Haha exactly $16 of course, cant beat that ratio aye.
Printable View
How could one not be happy. Its nearly Christmas and both SUM and MET have moved up to the point where they're both only 20% undervalued now. Happy days :D
SUM $10+ in 2020, you read it from me first :)
Beagle post from another thread
Quote:
A Bullish case for SUM based on superior growth and very realistic PE
Is more than a little spooky. The other day I noted way back in 2011 when SUM first listed the situation prevailed even then.
Thankfully the past no matter how sticky is not always a good guide to the future and I note for many years the two stocks traded on not dissimilar underlying PE's.
That situation is vastly different today.
At the mid point of RYM's forecast 31/3/20 underlying profit of $257.5m RYM trades on a forward earnings of 51.5 cps = forward PE at $16 of 31.
If SUM make $117m underlying for 31/12/19 that's also 51.5 cps, that's right folks exactly the same, and SUM's only a forward PE of just 15.5.
SUM trading at half the PE is not common over the years comparing these two and reflects the fact that SUM's earnings have grown much faster than RYM's over the 8 years since its listed that we can compare these two.
Heck, if SUM lifts its build rate in 2020 and the real estate market is strong so we get a ~ 25% lift in underlying profit for 2020 to 64.4 cps at $8 (even though this is a fresh all time high), SUM could be trading on a forward PE for 2020 of just 12.4 times earnings. WOW, that is stupidly cheap and this sector is going to be on fire and flush with well over $1.5 billion dollars of capital looking for a new home after the probable MET takeover. SUM were nearly $8 way back in August 2018 so in relative terms has done very little in gains for well over a year.
2020 could be SUM's year and with a resurgent real estate market there's no logical reason why we shouldn't see some PE expansion up towards the market median PE of 19.
How good could it get for SUM in 2020 ?. 19 x 64.4 cps underlying earnings = $12.23. We could see 50% added to SUM's price in 2020 in a favourable rerating scenario. One day the market will wake up to what a phenomenal growth story SUM has been since it listed, maybe after a decade of fantastic growth, heck that's late 2021, not that far away and could be $15 by then. I think its time to add SUM more to my position.
Still a few who think property prices don’t matter that much for retirement sector valuations
MET said the other day - The valuation of the company is particularly sensitive to house price inflation (HPI) and construction cost inflation
I topped up with some more SUM today. Takeover of MET almost certain to go ahead in my opinion and over one and half billion dollars will be looking for another home, much of it in the retirement sector as institutions rebalance their portfolio's. SUM is not expensive as pointed out with fundamental analysis above and from a technical analysis point of view the chart looks very encouraging.
Institutions will be looking for a well proven performer in this sector trading on compelling metrics to replace their MET shares with and SUM really stands out based on its long proven performance and exceptionally high average annual eps growth rate. The other thing is, if private equity sees value in MET, who's next ?
Topped up as well beagle
Broker made comment jeez winner you paying heaps more now than that first lot you got at $1.78 years ago
Told him you will be saying that again in years to come.
Good on ya mate. Don't forget to tell your broker its on half the PE now that it was when you first bought so effectively with earnings growth over the years you're buying double the value you were back then. WOW, that's quite a SUM of compound earnings growth over the years eh mate.
SUM share price doing well today ....could get to $8.50 by Christmas ...this year that is.
LOL as if there was any doubt which Christmas. At this rate we might get to $10 very early in 2020 as the MET takeover deal is completed and a billion and a half dollars gets mostly reinvested back into this sector. $10 by reporting day in late February 2020 would be nice :)
Not far to 4th quarter sales report
I reckon strong sales have been recorded this quarter .....and margins will have been so good they’ll have to give profit guidance ....like underlying earnings $117m-$120m
All those abnormal / extraordinary revaluations of 2016/2017 to be realised this and next year
Dead right mate, I agree 100%. My early guess is for underlying profit of $150m for FY20 giving about 65 cents per share. Put a market median PE of 19 on that and we're off to the races at over $12, maybe even more as institutional money from the MET takeover pours into SUM. You might even feel compelled to attend the annual meeting in April 2020 this time and hear about the excellent growth prospects :)
How are u going to top up if u had no more money left?
Not sure if you're asking me that question but for what its worth I almost always have at least a 10% portfolio allocation to cash so I can take advantage of special opportunities as they arise. Once its expended I replace it by reducing something that is already, or very close to already being fully valued by the market.
I guess for those that don't have enough exposure to the retirement sector and are already fully invested maybe they should reduce one or more of their other lower conviction or more fully valued positions and recycle that capital.
Could well be by the end of 2020 as people consider RYM's profit for 31/3/21. I think the whole sector is in for a very good year in 2020.
Decided to give myself another early Christmas present, one I know will give me much pleasure in the long run, SUM more SUM shares this morning, (bought more yesterday as well).
I have 100% confidence in the board and senior management and believe they will add tremendous value over time.
This is still trading well below the median PE for the NZX50 and doesn't deserve to be given its extraordinary track record of growth over the last 8 years.
Forward metrics for FY20 based on my best guess of earnings show this as outstanding value and will likely break through the $10 barrier sooner rather than later in 2020.
A ten dollar something price by the time of the next annual meeting in April 2020 wouldn't surprise me in the slightest.
I think a significant amount of cash from the MET takeover is going to be reallocated to SUM and if you wait until after the cash is released from that takeover SUM shares won't start with an 8 handle. Better to buy before the reallocation into SUM if you're in a position to do so, in my opinion.
Yeap, 1 p.m. close today mate and then we look forward to unwrapping our MET present on Friday morning. All other Christmas presents this year will pale by comparison :)
you must be up to the gunnels by now Beagle and good on ya
However I've reduced just a little.
Thanks mate. I really do think its a $10 stock in 2020, (am strongly inclined to believe my own B.S, especially after a very good and likely to be very successful MET foray).
Pretty sure I am not done yet. When you zoom out and take a 5 year view the SUM's look quite startling.
Year ended 31 Dec 2014 they made $24.4m underlying profit. If they make say $115m this year that's an average compound growth rate of 37% per annum !
Even if they grow underlying profit at just 15% in 2020, which really is a base case my estimate that's $132m on 226.8m shares gives 58 cps.
At $8.50 that's a FY20 PE of 14.7. That's a PEG ratio based on historical growth of only 14.7 / 37 = just 0.4 and has me wondering if SUM itself is not vulnerable to a takeover ?
Even if we have entered a new more mature phase of growth for the company and RYM type growth of 15% per annum is the new normal using my no growth PE of 11 for the ultra low interest rates and 1g where g is the sustainable growth rate estimated for the next 7-10 years I get a fair PE of 26 and valuation numbers vastly north of the current share price. I know $15 sounds "whacky" talking about it now...a 76% potential gain in the next 2-3 years is highly likely in my opinion as the value is there.
Even if the PE just rerates to the market median of 19 and why wouldn't it with their track record... and underlying growth continues at 15% for the next 3 years I get 51.5 cps for FY19 growing to 78.3 cps earnings in 2022 x 19 = ~ $15 in 2022.
I would be very disappointed in SUM becomes a takeover target as I honestly believe the company has a fantastic future and will be a very powerful force for creating shareholder value over the long run. They have a very experienced and highly articulate senior management team and an excellent board and I know the CEO and CFO are very intelligent and highly motivated guys.
Who would have thought SUM would be $9 by the end of the year (2 days trading to go)
Still relatively outrageously cheap
Beagle needs to revise his expectations
Bull case, suppose 51.5 cps ($117m) this year grows by an average of 30% per year for the next 3 years, (this is still a slower growth rate than their average of 37% per annum over the last 5 years) = $1.13 eps in 2022. Put even a market median PE of 19 on that you get $21.50 !
Revise that up as SUM's track record would then be longer than a decade and it might finally get SUM recognition as one of the NZX's preeminent growth stocks to a PE of 24 and you get $27. My bullish case is the share price could triple from here over the next 3 years.
Hi Beagle, thanks for all your insight on Sharetrader in general.
Wondering how you value the two other factors of these businesses, one being the change in value of property already built (which is at the whim of the market ultimately) and the other being the fact that they are creating value by developing new property, which is down to their efficiency. It seems like most of the analysis goes to the underlying business and not much to the development side, which when taken into account just makes things better. I mean when you crunch the numbers on the total income rather than underlying they are incredible.
Also your current no growth PE of 11, it being 8.5 in Benjamin Graham's day (say 1970) priced off bond yields etc.. 11 would be pretty conservative today would it not? Implying a 9% earnings yield and some going to (non growth) re investment and some for the risk, I guess the no growth yield could in fact be even higher today?
Thanks again.
Hi SailorRob. Thanks for your questions. International financial reporting standards (IFRS) captures the full profit of the company for the year, inclusive of all increases in property values for that year. Most analysts tend to focus on underlying profit (which is what I do) which captures the realised portion of IFRS profit, knowing that the difference is carried forward and represents the embedded value, i.e. value embedded within the books ready to be released when existing units are resold to new incoming residents. Hope that makes sense mate.
As you quite rightly point out if one starts to simply look at the total profit each year, (the IFRS profit including revaluation of all properties) the numbers become quite extraordinary. Ultimately the total IFRS profit is realised at some point down the track as the life cycle of each unit gets recycled so there is some validity in crunching the numbers based on headline total profit but I tend to stick with underlying profit as its far more conservative.
I continue to like my own version of Ben Graham's valuation methodology and as you may know use 1g as opposed to 2g that Ben used. Back then the risk free 10 year Government stock was 4% and its currently ~ 1.5% here so I add 2.5% or a PE of about 2.5 to his no growth PE of 8.5 to get 11. This implies an earnings yield of 1/11 = 9.1% compared to a 1.5% risk free rate or a 7.6% risk premium for the market as a whole. In his day it was 1/8.5 11.76% - 4.0% = 7.76% so about the same and I am comfortable with a PE of 11 for a no growth company.
Adding 1g to that (where g is a very conservative average 15% growth rate for SUM for the next 7-10 years which I note is well under half their average growth rate of the last 5 years which ahs averaged 37%) gives me a fair PE of 11 + 15 = 26.
Using that PE and some moderately bullish eps growth numbers for the next 3 years you can pretty easily build a case for the share price tripling over the next few years.
I believe SUM's growth rate is being significantly under appreciated by the market. One day the market will really wake up...
Beagle - last SUM press has underlying earnings 8 year growth at 36% pa
But real profit has been 60% pa in those 8 years
Pretty good eh.
Thanks for pointing that out mate. Its more than pretty good and gives an interesting insight into future underlying profit growth.
Beagles pretty excited about past SUM financials and how they’ll probably continue into the future for years to come
You can’t but be impressed by the numbers in column headed 8 Year CAGR in this slide from half year result.
Most impressive
And in those 8 years the share price has increased at 27% pa as well
That’s pretty good.
Much better numbers than RYM over the last 8 years.
SP has not grown at anything like the rate of earnings growth, YET. Share prices eventually follow earnings as in the long run the market is a weighing machine, not a voting machine.
SUM has a massive and geographically very well spread land bank and is also expanding into Australia. The size of their land bank provides a valuable clue as to their expected future growth rate.
SUM's long proven track record of very strong growth, (easily the fastest average eps growth rate in the sector over the last 8 years), is still not reflected in the current $8.90 share price.
Thanks Beagle, all makes sense :)
This for Winner69, you'll see that the 60% sell 40% buy is not a reliable trade indicator, you'd have made a couple of $ between 2014-2016 then be out and have missed all the action with no subsequent buy signals.
Try as you might, and I have, there appears to be no reliable recurring % sell indicator, and there's no corresponding buy % extreme that is reliable either.
A fun fact about reversion to the mean, but as a buy/hold/sell indicator, more a curiosity than anything particularly useful.
:(
Attachment 10925
Thank you for factually debunking what I know are factually unsound theories of price relativity. I'm sure Coutta will be along to point to the history of his theory holding water but I couldn't care less. Thankfully I have my own nose for a feed to follow backed up with very thorough analysis.
I see we're over $9 today. My call of $10+ by the time of the annual meeting in April 2020 is looking very good !
Baabaa - what a mess you’ve made off what should have been a nice simple chart ...did you apply some if TA skills to a reversion to the mean theory ...nuts if you have
You are worse than beagle - make a good combo you two -you;) complicating charts and beagle with his ratios. Suppose one / anybody can ‘debunk’ anything if one tries hard enough
I do like your normal nice clean and clear charts ...this one lets yourself down. ;):(:D:t_up::mellow: (as you can tell I have no idea what these smiley things mean)
No worries, better to stick with good FA and projections to pick a company, then as long as fundamentals don't change too much, use SP TA to time buys & sells. A good dose of detailed understanding of a company (FA) and its price action TA (market sentiment / momentum) is way better than making buy/hold/sell decisions based on any comparison with any other company, even in the same sector. jmho.
SUM has very bright future, the sell off on property market jitters was a godsend buy-in/accumulate opportunity. My best performer for 2019. Eyes on sales performance for 2020, this could really fly.
Ha ha Winner, the chart is simple, it's the narrative that confounds the myth. No one I think is saying that reversion to the mean isn't real (long term rolling SUM % of RYM is ... almost exaccery 50%), all we're saying is that the relative % per se is not a buy sell hold indicator, or not a consistently reliable indicator. I'll reflect on being "worse than Beagle", being worse than a very very high bar could still be a good thing.
Happy holidays everyone. It's been an enjoyable and profitable year with SUM, all the best for 2020.
BAA
The main thing here winner is that we have proven history on our side rather than Beagle trying to will the SUM sp higher because SUM ratio says it should be, the Couta theorum was not designed as a buy/sell indicator but simply to prove that the SUM sp would always gravitate to half that of RYM which it has stubbornly proven to do so. PS-Doesnt matter if and when the SUM sp hits $10 as all that's means is that the RYM sp will be $20 so punters really no better off buying one over the other aye.
SUM up 65% from the lows of $5.50 mid year. The barking was very clear and persistent and anyone that listened should be very well pleased.
Its not done yet by any stretch of the imagination and 2020 could be a huge year for SUM. The company is still trading on a PEG of less than 0.5 based on its CAGR over the last 5 years.
There is serious money to be made when thorough fundamental analysis shows a compelling investment case and then technical analysis starts firing off clear buy signals.
Hey Coutts...if you believed your own theory why didn't you buy in the mid $5 range when SUM were about 42% of RYM and you could also be up 65% ?
Missed opportunity because of your "enthusiasm" with ATM ? Attachment 10926 Ouch !!
Wow this got Above $9 today, OCA had a great day as well, sector is looking good going forward but this sudden jump is sure to fade away. Long term holder though so don’t really care about the ups and downs in the short term. I really do think thy OCA will get their spending sorted over the next couple years hence the most bang for buck from that MET sale will end up in OCA
You know me I like to keep a narrow focus so my enthusiasm is and has been for ATM for quite some time now and will be for a good while going forward, not a missed opportunity just a different opportunity. PS- You might like to run your graph for SUMVATM back a couple more years and see which one looks better or better still from the time of SUMs listing in 2011 against ATM until now.
.................
SUM $1.95 in Sept 2012, now $9.05 that's 4.64 times your money. That's quite SUM update for ya...but yes RBD been going gangbusters too. Maybe old folks eat lots of greasy chickens :)Quote:
The horrible discovery .....since Sept 2012 it looks like I’ve made twice as much on the RBD shares I kept than the SUM ones I bought (think it’s 420% v 220% over 7 years)
Might need to update this from September .....but I think greasy chicken still way out in front
SUM share price over 9 bucks - driven by general positive market sentiment and the euphoria in the retirement sector. Seems punters just have to buy things - anything
Nothing to do with fundamentals or ratios - just buy things is the game
But let’s hope the fun continues ....but memories of pretty seductive beauties and hay are still with me.
Shut up winner....let people keep buying....n let SP keeps going up..enjoy the ride
Ben Graham once said the stock market can become nothing more than a beauty pageant. .hence his famous phrase ““In the short run the market is a voting machine, but in the long run it is a weighing machine.”
Seems Summerset is the prettiest and most seductive and everybody is voting for her at the moment ......slapping high price to earnings ratios and and valuations on her.
No doubt the market will soon revert to be a ‘weighing machine’ and all this current nonsense will stop.
But let’s make hay while the sun shines
Tomorrow is the start of SUM's FY20 year and investors will start pondering their prospective FY20 earnings of maybe $140m giving 62 cps. $9.05 / 0.62 = forward PE of just 14.6 for a company with average compound growth of 37% per annum.
Why should this trade on less than the median forward PE of 19 given they have the highest average compound growth rate of any stock listed on the NZX for the last 8 years ?
You can very easily make the case SUM is stupidly cheap. When a compelling fundamental investment case exists and technical analysis supports this there's usually a LOT of money to be made. I might buy SUM more when we see the quarterly sales stat's next week.
Just as well Rob Campbell chairs SUM eh Winner, that way we know Summerset isn't one of the companies that's a major cause of most of the evil's in society.
https://www.nzherald.co.nz/business/...ectid=12297215 So...not only is FA great but so is TA and SUM ticks all the ESG boxes too !
No new year's awards for the dog...need to keep my snout and paws busy for another decade and then I might get a pat on the back.
Congrats, stick those in the bottom drawer for quite SUM years and you'll reflect back on this last day of the decade and be able to give yourself a very big pat on the back.
I have quite a SUM of SUM shares already so am very well positioned for the 2020's :t_up: :t_up:
Speaking of being bloated I'm hoping that the MET offer expands just as quick as my waistline has over Xmas
https://www.bing.com/videos/search?q...DF&FORM=WRVORC :lol: :lol:
Thanks heaps for your analysis over the last year or so Beagle. It's been a tough one for me and I am a lot more skeptical these days but next year looks promising. Just have to survive Kim Jong Un, China & the South China Sea and Donald Trump and things might be OK. Happy New Year people!;)
Australian property prices rocketing up
From Westpac report:
The recovery in Australian dwelling prices that began in mid-2019 accelerated in the final quarter, sustaining a robust pace into year end. The CoreLogic home value index, covering the eight major capital cities, rose 1.2% in the Dec month following a very strong 2.0% gain in Nov and a 1.4% rise in Oct, giving a 4.7% gain for the final quarter. Prices rose 3% for the year as a whole – a 7% rebound in the second half more than offsetting a 3.8% decline in the first.
Gotta say that those bushfires look the worst I have ever seen. Even though the Australians have been very tough on Kiwi's with some of their recently changed policies, I feel sorry for them, those fires are profoudly shocking. Someone made a comment about global warming and Australians crossing the ditch to retire here a while back and suggested that even if 1% did that it would make a big difference to demand for retirement village living here. I think that 1% guesstimate is starting to look a little bit conservative. Fire risk aside as a separate issue, its simply getting too hot over there...
You being unusually conservative / bearish on that $140m F20 earnings.....only 16% earnings growth
Remember we’ve got all those abnormal / extraordinary revaluation gains from 2017/2018 yet to be realised to be
No doubt when we (should) get a real positive earnings guidance for F19 next week
It'll probably be more, just a little early to make that call. $150m for Fy20 wouldn't surprise me and as much as $200m in FY21 when their development program hits high gear. Fabulous stock to hold long term and just let compound earnings growth do its magic.
Q4 sales out this week
As long as there are more than 200 sales in the quarter we'll be more than OK
They will need to provide guidance as to FY19 earnings I reckon as the realised gains in F19 will be hugew as thas extraordinary abnormally high revaluations in 17/18 start coming out
193 sales for the Dec/2018 quarter. Would there need to be a significantly higher number to maintain the current share price? Annual figures would only be marginally ahead of last year.
There were 204 sales in 4thQ Dec/2017.
But remember what Julian said after Q3 about new sales maintaining the momentum reported in the first half.——code for we still going backwards at the same rate
What’s important at the moment is how much they realise on each sale. With extraordinary valuation gains made in 17/18 starting to be realised expect the average gains per sale to be significantly higher in F19 v F18. So even if sales are only marginally ahead of pcp underlying earnings will be significantly ahead - around $120m I reckon.
I'm sticking with ~ $115m underlying profit for FY19. Share price is always forwards looking Bjauck and is pricing in a full year of more vibrancy in the housing market in 2020, more sales as well as possibly higher numbers of units to be built in 2020, more development margin and resales as Winner mentioned will be at much higher prices realising huge previous years valuation gains. $150m is my current best guess for underlying profit for 2020 which gives underlying eps on 226.8m shares of 66 cps.
A forward 2020 PE of just 13.6 is much too cheap for a company with the history of growth SUM has. Its going materially higher in 2020 is my prognosis.
Beagle - $115m would be a pretty slack year (historically)
F18 was $98.6m which was up 21% on pcp even though sales were down 6%.... all because average realised gain per sale up significantly. That’s the important bit
So F19 sales about the same (not down like F18) and a significantly higher average gain per sale it looks $120m on cards
About 20% earnings growth. Most of the year the Auckland market was quite subdued so that will weigh a bit on the annual result for 2019.
2020 a different story though. Resales another area which has been tracking at much lower than normal levels for the increased number of units in their portfolio.
I expect a solid gain in the number of resales with very fat realisation of previous IFRS profits in 2020 and beyond.
Hey Maverick - if I do a +/-$2m to my $120m we could almost agree on $117m eh
Knowing that the way we view Summersets financials are pokes apart and our forecasting models are very different I think getting about the same number is pretty amazing
Must be about right that $117m (plus of course)
https://www.stuff.co.nz/business/118...7+January+2020
I've upgraded my forecast seeing as the year ended so strongly from $115m to $117m :D
Yes Winner, 18.6% to be precise but yes, for most of 2019 the Auckland real estate market was slow and in the doldrums so the effect of that will show up in the forthcoming historical financial results and more especially the slowing of their development program to "fit" the slower market but the outlook for 2020 is looking very bright and I would think they will be ramping their development program back up. $150m+ on the cards for 2020 :t_up:
2020 will be a great year imo, all the ducks line up as of now.
2019 anything around $107m will be pleasing.
Been a bad couple days for the SUM share price - at least it didn’t close on the low for the day
Those sales numbers coming out soon better be pretty good ....or else we could see the 700’s again
Better be good Winner...all my chips are in SUM now...so...black or red tomorrow....ding ding ding....no more bet please.....
you've got to admit its been a good six months and the last blow-off is probably overdone at this point.
Attachment 10935
anything more than a 45 ° line usually has to take a breather.
I still have most of my holding
SUM is one of those buy and look at it in 10 years stocks:) Dont worry too much about the small ups and downs, just remember that at some point in the future they will have to increase their build rate to 600+, not sure when but they will....
The result I'm hoping/expecting today with sales, if they come out today, that tells everything is steaming along nicely are:
new sales 110-115
resales - 80-90
Would love to know the reason for that 40c drop in price yesterday on 150,000 odd shares. Beagle what do you think is going on there - just profit taking?
What - you think Iran did it? Like SUM would give a rats...OCA hardly moved...
Gidday mate. Must admit I went for a nice drive yesterday to see the gannets at Murawai, (good at this time of year when a lot of Aucklanders are out of town and not so busy as normal) and came back in the late afternoon to quite a surprise with the escalation of tensions in the middle east.
Fear and greed have always been the two biggest motivators in the market and always will be. I think in the context of a very strong rally in recent weeks it was simply some people deciding to take some chips off the table.
With the incredible amount of tension in the middle east I got to thinking yesterday evening (in a rather sad and sombre mood) as most of the sun made its way through the light smoke that's still drifting through the atmosphere from the Australian bush fires and what sun there was shone on me, how incredibly fortunate we are to live in New Zealand free from war and strife and for the most part at not much risk from the awful bushfires ravaging Australia, in a warm temperate climate that's not too hot or too cold, free of religious persecution. We're very blessed to live here with ample food and water and overall a very good standard of living.
Pretty nice place to retire isn't it :) I know the senior management team at SUM are very sharp and very motivated...very good place to invest over the long term.
No stock is free of the odd bit of turbulence from time, to time. Long term...you can't go wrong...
Hopefully things settle down in the middle east. Surely all nationalities want a nice safe place for their kids and grandkids to grow up.
Cheers for that Beagle - yes we are very lucky here in NZ, I just don't like seeing sudden uncorrelated moves on the market where one stock in the sector can move from just under $8.90 to a low of 8.35 and back slightly, on high volume, without understanding why. Especially when I have just bought into it! Cheers...
Well not "completely" else what would be the point!
Like any person with a mental illness you have to understand the triggers and reactions of the particular condition.PS-Have worked amongst people with every imaginable mental illness for a long time, although not so much now although I still find more sanity when I do oftentimes than working on the market.Lol