SUM - Summerset Group

[Beagle]

https://www.nzx.com/companies/SUM/announcements/302543
Congrats to the team at SUM. Makes compelling sense to diversify the funding source and lock in some of their funding costs for six years at close to a fifty year low in interest rates. Nearly $400m in headroom in their main funding facility now gives them ample headroom to pursue growth opportunities.

[Zaphod]

Agree, the long term potential is good.
As I said "....SUM people gnashing their teeth at recent lows...while others see it as an opportunity..." I've been nibbling and adding SUM in the recent lows. I think it's just a question of time till the short term decline ends and the long term trend returns. However, it is also election year.....

Don't worry, I'm definitely not disagreeing with you. Just adding some thoughts to what you've said

[777]

LPTs don't have a relationship to residential prices.

If residential prices were to drop by 50% I think you will find that there is a relationship.

[lawson]

If residential prices drop by 50% we'll all be able to compare notes as we queue up for the great NZ soup line

I am tempted to top up on SUM but also tempted to diversify and add some MET to the mix. I need to get on and make up my mind or they'll both rebound before I pick any up.

[dobby41]

If residential prices were to drop by 50% I think you will find that there is a relationship.

You would be hard placed to establish a relationship because there would be a lot of other things in play.
People see what they want to see and discount the rest - confirmation bias.

[Lewylewylewy]

It's sooo hard to know what to do.

I have more access to property information than most, but not all the data.

From what I can tell, prices seem to be generally up, but not as high as they previously were some months ago at their peak. for me, the question is WHY are they up a little? (what's the driver that's mildly overcome the previous causes for a drop?). If we can know this, we will be able to predict a trend going forward.

If I could know this, I could have more confidence that SUM are currently at a bottom.

I believe that SUM have reached the bottom for now, but an extended stagnancy in property prices or a drop could cause a further drop. I do believe that there will be an increase on the next news scheduled announcement because it will be positive (or an increase that comes a month or two afterwards). But the question will then be, will it drop after that euphoria based on property price stagnancy. Also, will they drop from the current bottom more than the increase in confidence another good result will get.

I think if I can see another month or two of property price growth, and it's still hanging around the $4.80 or below, I'll be selling my RBD (target price $6.44) and making SUM my largest holding.

... So, that's where I'm at.

[Lewylewylewy]

I'll also be watching immigration figures, building consent rates (to some degree) and political policy changes relating to immigration (and thread from the Labour party).

[Beagle]

It's sooo hard to know what to do.

I have more access to property information than most, but not all the data.

From what I can tell, prices seem to be generally up, but not as high as they previously were some months ago at their peak. for me, the question is WHY are they up a little? (what's the driver that's mildly overcome the previous causes for a drop?). If we can know this, we will be able to predict a trend going forward.

If I could know this, I could have more confidence that SUM are currently at a bottom.

I believe that SUM have reached the bottom for now, but an extended stagnancy in property prices or a drop could cause a further drop. I do believe that there will be an increase on the next news scheduled announcement because it will be positive (or an increase that comes a month or two afterwards). But the question will then be, will it drop after that euphoria based on property price stagnancy. Also, will they drop from the current bottom more than the increase in confidence another good result will get.

I think if I can see another month or two of property price growth, and it's still hanging around the $4.80 or below, I'll be selling my RBD (target price $6.44) and making SUM my largest holding.

... So, that's where I'm at.

Good post, appreciate your honest feedback. For my money we're close to the bottom but there is political risk at present around a possible change to immigration policy. Even if that eventuates and we see some moderation to around 50,000 immigrants per year the thing that's supporting the real estate market is simply that new demand from immigrants is presently outstripping the building industry's ability to supply. If immigration was reduced demand / supply would probably become more equally balanced and we'd possibly see a period of zero house price growth nationwide in real inflation adjusted terms for a few years. My forecast model is based around zero growth in real inflation adjusted prices in Auckland for several years and 3% real price growth throughout the rest of the country.
On those assumptions fundamentally I believe the stock is very, very cheap...but we have to wait three months for the election and about another month before SUM will probably come out and update FY17 guidance. No way I will sell at this level but I am happy to exercise a little patience when it comes to upping the ante.

[Hoop]

SUM is in a medium term down trend (2.5 months) ...You have to have a good reason to buy in a downtrend....There are only a few reasons using bear market strategies e.g Dead cat bounces, S&R tools with sucker rallies, etc..In SUM's case there doesn't seem to be any reasons buying SUM with less risk atm..

There are indicator hints that SUM is attempting to form a bottom pattern, The stochastic is positive for a breakout but this only one very fast leading indicator which could turn negative very quickly...There are no price signs that the down trend has ended yet, so buying in at the moment hoping to find the bottom or near bottom is gambling with your money..
The first breakout sign is very close to the bottom at $4.77+..If you have very itchy fingers and thinking it's the bottom then it make sense to wait.. So far SUM has been testing this area and has failed..

https://www.tradingview.com/x/6gQvlirX/

[Entrep]

Thanks Hoop, always appreciate your input