting on a 9% compound return EXCLUDING dividends.
$2.70 * (1.09) ^ 5 = $4.15
With dividends its a double digit compound return. Time is the friend of a wonderful business as the saying goes.
Over even more time that compound rate for the 'unlucky' souls who paid $2.70, will undoubtedly look even better. So even a high price can look good with enough patience.
The caveat is that you have to be right about the business.
Cheers
Sauce
Hi Troyvdh.
No I have not bought any more. And I must also admit to selling a few off the top at much lower prices.
But I won't be selling any more, and as previously disclosed, my RYM holding is the largest asset I own by a large margin now..
Cheers
Sauce
Sorry I don't know the details,but a broker has been doing Ryman presentations in Asia which has generated overseas buying interest.
Sorry I do not know full details.I spoke to my broker on another matter today and he made the above comments .
Posted in good faith.
Makes sense Percy; it would appear demand has been outstripping supply :)
Indeed.
I see an opening for a very politically incorrect joke there Sparky but lets not go there ;)
gee percy....what are you saying...can you please ask your broker how many shareshe has bought..and owns from his own money....
I am not a conspiracy theorist....but in the real world ....but give me a break....if those "Ryman reps"...were bonefide and collectively thought that RYM was a screaming "buy"...then why on earth would you publise that fact RYM was a "buy"....and not totally engorge your self ....without telling other folk....
....does anyone get my point....troy
Because they operate on the sell side. I.e. they make money from commission. They wan't people to buy because that's how they make money.
As Buffett would say, asking a broker if you should buy a stock is like asking your hairdresser if you need a haircut.
Regards,
Sauce
RYM trades on a PE of about 27 x underlying cash earnings. That is a very hefty multiple, even if there is unrealised cash generation locked into the portfolio
Hi Sauce, just wondering what you mean by underlaying cash earnings?
I see $169mil of operating CF this gives a operating CF of 12, NPAT of $121mil this gives me a P/E of 16.7, underlying profit of $84.1mil this gives me a underlying profit P/E of 24.1 and a free cash flow (as opCF - Cap ex) of $94mil this makes the P/FCF of 21.5.
Thanks Sauce did not want to be pedantic, didnot know what was ment by the term underlying cash earnings :)
On a side note though; don't get caught up in NPAT or Operating cashflow. Ryman's NPAT is near on irrelevant. And Operating Cashflow largely consists of RYM's capital recycling activity.
Regards,
Sauce
...Giday...I would appreciate if those folk who quote/and or take advice from financial advisors;brokers....actually ask the aforementioned if they actually personally hold and have paid for the shares themselves....
It is also quoted online here http://www.stuff.co.nz/business/mark...vestors-buoyed.
If "a bit of a tour through asia to fund managers"was driving the price shouldn't the matket have been notified. Mind you he also said "a lot of uncertainty cleared out of the way" which I'm not too convinced by....
I have some spare cash I am trying to stop the family spending and are a Ryman fan but at this price?
Room for a village in the Cayman Islands Sauce?:). If, you, do, live there whats it like?
Thank you for the link.
Your spare cash.Go to www.chrislee.co.nz and go to market news.HNZ."Sale of FPF will confirm the current market value of net lending assets and balance sheet equity in the finance sector,which is unlikely to be at the discount currently ascribed to HNZ share on the market."
RYM.Like Sauce I am not buying,but I am too scared to sell any either.!!!!!!
Hi JT,
No I don't live in the Caymans. Never been there. For some reason, 8 years ago when I joined Sharetrader, I thought it sounded cooler. Which, with the clarity that 8 years brings, was almost as dumb and pointless as posting random thoughts online under an anonymous moniker for other anonymous people to read. Since then more than a few people have thought it was genuine. Come to think of it, it's also possible someone may have mistakenly believed a post or two of mine.
I must change it. I live in the capital city of NZ.
Cheers
Sauce
I have looked used Yahoo finance and used 5 and 10 year performance of RYM compared with global giants like KO, YUMS, MDL, DIA. RYM outperforms easily. If it maintains 15% growth per year this is your 1 stop shop growth share.
My question is I want to top my holding up. Do I wait for a dip or forget timing and just buy.
Very good question.I do not really know the answer.
At present $4.09 to $4.10 is stopping it.If it goes to $4.11 I think you will find it is away again,so you should buy at $4.11 or $4.12 .
The SP has moved up a long way in a very short time,so if it does not go through $4.09 to $4.11 it may well drop down to below $4.
I would hold off,as I expect it to come back.
Might need a few more villages in Wellington !!!!
http://www.stuff.co.nz/dominion-post...o-exceed-young
When you take the train into Wellington you can see the construction site at the old Petone College.
http://www.stuff.co.nz/dominion-post...m-Hutt-village
“The market can stay irrational longer than you can stay solvent.” ....John Maynard Keynes
This famous quote illustrates the unpredictability of a market with regard to its valuation (FA)..although this quote originated during a bear market it could also be relevant at the other end of the spectrum.. a bull market....It proves a point that picking tops and bottoms using rational logic is futile.
Voltage I can not answer your question as there is no way yet to determine how long this price can stay in an accelerated upswing It could be years and rises to ridiculous levels or it could be over now...FA is not going to help you...except by telling you that the stock at a PE of about 17 is probably underpriced for a growth stock..but property stocks tend to have lower PE Ratios than the market average don't they?
Percy offers the best solution.. buy in if the shareprice enters a new high.
To illustrate RYM behaviour it is best to look at other growth stocks that enter blue sky territory and look for similar patterns or to get a feeling to how irrational these share market darling stocks can get....Emotion is a definite no no with these stocks you have to ride them to wherever it takes you...With emotion it is too easy to think rationally that it can't go any higher...it will reach a point when it wont but it will be when the market decides not you.
Below I have used one example Mainfreight....Notice the long rallies this darling stock had ...notice although MFT is still growing** it can enter a stagnant phase for years too...A ex-darling stock gets the cold shoulder treatment just like the behaviour from a jilted lover. Whoever would have thought in Jan2007 that a growth stock share like MFT would be half its share price in a year time.....irrational ..eh?
***decreased profit PE Ratio 12.5
I have used only one example here MFT but if you own a growth stock it would pay to do your homework and look at many other growth stock examples that enter blue sky area to gauge their behavioural patterns.
http://i458.photobucket.com/albums/q...30092012-1.png
http://i458.photobucket.com/albums/q...FT30092012.png
Hoop
FYI
PE using reported profits is useless with RYM due to IFRS accounting.
Cheers
Sauce
Chalkie not a fan
http://www.stuff.co.nz/business/opin...-a-risky-wager
Ratkin He is the first one to take a realistic look at RYMAN without having blinkers on
http://www.stuff.co.nz/waikato-times...-a-risky-wager
^ Just read this article, certainly worth a look at. I've had a similar feeling; nearly every article with Ryman has the words 'darling of the market' or 'solid growth stock' and I think some of this hype has created a bit of a bubble for Ryman's stock price recently. But somehow I get the feeling there is still lots of space for that bubble to expand so I wouldn't want to be jumping of the wagon right now.
It seems the slow growers have become the go to stocks recently. Will be interesting to see where Metlife is in a couple of years, they have a much lower price to capital ratio and perhaps they could become the new 'hero stock' of the NZX. We all know that Ryman's business models are said to be better but does that really matter with the amount of growth potential in this sector?
Aha only just saw Ratikin's link is the same, my mistake- article just came in my email alerts today