SUM - Summerset Group

[dobby41]

Often folks who are at the AGM have their phones at the ready to buy/sell as the meeting progresses depending on the detail, confidence etc.Im guessing it wasn't the knockout euphoric show that some(who were buying the day before) seemed to be expecting.

It's an interesting point Joe makes - why blame the AGM when the share price moves more on no news at all.
Blaming the AGM is just an attempt to rationalise the irrational - humans like to do that.

[Beagle]

The hound will be at the annual meeting "hounding" Julian Cook for information on indications regarding the development margin for FY17 in the meantime I note there was a big jump in development margin between 2H FY16 23.6% and 1H FY16 20.3% so if that flows through into FY 17 and beyond...

Regarding resales of existing units. Embeeded value is up 20% per unit on FY15, (source Results presentation with FY16 results)
Just sniffing between the lines I see resales as a proportion of stock on hand at the start of the year for the last five years were 11%, 10.6%%, 9.3%, 11.6% and 10.0% for 2016, average 10.5% churn.
2016 was slightly lower than average, (nice warm winter will do that for you) but if 2017 is a normal year we could expect 2828 x 10.5% 297 resales up considerably from 244 last year and taking into account much higher embedded value we could see last year's $15.4m gain on reslaes jump to 297 / 244 x 1.2 = $22.5m, an increase in profit from last year of $7.1m

EPS could climb by circa 12.5% ($7.1m / $56.5m) this year just from resale gains volume and embedded value expansion.
I expect development gains to also expand in line with volume expansion circa 450 / 400 = 12.5% plus possible further gains from increasing average development margin.

My base case taking into account profit growth from resale volume and margin expansion and development volume expansion only, (assuming no expansion in development margin) is therefore for 25% EPS growth in FY17.

Posted 27 March 2017. Nothing I heard yesterday or discussed with Julian Cook after the meeting changes my base case assumption noted above.
I am forecasting $70m underlying profit for 2017 which is 32 cps and the stock is on a 31 December 2017 PE of only 16.2 at $5.20
I will post more thoughts on the annual meeting later when I have time but the starting point to understand the value with this stock is that this forward PE is only the average forward PE for the NZX50 and this company operates in a sector with very strong tailwinds for the next 20 years. Nothing in the extremely strong historical growth or the outlook warrants only a market average forward PE in my opinion or the substantial PE discount to RYM. This is the lowest forward PE the stock has traded at (to the best of my knowledge) since listing. The current SP in my opinion does not recognize that this is the fastest growing company in this sector.
Over the medium term I expect the market will recognize this.

Edit: A reminder. This sector has had close to half a billion sucked out of it by Infratil selling down its stake in MET and by the Oceania float. The recent correction in SUM's SP is a function of supply / demand characteristics of the capital market. Its simply not feasible to suck that amount of capital from the retirement sector without expecting some effect on the SP of the incumbent companies within it. Rob Campbell actually alluded to that point in his off the cuff comment that there's been a lot of institutional maneuvering in this sector in very recent times. Some people will be concerned by the short term price correction, others will see it as an opportunity to acquire an extremely well managed and well directed company with excellent long term growth prospects on a very attractive price earnings multiple.
The board and management have my full confidence. I think Julian Cook has come ahead in leaps and bounds over the last three years since his appointment as CEO.

[Joshuatree]

It's an interesting point Joe makes - why blame the AGM when the share price moves more on no news at all.
Blaming the AGM is just an attempt to rationalise the irrational - humans like to do that.

Who's playing the blame game? Im surmising what may have happened yesterday s/p wise on the day of the meeting.Looks like some folk got set prior ,expecting a s/p rise which didn't happen.

I agree a day in the life of an investment grade stock is not that relevant.

[couta1]

Holders can be confident in the quality of the board and senior management to lead the company forward on the growth path, the only negative thing about the meeting yesterday was the inappropriate presence of union delegates asking questions which were out of place for a AGM. Enjoyed catching up with other fellow forum members. PS-People sell shares for many reasons on any given day. PPS-Yes I did have my phone at the meeting and was buying.

[Bjauck]

Holders can be confident in the quality of the board and senior management to lead the company forward on the growth path, the only negative thing about the meeting yesterday was the inappropriate presence of union delegates asking questions which were out of place for a AGM. ...

What were the out of place questions?

[couta1]

What were the out of place questions?

Asking question about cleaners wages etc. The union shouldn't have even been there, if they want to discuss such matters, they need to arrange a private meeting as they normally do, bad taste I thought.

[Joshuatree]

Thanks for your thoughts from the meeting Roger and couta; anymore views appreciated.

[percy]

I know of a guy who managed a retirement village in Aussie.Worst job he had ever had,as all the old buggers complained all the time, as they had nothing better to do.
What has surprised me is the agms for SUM and RYM have not had complaints from residents.The two RYM agms I have attended have even been held in their villages.
I think that says a lot for both companies.
Yes I think if I was an under paid cleaner, I would expect the union to bring it up at an agm.

[iceman]

Not much too add to what couta1 and Roger have said. SUM have confirmed they're on track with 450 units this year. Some delays with their Parnell development but mainly due in house issues with design and construction of the village.
They have a 6 years land bank at current build rate but continue looking for more land where older people live and want to live.
I definitively see indications of them looking for building more in inner cities or CBDs with easy access to various infrastructure including transport.

An interesting comment from the Chairman was that they are evaluating an entry into Australia but made it clear no announcement on this is imminent.

Another interesting comment was Julian saying they were looking at ways to increase utilisation of existing properties by providing "various other services" to older people living inside and outside the villages. So senior people living in the are could seek services. Chiropractors-hairdressers-daytrips ? I don't know but probably lots of options.

Very impressed with a well qualified and diverse Board.

Nice to meet a few fellow ST at the meeting and a few drinks and a chat afterwards. Thanks to all

[iceman]

Percy they read out results from a customer satisfaction survey at the meeting with 94% of respondents being satisfied. I thought that was impressive