SUM - Summerset Group

[James108]

Have you thought about in what scenario compoung growth of 48% would continue? Considering that build rate is increasing by only 10-15%, development margin and resale margin would have to increase substantially. Or the least likely scenario is that daily op fees would have to increase compared to costs (this has actually been going in the OTHER direction, i.e. costs are increasing faster than fees)

Development margin imo has little scope to increase, with stagnant property prices in Auckland and the development margin already well in excess of summersets stated goal (and I havent checked but probably also in excess of Rymans long term average?).

Another year of 48% is imo highly doubtful but would be happy to be proven otherwise.

[Beagle]

I think you'll find that their development margins still have some way to go to catch RYM.
Don't underestimate the possibility of an extra cold winter resulting in significantly higher resales and taking into account their substantially higher embedded value from existing units...
Also don't underestimate additional efficiencies from greater critical mass and extra procurement efficiencies within their development model, buying in vast bulk is a lot cheaper the more the bulk is.
Time will tell. I guess people look at five years of average 48% growth and say it can't happen again...a bit like not wanting to back a racehorse at the races because its won five in a row and gone up several classes in the process ? It can't continue to win right ?...or perhaps, just maybe it can :)

[777]

Article from Stuff....

http://www.stuff.co.nz/business/90762761/retirement-village-sector-hot-listed-fund-advances-mortgages

[hamish]

A friendly invitation to attend and enjoy a beverage or two and lively discussion afterwards.

Couta1 and I will be there and thought this might be a good opportunity after the meeting for a sharetrader get-together for Wellington people to enjoy a chat afterwards.

All welcome.

I look forward to meeting you guys and understanding more about (a) Couta's 'outrageous portions in an unbalanced share portfolio thoeory and (b) the let sleeping dogs lie by generous foodbowl strategy...

[winner69]

That would make it equal to the Ryman SP in 2 years ($11-$12 dollars is what I would predict for Rym in a couple of years) Too bullish mate, Sum price equalling Rym in that timeframe ain't going to happen.

Possibility in 3 years - SUM 29% pa nd RYM 9% pa - boith a bit stretched

Very probably in 4 years - SUM 21%pa and RYM 7% pa (still a bit stretched for RYM?)

Whatever SUM might hit $11 before RYM unless troy gets his desired stock split

[iceman]

I look forward to meeting you guys and understanding more about (a) Couta's 'outrageous portions in an unbalanced share portfolio thoeory and (b) the let sleeping dogs lie by generous foodbowl strategy...

I will be there with you guys again and look forward to it

[Beagle]

I look forward to meeting you guys and understanding more about (a) Couta's 'outrageous portions in an unbalanced share portfolio thoeory and (b) the let sleeping dogs lie by generous foodbowl strategy...

I'm liking your sense of humor already and looking forward to meeting you.


I will be there with you guys again and look forward to it

Good stuff mate :)

[couta1]

I might join you if I figure out where the meeting is. The meeting is at The Makaro Room at Te Raukura, Odlins Square, Taranaki Street Wharf, not far from St John's Bar&Resterant.

[QOH]

If you coming in by chopper just up from the Queens Wharf helipad past the kids playground and just before the St Johns Bar

I won't be coming by chopper unless I'm seriously injured on the way.

[Beagle]

http://www.summerset.co.nz/assets/Investor-Centre/Annual-Reports/2017.02.23-Annual-Report-2016-Web.pdf

I've had a good read through. Julian Cook talks about continued profit growth looking forward. Hard to figure the recent SP correction ?
Disc: Core long term portfolio stock holding.

[Lewylewylewy]

Always nervous holding shares with a divie that's less than the bank rate, as a change in circumstance can ruin the investment. I imagine investors are nervous about house prices stalling (don't want to rehash the arguement, but it does seem to be something that effects the SP, whether you like it or not - investors are factoring this in [IMO]). Also money leaving the country and Trump nerves could be causing people to cash up?

Thoughts?

[Ggcc]

Concerning the housing market...... Julian cook had this to say. "For shareholders, this should mean continued growth in earnings. We have discussed our approach to property market cycles in previous annual reports.
In short, demand for our villages is driven by the increased number of older New Zealanders and the value we o er them in that stage of life. This demand is not driven by the property market."

[macduffy]

http://www.summerset.co.nz/assets/Investor-Centre/Annual-Reports/2017.02.23-Annual-Report-2016-Web.pdf

I've had a good read through. Julian Cook talks about continued profit growth looking forward. Hard to figure the recent SP correction ?
Disc: Core long term portfolio stock holding.

SUM's 6 month chart is a series of rapid jumps and falls - the most recent a quick rise from around $4.80 to $5.40 and back down again. It seems to me that the stock is subject to extreme bouts of enthusiasm, followed by doubt as to whether it may have been overbought. I would expect another round of this treatment in due course. I hold.

[Beagle]

Minor amendment to previous posts regarding underlying EPS. EPS based on weighted average number of shares on issue is exactly 25.6697 cps, (slightly higher than previous calculation).
At $5.05 SUM currently trades on a 2016 PE of 19.67.
I think the market is presently a little obsessed with the potential for the property market to correct and its potential for impact on SUM.

[percy]

Page 19 SUM annual report.
"Since opening our first village almost 20 years ago,Summerset has seen two property downturns and during each,demand for our services remained consistent."
Other worthy quotes;
page 14.We deliver these results by providing our residents with an offering that meets or exceeds their expectations,ensuring they are proud to live at a Summerset village."
Pages 6 & 7's graph show shows very clearly the phenomenal growth SUM have enjoyed,yet it seems to me as though SUM has only recently achieved perfection in their business model.The developement margins are now excellent.
Therefore I think the future looks as though SUM will gain further momentum.
I was so impressed reading the annual report, I am considering adding to my "free" shares,even at over $5.

[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.

[winner69]

Shareprice might be 4xx before the next update early April at the rate it's going down

Better be a boomer number or else there might be a bit more of a market over reaction

Jeez, pretty close to 4xx .......better be boomer numbers in a few weeks or else the xx might be 50

[JeremyALD]

Jeez, pretty close to 4xx .......better be boomer numbers in a few weeks or else the xx might be 50

Will be a good time to top up!

[couta1]

Will be a good time to top up! $4.99 it is, any further offers.

[Beagle]

$4.99 it is, any further offers.

Hmmmmmmm. Well my base case is 2017 underlying earnings of 32 cps, see post #4267 above. At $5 it trades on a current year PE of only 15.6 ! I think this is absurd considering their track record since listing and the demographic tailwinds favoring the sector for at least the next 25 years.

Let it come down a bit more and I'll have to consider doing a Couta1 :D

[couta1]

Hmmmmmmm. Well my base case is 2017 underlying earnings of 32 cps, see post #4267 above. At $5 it trades on a current year PE of only 15.6 ! I think this is absurd considering their track record since listing and the demographic tailwinds favoring the sector for at least the next 25 years.

Let it come down a bit more and I'll have to consider doing a Couta1 :D Do it mate, you know overdiversification is highly overrated.:D

[Beagle]

Keeping powder dry at this stage mate. Lets see what Julian Cook has to say on 27 April on the record during the meeting and any other information we can "hound" him for afterwards :)
If it wants to fall further between now and then I won't be one of the ones panic selling.

[JeremyALD]

My only concern is if there is a big housing correction how much the SP will fall. It's clear people will sell this down if that happens.

[winner69]

Only 8% off recent high .......but those holding whose actions are guided by 100MA and 200MA must be getting a bit tetchy

[sideline]

My only concern is if there is a big housing correction how much the SP will fall. It's clear people will sell this down if that happens.

A look at the charts tells me that RYM,SUM and MET appear to all have got LOWER highs in Mar 17 after peaking in Sep 16, perhaps starting a downtrend.

One question is on my mind regarding this sector which I haven't seen discussed here: In 2014 aged care worker Christine Bartlett won her case for equal pay in women dominated professions which could greatly affect the cost structure of rest home care. This is slowly working its way through legislation at the moment.
Do posters here see this change affecting the profitabilities of the rest home village operators in a major way??

[percy]

No as the majority of their profits are made in developement and resales.

[Baa_Baa]

Only 8% off recent high .......but those holding whose actions are guided by 100MA and 200MA must be getting a bit tetchy

That lower high put in a top that set a new down trend line. I had to delete all my trend lines and channels which were previously pretty reliable, and reset them, currently the long term up trend (log scale) is around about 4.80 so todays close is nearby though that's still below all the major MA/EMA's. Interesting for the TA's, the recent low was smack on the 38.2% fib retrace.

I wonder whether SUM is doing the RYM thing, that Roger and Winner talked about for a few years and has played out pretty much as they described ... that SUM in this case, might have got hyped to perfection and is now trying to find fair value again. The market may be forward looking but it's not stupid enough to ignore the ST ramping effect when there's plenty profits to be scalped.

Anyway, there's a ton of support at those MA/EMA's below here and the longer term rising trend line. If it naffed all of those then that would be a source of concern, otherwise as they say a 'healthy correction' (gag).

[sideline]

No as the majority of their profits are made in developement and resales.

Yes, but what happens if their wage bill goes up by 10-15% because of this - especially for operators who can't immediately
pass on those costs because they guarantee to 'never raise the fees' during occupancy (Ryman, I believe).

[couta1]

No as the majority of their profits are made in developement and resales. It could have the potential to hit companies with less development involvement, but this would be overridden by the necessity of the Govt to increase its funding level to the sector to stop the not for profits going to the wall.

[couta1]

Yes, but what happens if their wage bill goes up by 10-15% because of this - especially for operators who can't immediately
pass on those costs because they guarantee to 'never raise the fees' during occupancy (Ryman, I believe). Your mixing up the fees payable by those in Apartments(No rise guarantee) with fees for the care centre residents(Rise annually as set by the DHB's)

[James108]

No as the majority of their profits are made in developement and resales.

And the majority of their losses are made in day to day operations...???

[percy]

And the majority of their losses are made in day to day operations...???

What losses.?

[Beagle]

That lower high put in a top that set a new down trend line. I had to delete all my trend lines and channels which were previously pretty reliable, and reset them, currently the long term up trend (log scale) is around about 4.80 so todays close is nearby though that's still below all the major MA/EMA's. Interesting for the TA's, the recent low was smack on the 38.2% fib retrace.

I wonder whether SUM is doing the RYM thing, that Roger and Winner talked about for a few years and has played out pretty much as they described ... that SUM in this case, might have got hyped to perfection and is now trying to find fair value again. The market may be forward looking but it's not stupid enough to ignore the ST ramping effect when there's plenty profits to be scalped.

Anyway, there's a ton of support at those MA/EMA's below here and the longer term rising trend line. If it naffed all of those then that would be a source of concern, otherwise as they say a 'healthy correction' (gag).

Interesting that $4.80 baseline support. I calculate at that point SUM would be trading on a 2017 PE of only 15 times my forecast underlying earnings of 32 cps. At that price I would be very seriously tempted to "bet the ranch" because long term that is a ludicrous PE for a stock with SUM's track record given demographic tailwinds for this sector.

By the way...RYM still substantially overvalued compared to SUM and SUM can't do a RYM like I predicted 3 years ago for RYM because its been growing earnings at an average rate of 48% not ~ 15% like RYM.

When I made that call on RYM three years ago their forward PE was well over 30 so over twice the valuation of SUM cuurently. I got that call bang on the money. Lets see how I go in three years with SUM as a long call. This stock is a genuine bargain at the current price and I am not in this for any short term ramp gain, I can assure you I'm in this stock as a serious long term value play in this high growth sector.

[BlackPeter]

Interesting that $4.80 baseline support. I calculate at that point SUM would be trading on a 2017 PE of only 15 times my forecast underlying earnings of 32 cps. At that price I would be very seriously tempted to "bet the ranch" because long term that is a ludicrous PE for a stock with SUM's track record given demographic tailwinds for this sector.

By the way...RYM still substantially overvalued compared to SUM and SUM can't do a RYM like I predicted 3 years ago for RYM because its been growing earnings at an average rate of 48% not ~ 15% like RYM.

When I made that call on RYM three years ago their forward PE was well over 30 so over twice the valuation of SUM cuurently. I got that call bang on the money. Lets see how I go in three years with SUM as a long call. This stock is a genuine bargain at the current price and I am not in this for any short term ramp gain, I can assure you I'm in this stock as a serious long term value play in this high growth sector.

Frightening ... it looks like couta, you and myself seem to agree on a stock ... just bought some more at 500.

Sure - they might go down to the MA100 (485) or even to the bottom of the current channel (470) but than - they might not ... and at this stage I am quite happy with buying into a quality company at a forward PE (averaging forecasts for the next 3 years) of 11.3 and a forward CAGR of above 17!

I do see SUM at this stage as one of the best value long term holds on the NZX.

Of course ... DYOR!

[Beagle]

Just for the benefit of others and especially newer investors. Most analysts and professional investors seem to prefer to compare companies in this sector based on underlying earnings which excludes the annual property revaluation that is required under international financial reporting standards. Its easier to compare the companies using this approach because it strips out current year revaluations which can differ quite markedly from one company to another. Some people prefer to use the full earnings metric (IFRS) based on the fact that in the vast majority of cases the annual revaluation figure is positive. There is certainly a fair degree of validity to this approach in my opinion as historically the cost of construction at least matches the inflation rate so some annual revaluation over the long run is justified but this approach tends to give significant swings in annual profit depending upon the state of the property market as at balance date from one year to another. This is the basis upon which the company is required by accounting convention to disclose its EPS which is shown in the financial statements at 66.93 cps compared to 38.94 cps last year.

The matter of which is the more relevant figure has previously been debated on here at very great length, (it is not my intention to reignite that debate), simply to point out that some posters will post quite different metrics to others. I remain of the view that underlying earnings is the best comparative metric to use.

The whole thing is a bit of a minefield though really because by not recognizing the full revaluation metric and using underlying earnings one then needs to make an assessment of expected future underlying earnings based on the sum total of previous revaluations not recognized already as profit. This is referred to in this sector as embedded value, a subject I briefly touched on yesterday in post #4267
Basically the higher the embedded value per unit multiplied by the expected average churn rate gives you some forward visibility on the following years expected underlying earnings from resales.

[BlackPeter]

Roger, good in pointing this out ... and I think both assessments have their merits.

Using underlying earnings are a good way to compare competitors in the same industry. However - IIFRS earnings (over a longer timeframe) are in my view the only method to capture and compare the real (past and potential) income gains from investments ... and that's what I need to decide e.g. whether I want to buy more SUM vs e.g. more THL vs more TNR in order to optimise the growth of my funds. Comparing underlying earnings wouldn't help me with this decision, given that money made through revaluations (as long as they are kosher) is real money as well.

[winner69]

Frightening ... it looks like couta, you and myself seem to agree on a stock ... just bought some more at 500.

!

Truly frightening - BP, Roger, couta, percy and others piling into Summerset big time.

Rarely do we such consensus amongst the ST luminaries ....along with backing the words up with real money shows real commitment

Must be the best thing since sliced bread

Maybe time to sell down to feed the frenzy


...and put it all into Pushpay

[Food4Thought]

24 Little Hours... passed and the price is up again.
Missed that opportunity.

[winner69]

24 Little Hours... passed and the price is up again.
Missed that opportunity.

Good eh

Still a good time to buy ...just not as good as Monday ...or yesterday

[Beagle]

24 Little Hours... passed and the price is up again.
Missed that opportunity.

The hound did bark pretty loudly.... in fact I felt I nearly went "horse" :D
Not too late mate, still great long term value at $5.15.

[Food4Thought]

The hound did bark pretty loudly.... in fact I felt I nearly went "horse" :D
Not too late mate, still great long term value at $5.15.

It is. I recently decided that some spare cash would be better in HBL, which would also somehow spread my portfolio risk a little into an area long term I see HBL performing and having a unique place in banking in New Zealand.

I have a bit of a theory with a lot of businesses with DRP. Often people cash out some winnings shortly after their DRP is complete with the registrar. They sell... supply increases, demand drops prior to EX date and then we have a little blip. Normally hungry share holders are waiting and scoop up the available supply and presto, back to where it was, DRP issue rate.

It's the DRPdoubledip. Still inspired by SUM and the long term aged care sector. Everyone wants to live comfortably as they get older after a life of putting in a lot of work effort and often going without certain luxuries.

Good day :)

[Beagle]

HBL doing well mate, you'll be all good in there too.

In the meantime this is how all those canny people who bought SUM shares at around $5 must now be feeling...come on all together now :) http://www.bing.com/videos/search?q=Beagle+wagging+his+tail&&view=detail&mid=2299B1757FBD13B8D1CC2299B1757FBD13B8D1CC&FORM=VRDGAR

[BlackPeter]

In the meantime this is how all those canny people who bought SUM shares at around $5 must now be feeling...come on all together now :) http://www.bing.com/videos/search?q=Beagle+wagging+his+tail&&view=detail&mid=2299B1757FBD13B8D1CC2299B1757FBD13B8D1CC&FORM=VRDGAR

Well, yes - I probably would have chosen a different analogy ... but from 498 to 525 in 2 days feels good :t_up:. Glad I increased my holding from "M" to "L".

[Beagle]

Well, yes - I probably would have chosen a different analogy ... but from 498 to 525 in 2 days feels good :t_up:. Glad I increased my holding from "M" to "L".

49% of me was quietly hoping it would drop down to $4.60-$4.70 so I could throw the diversification rule book out the window and do a Couta1 and go XXXXXXXXXXXL.

I sort of live it hope it still might happen. Weird felling wanting it to go down but also happy it goes up, you could say I'm a conflicted hound :D

[Food4Thought]

49% of me was quietly hoping it would drop down to $4.60-$4.70 so I could throw the diversification rule book out the window and do a Couta1 and go XXXXXXXXXXXL.

I sort of live it hope it still might happen. Weird felling wanting it to go down but also happy it goes up, you could say I'm a conflicted hound :D

Could have pulled a Couta1:t_up:. Couta1, honorable bravery, never forgotten.

[Beagle]

https://www.nzx.com/companies/SUM/announcements/299158

My opinion. Julian Cook's lengthy investment banking background is a very valuable asset to the company here. Clearly they're gearing up for ongoing strong growth and putting in place the structure that facilitates that. Worth noting that SUM make use of comprehensive interest rate swaps contracts that have the effect of fixing their interest for up to ten years at interest rates between 3.54% and 4.47%, (see page 44 of the 2016 annual report). With the company growing so strongly at an average compound growth rate of 48% per annum since listing it makes profound common sense to borrow in a prudent manner at those effective fixed rates to facilitate ongoing growth. Their gearing rate is currently very modest and they already have ~ 6 years land banked supply so one assumes SUM directors and management have a very strong desire to ensure this company is able to take advantage of opportunities as they arise and thrive going forward.
Disc: Hold plenty and looking for even more on any possible future correction.

[JoeGrogan]

https://www.nzx.com/companies/SUM/announcements/299409

moore good news.

[Beagle]

https://www.nzx.com/companies/SUM/announcements/299409

moore good news.

Superb result, everything tracking very nicely indeed for another year of strong growth. No wonder directors have been buying on market recently just before the "close out period" commenced regarding these quarterly metrics. I'm looking to buy more.
Should make for a very pleasant annual meeting on 27 April which the hound will be attending endeavoring to sniff out more information. Said hound is rumored to have a very helpful suggestion for Julian Cook that will likely boost their development margin going forward but he's keeping that card in his paws for now :D

[winner69]

https://www.nzx.com/companies/SUM/announcements/299409

moore good news.

Yep sales up 41% on pcp - can't do much better than that

And betcha at higher prices a year ago = even more profit

Share price $6 sooner than later I reckon. (Even though $7 is where it should be relative to it's peers)

[silu]

Very good numbers. For a moment I felt guilty having sold a third of my shares a while back until I remembered what I bought with it. But if funds allow I should definetely buy some more.

[JeremyALD]

Bugger I put an order in yesterday at 4.47pm and just missed out on a buy before end of trade! Will see where it's at this morning. Might still jump in.

I also noticed Auckland house prices have only gone down .3% in the last three months and the country is up overall. No worries there for now at least.

[Beagle]

Bugger I put an order in yesterday at 4.47pm and just missed out on a buy before end of trade! Will see where it's at this morning. Might still jump in.

I also noticed Auckland house prices have only gone down .3% in the last three months and the country is up overall. No worries there for now at least.

Thanks, got a link mate ?

[iceman]

Thanks, got a link mate ?

I suspect this is what he was referring to Roger http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11831571

Great numbers out today from SUM. Look forward to a catch up at the AGM

[couta1]

That's a great result considering that Q1 sales have been slower historically, stating that sales will be slanted toward the second half of the year sounds like a bullish signal to me.

[Food4Thought]

That's a great result considering that Q1 sales have been slower historically, stating that sales will be slanted toward the second half of the year sounds like a bullish signal to me.

Exciting for sure. I am optimistic there will be a new high soon (within 3 months) and I'm not surprised. I was wondering what happens with all those wiser people who have houses in prominent locations selling up or down sizing as they get wiser. More of them on a daily basis start to approach the need for care and aged care. I do wonder about this with my parents, how ever that is hopefully some time away yet for them, and SUM shares are one of the precautions I have taken to make that transition possible.

On to other matters - Great day :) :t_up:
Hope all those affected by Debbie are keeping their heads above water.

[Beagle]

I suspect this is what he was referring to Roger http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11831571

Great numbers out today from SUM. Look forward to a catch up at the AGM

Thanks mate. Me too :)

Just by way of anecdotal evidence I was looking at my 31 March 2014 balance sheet the other day and noted these in there at balance date at $3.48 at the time. Since then they have grown earnings, 10%, 55% and 50% for the three years so if they were trading on the same PE as at 31 March 2014 the stock would presently be $3.48 x 1.1 x 1.55 x 1.5 = $8.90 !

These are a superb long term buy at the current price in my opinion. By my calculation on a forward PE of just 16.7 based on underlying earnings growth of 25% for 32 cps for FY17, (which I think is increasingly looking like a very conservative growth rate assumption for the current year). Market is obsessed with the possibility of a housing correction...which by way of the evidence emerging, simply isn't happening https://www.nbr.co.nz/article/aucklands-average-house-price-reaches-record-968570-march-barfoots-data-shows-b-201556

I bought more today.

[JoeGrogan]

Hopefully the sp can break through the $5.40 barrier this time around.

[Food4Thought]

Hopefully the sp can break through the $5.40 barrier this time around.

It has, and not many sellers left. Only small parcels showing at the moment. Not a bad day. I love these 1% days, 1 % on a lot, is very nice. More excited about it breaking through the $5.60 mark... but i'm probably one of the more optimistic holders on here.:D

[winner69]

It has, and not many sellers left. Only small parcels showing at the moment. Not a bad day. I love these 1% days, 1 % on a lot, is very nice. More excited about it breaking through the $5.60 mark... but i'm probably one of the more optimistic holders on here.:D

No mate - the optimistic ones are waiting for $7 by Christmas (when reported earnings will be looking like 75 cents a share (ie a PE less than 10)

[Food4Thought]

No mate - the optimistic ones are waiting for $7 by Christmas (when reported earnings will be looking like 75 cents a share (ie a PE less than 10)

I like you. I like that optimism

[Ggcc]

Slowly dropping on a bit of downward pressure..... overseas turmoil? Nothing really changed including whopping growth in the company. Still thinking if it gets down too low I may do a couta and fully invest in one to two companies at most.....

[Fox]

Slowly dropping on a bit of downward pressure..... overseas turmoil? Nothing really changed including whopping growth in the company. Still thinking if it gets down too low I may do a couta and fully invest in one to two companies at most.....

Just market jitters with global concerns, nothing specific to SUM.

[iceman]

It really is shameful how many operators in this industry have treated their workers with low pay and sometimes bad condition. It is good to see this settlement which hopefully will be signed off today http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11839877

[couta1]

It really is shameful how many operators in this industry have treated their workers with low pay and sometimes bad condition. It is good to see this settlement which hopefully will be signed off today http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11839877 This is going to affect the bottom line profit of all the listed companies big time, the more the company relies on care beds for income, the bigger the hit will be.

[LAC]

This is going to affect the bottom line profit of all the listed companies big time, the more the company relies on care beds for income, the bigger the hit will be.

Yes, I agree with that. Unless the "customer" takes on these costs which is a tough sell.

[Ggcc]

I love how people love the idea of everyone getting paid more. The only hidden thing is, it comes at a cost to someone else.

In most cases the customer has to take on most or all of the extra cost.

[bull....]

I love how people love the idea of everyone getting paid more. The only hidden thing is, it comes at a cost to someone else.

In most cases the customer has to take on most or all of the extra cost.

In the majority of cases the customer is the Govt so unless the Govt wants to pay more the companies will wear the cost.

[couta1]

Yes, I agree with that. Unless the "customer" takes on these costs which is a tough sell. The gap between the bed funding benchmarks set by the individual DHB's and the total increase in the wages to revenue bill of each company will determine the extent of the hit, but it will be significant based on those projected hourly rate increases. The gravity train days may be about to slow down significantly unless the Govt increases their funding to the sector via the DHB's to bridge the gap.

[bull....]

I was warning on the oceania thread that the days of this sector wont last fore-ever. Anyway they all make plenty of profit guess it will just be less profit maybe they can increase the exit fees on retirement living to 50% fee instead of the 20 - 30%?

[couta1]

It's only the beginning of pain folks for the sector, next up will be nurses hourly rates which will be measured against those working for the DHB's and were talking a big difference in hourly rate. And then there are the cleaners and activity staff. Baton down the hatches folk and fasten your seatbelts, could be a wild ride going forward.

[iceman]

This is going to affect the bottom line profit of all the listed companies big time, the more the company relies on care beds for income, the bigger the hit will be.

couta1 do you think it is fair to say that the industry have brought this on themselves by paying very low wages for far too long ? I have a friend working as an age care worker and find her earnings shameful. What do you think based on your vast experience

[Carpenterjoe]

Seems bloody low to me, no way in hell could I live on $23ph. With intentions of an increase to 27ph in five years seems pretty criminal.

[BlackPeter]

It's only the beginning of pain folks for the sector, next up will be nurses hourly rates which will be measured against those working for the DHB's and were talking a big difference in hourly rate. And then there are the cleaners and activity staff. Baton down the hatches folk and fasten your seatbelts, could be a wild ride going forward.

The pain will not be on the industry, but on the old folks (who either will pay more or accept lower care and living standards) and the taxpayer (who will fork out the money for the old folks who can't afford to pay). If it makes no sense anymore to invest in this sector, than investors money will just go somewhere else, the industry will stop developing new retirement villages ... and it will be up to the government to look for an alternative solution to house the elderly who can't pay for the increased caregiver wages (one way or another).

Obviously - some elderlies might choose to retire in Malaysia or Thailand instead ... lower caregiver wages and better weather.

To look after the rest ... looking forward to increased taxes for everybody!

[couta1]

couta1 do you think it is fair to say that the industry have brought this on themselves by paying very low wages for far too long ? I have a friend working as an age care worker and find her earnings shameful. What do you think based on your vast experience Some players have, I know Kristine Bartlett well and Terra Nova were the worst of offenders at the time,she sought a modest pay increase before all the legal action started but being a group of accountants, they played hard ball and all this is the result. I know Ryman have been paying more than the minimum wage to many of their workers for many years now in anticipation of this ruling. The problem is that the not for profits like Presbyterian support who don't have property development will find themselves in a very difficult position after this ruling, where will the extra money come from to pay the extra wage bill? Unless the Govt increases the subsidy rates significantly, many not for profits will go to the wall, which is a crying shame because many of them offer excellent care models to their residents. I'm picking the Govt will be forced to up their game here.

[couta1]

Seems bloody low to me, no way in hell could I live on $23ph. With intentions of an increase to 27ph in five years seems pretty criminal. Big step up from the $16 most are now getting.

[Carpenterjoe]

Anyone know what % of summersets staff full under this situation?

[trader_jackson]

Seems bloody low to me, no way in hell could I live on $23ph. With intentions of an increase to 27ph in five years seems pretty criminal.

Isn't $23 an hour nearly the average wage in New Zealand?

To clarify, are you implying nobody can live on $23 an hour?
I have a feeling there are hundreds of thousands of people in this country who have to live on $23 an hour or less, with the prospect of just above CPI increases in their wages, not just for 5 years, but decades... and they aren't just the people being talked about in the article above.

And yes, I agree with BlackPeter... the government will have to increase funding to all care facilities (currently outside of the government ones) otherwise they will "up and leave" or quality will greatly deteriorate and we will have a UK problem where some companies, and likely not for profit, fall over and the government is forced to provide all care based facilities... good thing for all listed retirement operators, is that they are moving towards and ORA model with care beds, with many offering 'premium' services as a way to increase revenue. I also believe they pay well above minimum rates already.

[dobby41]

Some players have, I know Kristine Bartlett well and Terra Nova were the worst of offenders at the time,she sort a modest pay increase before all the legal action started but being a group of accountants, they played hard ball and all this is the result. I know Ryman have been paying more than the minimum wage to many of their workers for many years now in anticipation of this ruling. The problem is that the not for profits like Presbyterian support who don't have property development will find themselves in a very difficult position after this ruling, where will the extra money come from to pay the extra wage bill? Unless the Govt increases the subsidy rates significantly, many not for profits will go to the wall, which is a crying shame because many of them offer excellent care models to their residents. I'm picking the Govt will be forced to up their game here.

she sought !!! (not sort)
and Ryman have paid more than the minimum wage to their care workers for a long time but not much more!
The increase will be huge for most, if not all, the care workers and so it should be.
Govt will increase funding - they'll have to.

[dobby41]

I love how people love the idea of everyone getting paid more. The only hidden thing is, it comes at a cost to someone else.

In most cases the customer has to take on most or all of the extra cost.

I presume you would rather live in a low wage economy?
Myself - I'd rather live in a fair wage economy and pay the price accordingly.

[couta1]

she sought !!! (not sort)
and Ryman have paid more than the minimum wage to their care workers for a long time but not much more!
The increase will be huge for most, if not all, the care workers and so it should be.
Govt will increase funding - they'll have to. Picking on a one word mistake is rather pathetic, really?

[Carpenterjoe]

Yes, I think there are hundreds of thousands who survive on current pay rates. How someone can get financially ahead and not have to worry about money on $26 an hour is my point.

[dobby41]

Picking on a one word mistake is rather pathetic, really?

It was in passing couta1 - don't take it to heart (well maybe learn from it).

[dobby41]

Yes, I think there are hundreds of thousands who survive on current pay rates. How someone can get financially ahead and not have to worry about money on $26 an hour is my point.

Survive would be the operative word.
Most would not be the main bread winner and that is why it has persisted.

[Beagle]

Some players have, I know Kristine Bartlett well and Terra Nova were the worst of offenders at the time,she sort a modest pay increase before all the legal action started but being a group of accountants, they played hard ball and all this is the result. I know Ryman have been paying more than the minimum wage to many of their workers for many years now in anticipation of this ruling. The problem is that the not for profits like Presbyterian support who don't have property development will find themselves in a very difficult position after this ruling, where will the extra money come from to pay the extra wage bill? Unless the Govt increases the subsidy rates significantly, many not for profits will go to the wall, which is a crying shame because many of them offer excellent care models to their residents. I'm picking the Govt will be forced to up their game here.

I believe the Government are going to have to lift their funding in this area. If not companies with a high focus on care beads like Oceania will get hit very hard.
There's basically no money in care bed and dementia facilities. If you drill down into the accounts you will see that SUM makes virtually 100% of its money from development margin and profit on resale of its existing units. This won't hit SUM very hard at all but as you say the worry is that many not for profit operators like the Salvation Army and Presbyterian support services that provide extremely valuable widespread support to the elderly get really hurt by this.

[trader_jackson]

I believe the Government are going to have to lift their funding in this area. If not companies with a high focus on care beads like Oceania will get hit very hard.
There's basically no money in care bed and dementia facilities. If you drill down into the accounts you will see that SUM makes virtually 100% of its money from development margin and profit on resale of its existing units. This won't hit SUM very hard at all but as you say the worry is that many not for profit operators like the Salvation Army and Presbyterian support services that provide extremely valuable widespread support to the elderly get really hurt by this.

This won't hit SUM or MET very hard at all, and likely also not Ryman, Oceania and Arvida... they have it easy: they can move to new models (ORA's, premium add ons) or pass on costs... (which they have already been doing, without much issue).
it is the not for profits, and small operators with little to no scale that will suffer the most, as they struggle to pass on costs via raising prices

[artemis]

Survive would be the operative word.
Most would not be the main bread winner and that is why it has persisted.

True, but also because the job is at the lower end of skills needed. And there are government top ups as well - Working for Families, Accommodation Supplement - and the government will have factored in reductions in these to its costings.

Similar to the so-called living wage - Treasury advice was that the main beneficiaries are the government and very young workers.

[Leftfield]

This won't hit SUM or MET very hard at all, and likely also not Ryman, Oceania and Arvida... they have it easy: they can move to new models (ORA's, premium add ons) or pass on costs... (which they have already been doing, without much issue).
it is the not for profits, and small operators with little to no scale that will suffer the most, as they struggle to pass on costs via raising prices

Agree, IMHO any drop due to this news will represent a good time to top-up SUM.

[couta1]

It was in passing couta1 - don't take it to heart (well maybe learn from it). All good, I even corrected my mistake, but I can't guarantee it won't happen again.

[couta1]

Bought more today at around $5.25 but will leave it at that for now as this knife has fallen furtherest from the retirement stock table today, people freeing up funds for the Oceania float as you suggested Roger? can't for the life of me understand why you would sell this stock in order to buy Oceania. PS-I have equal dollar value in Ryman and Sum currently, interested to see which horse is in front in a months time with the Ryman result coming up end of May.

[Beagle]

Bought more today at around $5.25 but will leave it at that for now as this knife has fallen furtherest from the retirement stock table today, people freeing up funds for the Oceania float as you suggested Roger? can't for the life of me understand why you would sell this stock in order to buy Oceania. PS-I have equal dollar value in Ryman and Sum currently, interested to see which horse is in front in a months time with the Ryman result coming up end of May.

I couldn't agree more. Oceania will be affected to a far greater degree than SUM by forthcoming changes to pay rates in the care sector. The float price for Oceania was set before today's news. Logic would suggest the stags won't do very well out of the Oceania float but stranger things have happened so you never know. SUM my #1 holding and very happy to hold long term.

[winner69]

I presume you would rather live in a low wage economy?
Myself - I'd rather live in a fair wage economy and pay the price accordingly.

I would too........but many won't be happy to 'pay the price sccordingly'

And those who can't put their prices go out of business leaving people on the dole. Affects the SME more.

[couta1]

I would too........but many won't be happy to 'pay the price sccordingly'

And those who can't put their prices go out of business leaving people on the dole. Affects the SME more. No free lunch here, talk of ACC Levy's increasing and those not eligible for the residential care subsidy will pick up the tab. Meanwhile the wealthy residents with money in a trust will continue to receive a residential care subsidy courtesy of the taxpayer.More bad attitude kiwis will line up for care jobs lured by the higher pay but their hearts will be far from the job and a genuine care of the residents. One manager at a large care facility stated at the facility meeting last week that she would not be employing further immigrants once these wage increases go ahead.(The ship had started leaking before today's announcement)A can of worms has just been opened.

[trader_jackson]

I would too........but many won't be happy to 'pay the price sccordingly'

And those who can't put their prices go out of business leaving people on the dole. Affects the SME more.

I'm surprised nobody has brought this up on the EVO thread... its not just the listed aged care sector potentially adversely affected...

[Baa_Baa]

... Meanwhile the wealthy residents with money in a trust will continue to receive a residential care subsidy courtesy of the taxpayer...

That was a depressing post, however can you clarify with your knowledge of the aged care sector re the snippet above? Our experience was quite the opposite. The MSD were vigilant in means testing our application for the residential care subsidy (for hospital / aged care at a Presbyterian facility).

Maybe you mean the select very few can afford the vehicles that hide from the MSD test? Those who can afford to form trusts that are so oblique that the cared for, and their spouse are truely hidden from the MSD test?

MSD followed the letter of the law, being that only the joint family home and the motor vehicle were exempt, and ALL other assets including trusts with either the cared_for or their spouse, in any form or association or beneficiary, were deducted.

The result being that residential care subsidy funding was withheld and subsequently funded solely by ourselves (at around $5,500 per month!) and would have remained so until the total of the 'savings' (other assets) diminished to below around $106k, at which point the residential care subsidy would kick in.

My point is that the law is very strict nowadays and has been for a few years, one can't easily hide assets behind a trust and expect the government to pay the residential care subsidiary (i.e. fund the care).

Privately funding aged healthcare is bloody expensive, especially at 'god's waiting room' end of the healthcare continuum. The government is not obliged to, is not easily deceived, and will not pay for any care, until the surviving relative (spouse) can't afford it!

In spite of all that, as soon as the DHB's spiked the annual care fees which they do every year, those costs were automatically passed on to those who funded the care, which wasn't the government.

The least resistance pathway to fully government funded aged healthcare seems to be on the same continuum of general benefit reliance, where those that have nothing get the best out of the system while the rest of us pay our way until we can't. It makes me sick thinking about it.

[Joshuatree]

Yes my understanding is that they can't hide their assets in a trust anymore and expect a free lunch but happy to be corrected there.
Int article by not for profit Enliven; that are happy with the wage increase.The Govt picks up all the increase?


Aged Care Provider Enliven Says Pay Equity a Game Changer

Tuesday, 18 April 2017, 5:21 pm
Press Release: Enliven (http://info.scoop.co.nz/Enliven)


MEDIA STATEMENT
18 April 2017 | For immediate release
Aged Care Provider Enliven Says Pay Equity a Game Changer
Aged-care service provider, Enliven, is welcoming the recently announced pay increase for care and support workers.
Part of the not-for-profit organisation Presbyterian Support, Enliven provides a wide range of aged-care services across New Zealand.
Enliven’s national spokesperson, Gillian Bremner, says the organisation’s pay rates are based on the funding they receive from the Government, “so this is great news for our staff”.
“We value our employees and want to see them receive fair remuneration for the training they undertake, and the essential work they do to support the elderly. We also firmly believe gender should not affect what people get paid, and we support this step by the Government to address that gender pay gap.”
Mrs. Bremner says Enliven will be closely reviewing the detail around this landmark decision by the Government, and the suggested sustainability and implementation plans.
“We see this is as an important step forward for our sector, and the people who are delivering these essential services.”

[couta1]

Baa Baa, over the last 27 yrs I've seen more than a select very few with their money protected by a trust, some of the well known and not so well known names I've met receiving the residential care subsidy is and was disgraceful considering their financial situations, nuff said.

[trader_jackson]

Yes my understanding is that they can't hide their assets in a trust anymore and expect a free lunch but happy to be corrected there.
Int article by not for profit Enliven; that are happy with the wage increase.The Govt picks up all the increase?

Would explain why Arvida hardly moved yesterday, and Oceania is unlikely be be negatively effected like we first thought? (along with Ryman, SUM or MET)

[couta1]

Would explain why Arvida hardly moved yesterday, and Oceania is unlikely be be negatively effected like we first thought? (along with Ryman, SUM or MET) Do you think all the hard working nurses in aged care are going to be happy receiving $26 an hour while caregivers receive $23, having spent 3 years in full-time study and with a large loan to pay off? Remember this Govt funding money won't cover any increases to nurses which will have to move to over $30 an hour to make things fair. Predominantly care based companies are yet to realise the full impact of yesterday's news. PS-I see English said there will be no flow on effect for nurses, I see more nurses heading to work for the DHB's for up to $10 per hr more than working in aged care, for a lot less work.

[Beagle]

Some people of very modest means who have worked hard and paid taxes all their lives and never received a benefit from the Government of any kind are the sort of people I sometimes help understand the benefit of having their home and modest other assets in a family trust which I recommend be set up not later than their 50's so that at some stage if they do get into a care situation in their 70's 80's or 90's their modest assets they have worked so hard for won't be unduly affected and their assets can be passed to the next generation as they quite rightly should be. On the other hand I have clients who are multi millionaires earning hundreds of thousands of dollars in investment income currently receiving the superannuation when they have no need of it. Their assets are generally held in Trust's too.

On another topic - 96% of SUM's underlying profit came from development margin or realized profit on resale of units. If we're talking total profit including revaluations it becomes crystal clear that this company makes its money from property, not provision of care services which are basically break even.

[Baa_Baa]

Baa Baa, over the last 27 yrs I've seen more than a select very few with their money protected by a trust, some of the well known and not so well known names I've met receiving the residential care subsidy is and was disgraceful considering their financial situations, nuff said.

Thanks, good to have the inside view, appalling as it is.

8802

https://www.workandincome.govt.nz/products/a-z-benefits/residential-care-subsidy.html#null

[Beagle]

In my experience WINZ take a dim view of any assets gifted or transferred into a family trust within 10 years of application.

Do it early, if you haven't already formed a family trust by the time you are 50, why not ?

[dobby41]

Baa Baa, over the last 27 yrs I've seen more than a select very few with their money protected by a trust, some of the well known and not so well known names I've met receiving the residential care subsidy is and was disgraceful considering their financial situations, nuff said.

27years is largely irrelevant as the rules have been tuned a lot in the last few.
And rightly so IMHO.

[Joshuatree]

Trusts/estates


(https://www.workandincome.govt.nz/products/a-z-benefits/residential-care-subsidy.html#null)Thanks BB. From the financial means assessment test info.
"We'll need more information if you or your partner have ever:


transferred assets to a trust


Re hard working nurses. Im hearing some of them do little; some medication and paperwork ;but scream and shout at the real care workers at the tip face trying to hold it all together and not take short cuts. The person i know goes straight above some nurses now to get any action as the nurses are more about hierarchy, sarcasm and are quite removed from the actual needs of the patient.


trusts/estates


(https://www.workandincome.govt.nz/products/a-z-benefits/residential-care-subsidy.html#null)We'll need more information if you or your partner have ever:

transferred assets to a trust
been the settlor, trustee or beneficiary of a trust or estate.

[dobby41]

Do it early, if you haven't already formed a family trust by the time you are 50, why not ?

Why not - because I am happy to pay around $60-70k/yr out of my millions in assets when I get to that point!

[BlackPeter]

Do you think all the hard working nurses in aged care are going to be happy receiving $26 an hour while caregivers receive $23, having spent 3 years in full-time study and with a large loan to pay off? Remember this Govt funding money won't cover any increases to nurses which will have to move to over $30 an hour to make things fair. Predominantly care based companies are yet to realise the full impact of yesterday's news.

And don't forget the hard working policemen, teachers, assistant doctors, retail staff, bus drivers, soldiers and factory workers. They all will be unhappy to see themselves now in the same pay bracket as untrained aged care staff. Expect over the next years a huge push in wages for basically everybody as well as in prices. They call this inflation. Thanks to the judge and the unions for starting the merry go round again ...! Everybody will benefit: higher prices for goods and services and higher interest rates leading to unaffordable mortgages and with that to dropping house prices. Looks like we solved all our problems!

[Beagle]

Why not - because I am happy to pay around $60-70k/yr out of my millions in assets when I get to that point!

No argument whatsoever from me on that one. But what about Joe and Sally average with say $300K in investments and a modest family home. Should their kids have a substantial chunk of their inheritance obliterated when Joe goes into a dementia ward for five years ?

[couta1]

JT, you are going off largely hearsay rather than fact, bottom line is, why should a hard working nurse with a degree, having sacrificed plenty to gain their qualification receive basically the same pay as a caregiver? Like I said earlier this can of worms has just been opened. PS-Any increase to nurses will come directly off bottom line profits, whoever the company, some would struggle to pay it and survive. PPS-Whoops forgot to mention all the hard working activities staff(Especially those working in dementia units) some with diversional therapy qualifications, who will be staying on under $18 per hr.

[dobby41]

No argument whatsoever from me on that one. But what about Joe and Sally average with say $300K in investments and a modest family home. Should their kids have a substantial chunk of their inheritance obliterated when Joe goes into a dementia ward for five years ?

Why should the kids expect anything?
You get to keep the last $120k (or thereabouts) + the house and car. So the elderly should have really expensive houses.

[kura]

In my experience WINZ take a dim view of any assets gifted or transferred into a family trust within 10 years of application.

Do it early, if you haven't already formed a family trust by the time you are 50, why not ?

This is incorrect, as I know from personal experience that timing of trust formation is irrelevant when applying for a residential care subsidy.
My mum set up a trust (for death duty purposes) back in the mid 1980's & transfered debt free rental properties into the trust.
The last 2 years of her life were spent in residential care & she was required to pay most of her cost of care.
The rule that caught her, was "deprivation of income" by transfering income earning assets into a trust, she had deprived herself of income, & this deprived income was taken into account when calculating the residential care subsidy.

However if you look at the nest generation (ie Me & other kids) and assume the trust was never distributed, then I would qualify for the full subsidy, as I have never deprived myself of either income or assets, as I never put anything into the trust, and I am not in a sole trustee/beneficiary situation.

Yes rules are complicated, & if you try to avoid the rules, your scheme will probably fail. There is going to be the rare exception to this general rule though.
Disc: Spent time reading detailed regulations & cases that were heard by Social Security Appeals Authority on the subject.

[dobby41]

kura - I think this would become more interesting also if, in the years before you needed care, that you got income from the trust (probably any trust).
Especially if that income was regular.
They are on to all of this!

[iceman]

And don't forget the hard working policemen, teachers, assistant doctors, retail staff, bus drivers, soldiers and factory workers. They all will be unhappy to see themselves now in the same pay bracket as untrained aged care staff. Expect over the next years a huge push in wages for basically everybody as well as in prices. They call this inflation. Thanks to the judge and the unions for starting the merry go round again ...! Everybody will benefit: higher prices for goods and services and higher interest rates leading to unaffordable mortgages and with that to dropping house prices. Looks like we solved all our problems!

Good point. I am not surprised and not disappointed that we are getting to this point after many many years of pathetic wage increases in NZ despite a good steady economy. Our average salary of USD 38k in 2015, about 8-10% below the OECD average is unacceptable and time for NZ to lift our game. But of course this is not a discussion for this thread :-)

[Beagle]

This is incorrect, as I know from personal experience that timing of trust formation is irrelevant when applying for a residential care subsidy.
My mum set up a trust (for death duty purposes) back in the mid 1980's & transfered debt free rental properties into the trust.
The last 2 years of her life were spent in residential care & she was required to pay most of her cost of care.
The rule that caught her, was "deprivation of income" by transfering income earning assets into a trust, she had deprived herself of income, & this deprived income was taken into account when calculating the residential care subsidy.

However if you look at the nest generation (ie Me & other kids) and assume the trust was never distributed, then I would qualify for the full subsidy, as I have never deprived myself of either income or assets, as I never put anything into the trust, and I am not in a sole trustee/beneficiary situation.

Yes rules are complicated, & if you try to avoid the rules, your scheme will probably fail. There is going to be the rare exception to this general rule though.
Disc: Spent time reading detailed regulations & cases that were heard by Social Security Appeals Authority on the subject.

Good debate and not arguing with the veracity of what you've said but if we return to Mr and Mrs Joe average and use that as a case study. Lets suppose they transferred their family home and their $300K of savings into a family trust over a decade before Joe had to go into care. If they hadn't of done that Mrs Joe average would have seen their liquid assets depleted to about $120K (a $180,000 reduction over 3 years) as they're required to pay for Joe's full care costs at about $60K a year, soon to go up with increased labor costs ?
This would undermine her security significantly in retirement as she might live another 10-20 years after Joe passes away, a long time with only $120K in liquid assets left, would you not agree ?

On the other hand seeing as their trust is earning say an average of 5% on those $300K funds, ($15K a year less tax at 33% for a family trust = $10K per annum) they would be required to channel that $10K a year to pay for a small portion of the circa $60K a year care fees. When Joe passes away in 5 years Sally Average is left with $300K, (the invested funds are not touched just the net income from them), to have a somewhat secure retirement with.

dobby41 - Debates about whether kids deserve inherited money...let's not go there...you won't get much argument from me, our two twenty somethings are both rat-bags. We try and love them anyway, sometimes that's easy and other times...

[Joshuatree]

JT, you are going off largely hearsay rather than fact, bottom line is, why should a hard working nurse with a degree, having sacrificed plenty to gain their qualification receive basically the same pay as a caregiver? Like I said earlier this can of worms has just been opened. PS-Any increase to nurses will come directly off bottom line profits, whoever the company, some would struggle to pay it and survive. PPS-Whoops forgot to mention all the hard working activities staff(Especially those working in dementia units) some with diversional therapy qualifications, who will be staying on under $18 per hr.

True i was off topic there but it was a first hand experience to ,me about some nurses, I'm sure there are many good ones too. Yes this is the beginning of inflation increasing but i know a hell off a lot of people have been just getting by and not getting ahead.

Mark this day as the trigger for a big shift in our economy/country. Hope its for the better of all and things don't get out of hand interest wise or prop crash wise.

[kura]

Good debate and not arguing with the veracity of what you've said but if we return to Mr and Mrs Joe average and use that as a case study. Lets suppose they transferred their family home and their $300K of savings into a family trust over a decade before Joe had to go into care. If they hadn't of done that Mrs Joe average would have seen their liquid assets depleted to about $120K (a $180,000 reduction over 3 years) as they're required to pay for Joe's full care costs at about $60K a year, soon to go up with increased labor costs ?
This would undermine her security significantly in retirement as she might live another 10-20 years after Joe passes away, a long time with only $120K in liquid assets left, would you not agree ?

On the other hand seeing as their trust is earning say an average of 5% on those $300K funds, ($15K a year less tax at 33% for a family trust = $10K per annum) they would be required to channel that $10K a year to pay for a small portion of the circa $60K a year care fees. When Joe passes away in 5 years Sally Average is left with $300K, (the invested funds are not touched just the net income from them), to have a somewhat secure retirement with.

dobby41 - Debates about whether kids deserve inherited money...let's not go there...you won't get much argument from me, our two twenty somethings are both rat-bags. We try and love them anyway, sometimes that's easy and other times...

While I can agree with the general principles, you have overlooked one thing about Mr & Mrs Average.
They are two individual persons who will each own 50% of all assets. A matrimonial property settlement can be easily used to bring a equal distribution of assets into legal effect.
So the $300k of joint funds, should be looked at $150K belonging to Mr Average, & $150K belonging to Mrs Average Then take away the $120K limit & Mr Average should only have to pay $30K towards the cost of his care, not a big impact on the family finances, given that he may remain in care for 10...20 years.

[Beagle]

While I can agree with the general principles, you have overlooked one thing about Mr & Mrs Average.
They are two individual persons who will each own 50% of all assets. A matrimonial property settlement can be easily used to bring a equal distribution of assets into legal effect.
So the $300k of joint funds, should be looked at $150K belonging to Mr Average, & $150K belonging to Mrs Average Then take away the $120K limit & Mr Average should only have to pay $30K towards the cost of his care, not a big impact on the family finances, given that he may remain in care for 10...20 years.

Fair comment but quite a different result if they had say $600K in assets other than their family home. I think what this good debate underscores is the importance for most Mr and Mrs Joe average to get good tax and legal advice well before they retire.

[Bjauck]

No argument whatsoever from me on that one. But what about Joe and Sally average with say $300K in investments and a modest family home. Should their kids have a substantial chunk of their inheritance obliterated when Joe goes into a dementia ward for five years ? Maybe the asset and income thresh-hold limits should be raised for everyone and not just for those who have paid accountants and lawyers to establish discretionary trusts. Should there be a government hand-out so that beneficiaries can receive inherited wealth? If you have ever settled assets in a discretionary trust from which you have ever derived benefit - the current value of those assets should be included in a means assessment.

[kura]

Fair comment but quite a different result if they had say $600K in assets other than their family home. I think what this good debate underscores is the importance for most Mr and Mrs Joe average to get good tax and legal advice well before they retire.

Yes, Agree !

One final thing I will mention, is that while the rules about rest home care, make it useless to attempt to use a trust to bypass government policy, there was one benefit that my mum got from setting up her trust.
Prior to going into care, my mum suffered a stroke & lived at home for some 20 years prior to going into a rest home. (wheelchair bound) Because she was at home & had a Community Services Card she was eligible for fully funded carers to come in each day ( 2hrs in morning & 1 hr in evening, seven days a week, plus a 2hr shopping trip once a week )
Compare this to a friends mum (who never set up a trust) who is in a similar physical state, and earns too much to get a Community Services Card, she must pay the full commercial rate for a similar degree of in home care.

Just to change subject, I really appreciated the work these caregivers did, & was appalled to learn that their pay was so low, yep they deserve their increase

[Bjauck]

....
Prior to going into care, my mum suffered a stroke & lived at home for some 20 years prior to going into a rest home. (wheelchair bound) Because she was at home & had a Community Services Card she was eligible for fully funded carers to come in each day ( 2hrs in morning & 1 hr in evening, seven days a week, plus a 2hr shopping trip once a week )
Compare this to a friends mum (who never set up a trust) who is in a similar physical state, and earns too much to get a Community Services Card, she must pay the full commercial rate for a similar degree of in home care.... So your Mum had access to her assets in the trust, yet could claim poverty to get tax payer provided government and Health Board funding?

[Biscuit]

I seriously doubt there is much point setting up a trust to try to get the Govt to pay for rest home care etc. We set up a trust a few years ago to manage assets after one or both of us died and the legal advice was pretty clear that it would not have any effect on those types of things. I think you guys are dreaming!

[Beagle]

I think we're well off on a tangent here and a lot of this Trust stuff has nothing to do with SUM so while I respectfully disagree with you Biscuit perhaps we should move any further discussion on this area to this estate planning area set up for this purpose. http://www.sharetrader.co.nz/showthread.php?10919-Estate-planning.

[dobby41]

That's a clever way to get the last word Roger
"I don't agree with you but let's get back on topic"

But I do agree about getting back on topic.
I think we have agreed that there is little in this to affect the profitability of SUM - the Govt will pay and they don't make a lot of their profit (% wise) from the care area anyway.

[macduffy]

But the real question is : will it now make a loss in the care area?

[couta1]

That's a clever way to get the last word Roger
"I don't agree with you but let's get back on topic"

But I do agree about getting back on topic.
I think we have agreed that there is little in this to affect the profitability of SUM - the Govt will pay and they don't make a lot of their profit (% wise) from the care area anyway. Any extra they have to pay Nurses and Activity staff will come out of their bottom line profit, and they will be paying, no Nurse is going to hang around on close to a caregivers pay. PS -I will give you some feedback on this once I've talked to a few Nurses etc from a few different facilities.

[couta1]

But the real question is : will it now make a loss in the care area? A yes answer to that, care areas will be subsidized by development profits. On a completely different note, seems plenty of small holders keen to sell this stock presently in comparison to Ryman.

[couta1]

Sum acting like a falling knife currently, bought a few more today but my hands are getting a bit lacerated, might have to use the pickup truck instead if it falls much further, my Ryman horse clear by a few lengths after today. PS-Just need Mr Cook to do a rave about how good yesterday's news was for caregivers like Simon did in the Herald yesterday, aye.

[Beagle]

Sum acting like a falling knife currently, bought a few more today but my hands are getting a bit lacerated, might have to use the pickup truck instead if it falls much further, my Ryman horse clear by a few lengths after today. PS-Just need Mr Cook to do a rave about how good yesterday's news was for caregivers like Simon did in the Herald yesterday, aye.

No worries mate, Mr Cook set to announce an automatic policy of up to two dogs per resident for life and fixed fees for life as well at next weeks annual meeting and they can get away with charging $50k more per unit and people will gladly pay it. Get the Couta truck out mate :) (Tongue in cheek in case anyone is wondering)

I think SUM people are freeing up funds for the Oceania float...must be better value because its less than a dollar, LOL.

[troyvdh]

What worries me about all this chatter ..and i have said this before..I fear for anyone venturing into the SM as a place to invest ...like Roger states "people are freeing up funds......."....Like what is wrong in viewing an investment as an investment...and not a 'stag' or a trade.....

And people complain about kiwis investing in residential property.....GEE I wonder why.

Why on Earth cannot folk view investing view same as something longer than a few days..weeks...

[Lewylewylewy]

...On another topic - 96% of SUM's underlying profit came from development margin or realized profit on resale of units. If we're talking total profit including revaluations it becomes crystal clear that this company makes its money from property, not provision of care services which are basically break even.

And now we come to the discussion about flat-lining property prices that don't affect SUMs profits :p

[JoeGrogan]

What worries me about all this chatter ..and i have said this before..I fear for anyone venturing into the SM as a place to invest ...like Roger states "people are freeing up funds......."....Like what is wrong in viewing an investment as an investment...and not a 'stag' or a trade.....

And people complain about kiwis investing in residential property.....GEE I wonder why.

Why on Earth cannot folk view investing view same as something longer than a few days..weeks...

This isn't specific to the NZ market. Why do people have to view it as a investment rather than a trade. There are many ways to make money in this game, sure investing long term is one of them but it ain't the only way.

Different strokes for different folks eh

[Lewylewylewy]

What worries me about all this chatter ..and i have said this before..I fear for anyone venturing into the SM as a place to invest ...like Roger states "people are freeing up funds......."....Like what is wrong in viewing an investment as an investment...and not a 'stag' or a trade.....

And people complain about kiwis investing in residential property.....GEE I wonder why.

Why on Earth cannot folk view investing view same as something longer than a few days..weeks...

Whats the problem? You want your shares to be less liquid? I don't get it. :(

Anyway, bit off topic...

Lest us remember that SUM have a big land bank in a game which is property driven. Pending property prices, I see SUM gaining value with a SP giving higher percentage returns over the next 6 years in divies (read: a slowing growth in SP, lower PE) as the growth potential drops... that said, good land purchases and strong demand could fire this up over the period.

I guess what im saying is that the risks to the company are govt legislation and property prices. Govt being the biggest one, as the investment will be fair value ones the growth has run its course (therefore any change in property market can only offer a neutral investment [opportunity cost] or a positive one here [good investment]).

What no one has commented on, is what is required to achieve the higher pay outlined. I read that it won't be given to everyone and there will be hard criteria to achieve to get the higher rates. I have no idea what these are and what percentage of the workforce this will affect, or if the area of the workforce affected give the additional benefit to SUM that SUM will have to pay for. Hopefully Couta1 can shed some light here :)

[Bjauck]

...

I guess what im saying is that the risks to the company are govt legislation and property prices. Govt being the biggest one, as the investment will be fair value ones the growth has run its course (therefore any change in property market can only offer a neutral investment [opportunity cost] or a positive one here [good investment])... Yet another residential property market warning:
New Zealand housing market crash warning issued by international ratings agency Moody's
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11837842

[dobby41]

Yet another residential property market warning:
New Zealand housing market crash warning issued by international ratings agency Moody's
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11837842

Haven't they done that before? Many times?

[Bjauck]

Haven't they done that before? Many times? Not just them.
Back in March:
Auckland affordability a credit negative - Moodys
http://www.mortgagerates.co.nz/article/976505219/auckland-affordability-a-credit-negative-moodys.html

and Fitch have warned us, although perhaps not so adamantly:
http://www.stuff.co.nz/business/property/89555518/Economy-good-but-housing-boom-over-ratings-agency-Fitch

IMF, The Economist have said NZ's housing is the most unaffordable in the World.

Each time the response is similar: We are not like other countries. This time we will be safe again. Our Banks (well, mostly Australia's Banks I guess because most of our money is wrapped up in housing!) have been stress tested.

It seems a bit like the story of the boy crying "Wolf!" and we know how that ended.

[dobby41]

It seems a bit like the story of the boy crying "Wolf!" and we know how that ended.

But it's different this time :D
Much of what they say is true and it is a matter of timing and extent of a fall.
Or maybe just a flattening (which would affect those expecting (and relying on) capital gains to see their 3% return and negative cash flow improve).

Some people will get very caught if they have to sell but most just sit tight if they can.

It is different this time, I think. Unfortunately because of that it is hard to see what will happen.
There seems to be more overseas money than before and we don't know how it will react.

[Beagle]

We are not the most expensive in the world. As reported on CNBC this morning Hong Kong is trading on 18 times medium household income.
Medium household income according to the department of statistics in N.Z. is ~ $73K.
I think (and I am going off memory here), the average house in N.Z. is somewhere around $550K, obviously Auckland is a lot higher.
National average is about 7.5 times national medium household income. Perfectly fine when interest rates are close to 50 year lows.
REINZ data shows nationally our market is tracking just fine and all the talk of Auckland crashing is just that, talk, it simply isn't happening.

[Bjauck]

We are not the most expensive in the world. As reported on CNBC this morning Hong Kong is trading on 18 times medium household income.
Medium household income according to the department of statistics in N.Z. is ~ $73K.
I think (and I am going off memory here), the average house in N.Z. is somewhere around $550K, obviously Auckland is a lot higher.
National average is about 7.5 times national medium household income. Perfectly fine when interest rates are close to 50 year lows.
REINZ data shows nationally our market is tracking just fine and all the talk of Auckland crashing is just that, talk, it simply isn't happening.

Hong Kong is part of China. So it is not the most unaffordable independent country I guess. I presume Manhattan is less affordable than NZ too. Hong Kong has millions of people on several small islands and a small patch of land. Auckland is sitting on a median home at 10 times median income. Auckland region has about a third of NZ's population. Hong Kong has less than 1% of China's population. I agree, maybe , if interest rates stay low, the clock could keep on ticking, all else being equal (constrained construction and supply, high immigration and investor demand continuing at current rates)

[Beagle]

A spokeswoman for Summerset said it was delighted caregivers would receive better pay.
“The settlement is fully funded, which means no impact on company profitability but will mean that staff will be better paid and we will be able to attract more staff to the industry, which we believe will enhance the level of care we are able to deliver.”

[couta1]

A spokeswoman for Summerset said it was delighted caregivers would receive better pay.
“The settlement is fully funded, which means no impact on company profitability but will mean that staff will be better paid and we will be able to attract more staff to the industry, which we believe will enhance the level of care we are able to deliver.” See my post above Roger re nurses and activities staff, it is only fully funded for caregivers. This ruling will cost the company, but to what extent is unknown until the nurses and others get their increase. A nurses hourly rate will go up around $4-$6 i estimate at this point.

[Bilbo]

We are not the most expensive in the world. As reported on CNBC this morning Hong Kong is trading on 18 times medium household income.
Medium household income according to the department of statistics in N.Z. is ~ $73K.
I think (and I am going off memory here), the average house in N.Z. is somewhere around $550K, obviously Auckland is a lot higher.
National average is about 7.5 times national medium household income. Perfectly fine when interest rates are close to 50 year lows.
REINZ data shows nationally our market is tracking just fine and all the talk of Auckland crashing is just that, talk, it simply isn't happening.

Hi Roger. From what I know about you from your other posts, I'm surprised by the above sentiment. I would have expected a more cautious outlook from you. If housing were a share or bond, would you buy it on fundamentals and market outlook (interest rate rises coming, immigration to be slowed, possible change of government?) Rental return of 3% if lucky, before costs (property management, maintenance, rates, insurance etc), which from my experience drops returns to sub 2%. Price supported by low interest rates which can really only go up from here (inflation figures just released show inflation now above 2%) and demand. Once the demand is suppressed or supply increased, price rises can not continue (all else being equal - wages etc). Just look at the lack of price growth in the ChCh market now that supply side of the equation is addressed.

It may take some large external catalyst for Akl prices to crash (fall +20%) but at best I can see a long sideways (5years+) period coming with little potential for upside.

[777]

From stuff who got it from NBR.

No tax paid by retirement Villages

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11841788

[Beagle]

Hi Roger. From what I know about you from your other posts, I'm surprised by the above sentiment. I would have expected a more cautious outlook from you. If housing were a share or bond, would you buy it on fundamentals and market outlook (interest rate rises coming, immigration to be slowed, possible change of government?) Rental return of 3% if lucky, before costs (property management, maintenance, rates, insurance etc), which from my experience drops returns to sub 2%. Price supported by low interest rates which can really only go up from here (inflation figures just released show inflation now above 2%) and demand. Once the demand is suppressed or supply increased, price rises can not continue (all else being equal - wages etc). Just look at the lack of price growth in the ChCh market now that supply side of the equation is addressed.

It may take some large external catalyst for Akl prices to crash (fall +20%) but at best I can see a long sideways (5years+) period coming with little potential for upside.

Its all about supply and demand. BNZ believe there are circa one million Kiwi's presently overseas. One presumes the majority of those still hold N.Z. residency and passports and are entitled to return at any time. Forgetting about how the Govt might tinker with immigration requirements for new entrants for a minute think about that number and then take a quick glace around the world on the geopolitical front and N.Z. looks increasingly attractive by the day ! OECD report says we're one of the most lightly taxed countries in the world too !
No capital gains tax for one thing. AKL market could indeed go sideways inflation adjusted for a few years, maybe not even keep up with inflation so reduce gradually in real terms. That's not a concern for SUM who have six years land supply on hand. Any temporary dip could actually be good for the company as it gives them an opportunity to acquire more land at much more attractive prices.
(Bare land has historically had a very high beta in regard to changes in the real estate market overall). Long term a temporary dip in real estate prices could be a very good thing...why do you imagine Julian Cook just organized an expanded debt facility ? Take advantage of any attractive land acquisition opportunities is the obvious answer.

No issues with most of the country but returning to the Auckland market which seems a bone of contention with a lot of folk.
Fact is building companies are only building just over (from memory), 10,000 homes a year and circa half the immigrants, (35,000) per year want to live in Auckland. We're short about 4,000 homes per annum according to what I've read. Until that's fixed, which won't happen anytime soon as the industry is basically at peak capacity already there's no let up in the demand supply imbalance.
SUM are building in other parts of the country as well as Auckland. Some people get myopic vision and think Auckland's problem is symptomatic for the company generally.
By my estimate SUM is presently trading at $5.17 at only 16.15 times FY17 underlying earnings. That's extremely cheap for this sector let alone for the company that's achieved the highest compound growth rate average for this sector over the last 5 years (48% per annum). SUM housing and care is a needs based supply. Massive demographic tail winds for this sector for at least the next 25 years by which time I will have talked Julian Cook into allowing me to have two dogs in my waterfront retirement unit at Hobsonville when I move in at 80 :) (God willing I live that long).

Disc: Watching this one closely, already my #1 investment position on the NZX but if it drops much more I might have to consider doing a mini Couta1 :D

[Ggcc]

Hey couta. A family member of mine is a nurse and fully believes that caregivers should get paid more than what they were on. When I questioned her whether she would want more money. Her response was "no and they fully deserved the increase. Being a caregiver is hard work and they have been underpaid for a long time."

So what I am saying is not all nurses want more money and yes this is one case. They deserved the increase was her response without hesitation. Have you spoken to nurses who have argued the pay increase? I do appreciate your input as you are fully involved inside the industry..

Cheers

[couta1]

Hey couta. A family member of mine is a nurse and fully believes that caregivers should get paid more than what they were on. When I questioned her whether she would want more money. Her response was "no and they fully deserved the increase. Being a caregiver is hard work and they have been underpaid for a long time."

So what I am saying is not all nurses want more money and yes this is one case. They deserved the increase was her response without hesitation. Have you spoken to nurses who have argued the pay increase? I do appreciate your input as you are fully involved inside the industry..

Cheers As posted above, I will do a survey over the next week(Haven't been doing much work this week hence all the posting) I'd say your family member is the exception though, and remember once a few get an increase, they all get an increase, whether they want it or not. By the way, does your family member work in aged care? Are they in an older age bracket, just out of interest? PS-Nurses working for the DHB's are on a significantly higher rate than those working in aged care.

[Ggcc]

As posted above, I will do a survey over the next week(Haven't been doing much work this week hence all the posting) I'd say your family member is the exception though, and remember once a few get an increase, they all get an increase, whether they want it or not. By the way, does your family member work in aged care? Are they in an older age bracket, just out of interest? PS-Nurses working for the DHB's are on a significantly higher rate than those working in aged care.

My family member is working in a private practice not in aged care. She did mention she receives higher than the nurses inside the retirement sector.... Not by a lot. Also mentioned the new nurses usually work there to get experience, or the really old ones who should have given up nursing a long time ago..... Ie wet healing rather than dry healing of wounds..... You know what I mean with that of course. I look forward to your survey, but as we know the unions will decide the best course of action, as most nurses are aligned with union representatives.

[couta1]

So far the Nurses union nor any other union has been able to bring pay equity to aged care nurses in comparison to their DHB and private practice colleagues, this needs to change.

[LAC]

My family member is working in a private practice not in aged care. She did mention she receives higher than the nurses inside the retirement sector.... Not by a lot. Also mentioned the new nurses usually work there to get experience, or the really old ones who should have given up nursing a long time ago..... Ie wet healing rather than dry healing of wounds..... You know what I mean with that of course. I look forward to your survey, but as we know the unions will decide the best course of action, as most nurses are aligned with union representatives.

I am quite familiar with the nursing industry, DHB nurses are significantly higher than retirement sector. Nurses who can't get into the DHB from graduating settle for retirement villages but then DHB's almost never want nurses that have only worked in the retirement sector because the roles of nurses in DHB vs Villages are so much different (especially the process, drug handling, medical system etc.).
It's a very tough industry with horrible shifts and below average pay to other less stressful jobs in NZ, those working in aged care are paid a lot less but have less risks as to working in the DHB environment. Specialized nurses have it a little better in terms of earning power but they tend to get deployed to other DHB's quite a bit. Private hospitals pay a lot better with better work hours but once again if you ever decide to get back into a Govt hospital it's pretty difficult.

[couta1]

The slide continues, went to grab Sum more at close but got shut out, Ryman doing okay, lots of reef fish want those Oceania shares aye. PS-Another potential 3 days of selling for the Oceania sellers.

[JeremyALD]

It amazes me that this is headed towards $5 given the outstanding results and momentum SUM have. I'll be topping up soon to make this my #1 share. Im thinking of trying to time my entry though, so will see if it heads lower in the short term.

The thing I love about SUM is there are so many tailwinds that if you're willing to hold for the long term you can't really go wrong (or at least that's what I tell myself). Plus a roughly 2% dividend yield isn't that far off the banks.

Roger we seem to be doing similar things investment wise at the moment?!

[sonny n share]

Some retirement villages not paying tax
http://nzh.tw/11841788

[Baa_Baa]

Some retirement villages not paying tax
http://nzh.tw/11841788

Maybe someone here can explain how that works? How they can get away with it, given the profits they make and returns to shareholders. Wouldn't want this to turn out to be a rort, or for the IRD to rule adversely, let alone back date a ruling.

[Beagle]

It amazes me that this is headed towards $5 given the outstanding results and momentum SUM have. I'll be topping up soon to make this my #1 share. Im thinking of trying to time my entry though, so will see if it heads lower in the short term.

The thing I love about SUM is there are so many tailwinds that if you're willing to hold for the long term you can't really go wrong (or at least that's what I tell myself). Plus a roughly 2% dividend yield isn't that far off the banks.

Roger we seem to be doing similar things investment wise at the moment?!

I'd like to think its great minds think alike mate :)


Maybe someone here can explain how that works? How they can get away with it, given the profits they make and returns to shareholders. Wouldn't want this to turn out to be a rort, or for the IRD to rule adversely, let alone back date a ruling.

Retirement companies got a binding ruling from the IRD on this many, many years ago. I'd prefer not to get into the ethics of this debate other than to say in the very long run I suppose at some stage there is some risk of a law change in this area.

[Baa_Baa]

Retirement companies got a binding ruling from the IRD on this many, many years ago. I'd prefer not to get into the ethics of this debate other than to say in the very long run I suppose at some stage there is some risk of a law change in this area.

Ok, forget the ethics then, what is it that enables a 'retirement company' to obtain a binding ruling, that exempts them from paying tax?

I wonder how many shareholders actually knew this. Maybe some/most did know, I'm just asking, as it seems a false pedestal for commercial achievement and one that can be whipped away at the behest of the IRD.

Not to mention MSD potentially changing the rules on care subsidies like they have in Australia. Seems this sector is riding the back of the taxpayer, for the advantage of shareholders, but that's just a personal perception.

Having some experience working with the IRD, it's situations like this that hit the public spotlight where the Commissioner gets a 'please explain' and suddenly there is a reversal of sentiment. The big rule in government agencies is never do anything that makes it to the front page of the newspaper and embarrasses the Commissioner, or CEO.

So now we have a headline. What next?

[trader_jackson]

I have to say, there have been so many posts I haven't been able to keep up... I think I posted about 2 days ago and in that time another 4 or 5 pages have been added... mostly not to do with SUM (I think?) Almost to do with retirement operators in general by the looks of it?
Should maybe create another thread?

[Beagle]

Ok, forget the ethics then, what is it that enables a 'retirement company' to obtain a binding ruling, that exempts them from paying tax?

I wonder how many shareholders actually knew this. Maybe some/most did know, I'm just asking, as it seems a false pedestal for commercial achievement and one that can be whipped away at the behest of the IRD.

Not to mention MSD potentially changing the rules on care subsidies like they have in Australia. Seems this sector is riding the back of the taxpayer, for the advantage of shareholders, but that's just a personal perception.

Having some experience working with the IRD, it's situations like this that hit the public spotlight where the Commissioner gets a 'please explain' and suddenly there is a reversal of sentiment. The big rule in government agencies is never do anything that makes it to the front page of the newspaper and embarrasses the Commissioner, or CEO.

So now we have a headline. What next?

You would need to go back and have a look at the "binding ruling" that binds the Commissioner. My understanding is it would take a law change to render that binding ruling ineffective but you might like to take your own specialist tax advice on that, I make that comment with due care but NO responsibility. Sorry I don't have unlimited time to research very old binding rulings, if someone else wants to the hard yards leg work please, by all means be my guest. The full behind the paywall article on NBR, (upon which the skimpy N.Z. Herald article is based), included a detailed response from Ryman Healthcare. Copyright, STMOD and the rules of this forum will not permit me to reproduce that here. Only $35 buys you one months access for those that want to see what Ryman had to say on the subject, (they were around a long time before SUM so logic suggests they were the ones that obtained the binding ruling).

[Baa_Baa]

You would need to go back and have a look at the "binding ruling" that binds the Commissioner. My understanding is it would take a law change to render that binding ruling ineffective but you might like to take your own specialist tax advice on that, I make that comment with due care but NO responsibility. Sorry I don't have unlimited time to research very old binding rulings, if someone else wants to the hard yards leg work please, by all means be my guest. The full behind the paywall article on NBR, (upon which the skimpy N.Z. Herald article is based), included a detailed response from Ryman Healthcare. Copyright, STMOD and the rules of this forum will not permit me to reproduce that here. Only $35 buys you one months access for those that want to see what Ryman had to say on the subject, (they were around a long time before SUM so logic suggests they were the ones that obtained the binding ruling).

That's a very defensive response Roger, but I can understand why, as it's not your or my responsibility to define or defend the IRD's binding rulings.

I am only interested in why the 'retirement companies' enjoy such a ruling and whether it is vulnerable. In my experience the IRD can unbind a binding ruling just as easily as they can create the binding ruling. They are a very short step away from making legislation.

It still seems that the 'retirement sector' might be propped up by MSD's residential care subsidies that could be revoked or amended at any time, and we are now informed about the no-tax prop that the sector enjoys.

What comes around goes around, it seems prudent to examine what is actually making this sector so profitable for shareholders, and what could be taken away at the swipe of the IRD Commissioner's and/or the MSD's CEO's pen.

[couta1]

That's a very defensive response Roger, but I can understand why, as it's not your or my responsibility to define or defend the IRD's binding rulings.

I am only interested in why the 'retirement companies' enjoy such a ruling and whether it is vulnerable. In my experience the IRD can unbind a binding ruling just as easily as they can create the binding ruling. They are a very short step away from making legislation.

It still seems that the 'retirement sector' might be propped up by MSD's residential care subsidies that could be revoked or amended at any time, and we are now informed about the no-tax prop that the sector enjoys.

What comes around goes around, it seems prudent to examine what is actually making this sector so profitable for shareholders, and what could be taken away at the swipe of the IRD Commissioner's and/or the MSD's CEO's pen. These companies are doing the Govt and country a huge service, sure they make good profits but that's the aim of every good business. If not for the likes of Sum and co the Govt and taxpayer would be subject to a massive expensive problem to accommodate and care for the people currently residing in these villages. The chance of the ruling being reversed is miniscule IMO. Reducing the residential care subsidy would also create massive problems in itself, once again where would you put all the people that would then be unable to afford to stay in the facility as private payers. Huge demographic tailwind set to fuel the demand for many years to come, it would be a completely dumb move by any authority to change a system which works incredible well for all parties involved.

[Snow Leopard]

Are you sitting comfortably?
Then I shall begin...

There is a :) straight forward :) principal in the New Zealand Tax System that items which are held with the primary intention of deriving income from, are themselves exempt from taxation on the change in their 'capital' value.

Essentially the binding ruling defines a retirement village operators apartments etc as falling into this category and thus exempt from 'capital gains tax'.

The main activities of the retirement village operators, to provide accommodation and care etc are very taxable.

While some operators shamelessly make a profit doing so (i.e. Arvida) others such as Ryman and Summerset just about break even, practically charities :cool:.

So there you have it:
They build properties to provide services to the elderly, they keep said properties, making only unrealised capital gains on, which is not taxable;
and if they make a profit on the services themselves then tax is paid.

I can foresee a few 'wait, but' and similar objections but I do not care for I have my black coffee and it came with a little caramelised biscuit.

Best Wishes
Paper Tiger

PS: see this post (http://www.sharetrader.co.nz/showthread.php?10933-Assessing-and-managing-portfolio-risks&p=663513&viewfull=1#post663513) to understand the coffee reference. I thought it worthwhile associating the two threads :p.

[Bjauck]

Are you sitting comfortably?
Then I shall begin...

There is a :) straight forward :) principal in the New Zealand Tax System that items which are held with the primary intention of deriving income from, are themselves exempt from taxation on the change in their 'capital' value..... A principal defined by its exceptions? One of these exceptions being the Fair dividend rate applied to Foreign Investment Funds (this can apply a tax on unrealised capital gains). Another is the taxation of unrealised increase in market value of fixed interest securities for taxpayers subject to accrual rules. DYOR. Plus there are other situations when an investor's realised capital gains, regardless of intent, are subject to income tax etc.

[couta1]

Plenty of tax paid from the existence of these companies whose shareholders pay tax at the rate of 33% on unimputed dividends. I know Ryman distribute 50% of underlying profit as divvies, not sure about the % for Sum or Met. Not to mention the mass of tax paid by the thousands of employees of these companies as well as all the contractors and suppliers, and let's not forget all those ACC Levy's. Overall this sector is a great contributor to the NZ tax base.

[Beagle]

These companies are doing the Govt and country a huge service, sure they make good profits but that's the aim of every good business. If not for the likes of Sum and co the Govt and taxpayer would be subject to a massive expensive problem to accommodate and care for the people currently residing in these villages. The chance of the ruling being reversed is miniscule IMO. Reducing the residential care subsidy would also create massive problems in itself, once again where would you put all the people that would then be unable to afford to stay in the facility as private payers. Huge demographic tailwind set to fuel the demand for many years to come, it would be a completely dumb move by any authority to change a system which works incredible well for all parties involved.

I agree 100%. One of the other things RYM said in response was that over the years 50% of their underlying profit has been paid out as unimputed dividends which are taxable in shareholders hands.
I believe how our learned friend Paper Tiger has summed it up above, summarizes the situation quite well.

[dobby41]

One of the other things RYM said in response was that over the years 50% of their underlying profit has been paid out as unimputed dividends which are taxable in shareholders hands.


An important point and one not mentioned in articles.
Of course the other 50% of the profit will drive the growth - handy not losing 28% of that!

[kura]

Surely the term underlying profit is wrong.
If there was a profit in the good old fashioned sense of income being greater than expenses, then they would be paying taxes & imputing their dividends.
Oh great, we also have development profits, but what is the purpose of building more assets that we don't make an ongoing profit from ?
At least most listed property companies make some rental profits & pay taxes, but most of them are PIEs, so at least they don't have to deduct RWT from the unimputed portion of their dividends.

[couta1]

In Accumulation Mode, the sellers are welcome to their Oceania shares.:D

[Beagle]

In Accumulation Mode, the sellers are welcome to their Oceania shares.:D

Sparked up changing soon to Summing Up ? :D

[couta1]

Sparked up changing soon to Summing Up ? :D Good point as I'm currently Sparked out. PS-Changed now.

[Beagle]

SUM's it up nicely mate :)

[couta1]

Since I put that accumulation post up, the sellers are running away, they must be reading this forum, hope some non readers come back late this arvo.:mad ;:

[JoeGrogan]

It's a pretty attractive price to be accumulating at, had to help myself to SUM more this morning.

[couta1]

It's a pretty attractive price to be accumulating at, had to help myself to SUM more this morning. Looks like the Oceania sellers are drying up, they only have 2 days left to sell anyway and most wouldnt want to cut it that fine, shame about that.

[Joshuatree]

Baa Baa
"What comes around goes around, it seems prudent to examine what is actually making this sector so profitable for shareholders, and what could be taken away at the swipe of the IRD Commissioner's and/or the MSD's CEO's pen."

Very valid point. The govt can as they've done in Aus recently stop being so generous; reduce funding, whittle a bit of there add a cost there. The companies will keep providing essential service but will they have the stellar gains of the past? Will EHE ( on ASX)ever recover? I think not because profits are now less. Will EHE stay listed ;prob but at a much lower s/p and off many investors radar. For me,from now on SUM and the others are not the bullet proof bluechip premium invest companies to be over exposed in imo, one needs to factor in a bit more risk i think. And now with the caregivers getting an increase(yay) as couta said ,nurses cleaners etc will want to have an increase too.Yes the national govt will pick up the tab for the careworkers ,FOR NOW.
The third spanner in the works is the IRD; how generous will they be going forward when the NZ economy cycle is less healthy.

[Beagle]

LOL some of you guys. What part of the plain English words "binding ruling" is so difficult to understand ! The ruling isn't bound up with licorice so when the next Commissioner comes into office he decides to have a nibble...honestly this is not rocket science, Binding is exactly that, it gives the taxpayer certainty ! http://www.ird.govt.nz/technical-tax/binding-rulings/what-is-br/what-is-br-index.html
You've got them on the run Couta1 with that 100,000 share bid at 512. Good on ya mate !

[Joshuatree]

I have no idea what to make of that last sentence Roger ; its well ,ludicrous but i must admit sounds hilarious so cheers:t_up:.But it is friday and funny juice and whacky back all round i say,TGIF. Another one (week)bites the dust and the sun is sinking;.... re 5 mins earlier each day, and the world is still spinning.

[Baa_Baa]

LOL some of you guys. What part of the plain English words "binding ruling" is so difficult to understand ! The ruling isn't bound up with licorice so when the next Commissioner comes into office he decides to have a nibble...honestly this is not rocket science, Binding is exactly that, it gives the taxpayer certainty !

That's a bit of a glib statement, although not unexpected. No disrespect, but dismissing out of hand any potential for your investment to be exposed to these risks, without accepting that the risks even exist, is shallow and ill-informed.

It helps to understand the machinery of government, the role of the Policy Advice Division (PAD) at IRD, how they draft policy that goes to a Bill and then to Parliament to be enacted, and how those things fundamentally influence binding rulings. You don't have to wait for a new Commissioner to consider binding rulings. The current Commissioner and indeed the current CEO of the MSD can make their own decisions anytime they please.

Why do you think the fourth estate chose to raise the matter of taxpayer funded carers pay rises and very quickly afterwards, raise the matter of 'retirement company's' being exempt from paying tax? If for no other reason, it is to raise awareness.

Yes I know, you and some vocal others think that because the likelihood of these risks eventuating is in your opinion so low that they don't warrant consideration, does not mean that others will not want to consider it. Let the discussion continue, back away if to you it is trite or nonsense as you've said enough and stated your position, clear the floor and let others speak.

A binding ruling is as pointed out binding, until the binding ruling is revoked or replaced. There are numerous examples of binding rulings that once existed but now do not. IRD can bascially do anything they want, at anytime and they don't have to let shareholders know anything about it. So can the MSD.

Hiding clear and obvious taxpayer rorts behind a binding ruling (IRD), that is a decade old, and taxpayer largess (MSD), does not guarantee that the status quo will continue forever.

[Beagle]

You seem so strong in your opinion Baa Baa perhaps you should do some research and provide a link to said binding ruling and better still seeing as this topic its not particular to SUM start a thread in an appropriate section of this forum. You've articulated your opinion very thoroughly too. Presenting some facts in an appropriate thread appears to be the best way forward if this worries you.

I'm looking forward to catching up with a few good blokes I know and hearing from Julian Cook and some of the Directors at the annual meeting on Thursday. I sleep very well at night with my investment in this needs based business trading on a very undemanding PE multiple with an underlying earnings compound average growth rate of 48% over the last 5 years.

The taxation treatment of SUM's annual profit is clearly laid out in pages 36 and 37 of the 2016 annual report. For those who have even bothered to actually study this, rather than pontificate ad nausea about alleged rorts they'll see the clear explanation as to why SUM pay very little, (not No) tax.

Good to see SUM as a very high growth company are only paying out about 30% of underlying profit, no sense in shareholders paying too much tax on unimputed dividends, better to channel earnings into even higher growth going forward :t_up: Actually I'd prefer they didn't pay dividends at all.

Edit: For those that are interested. If you pay just $35 for one months access you could subscribe to NBR behind the paywall where they have the full detail of the tax article with pro's and con's and response from RYM. In the comments section one person has kindly provided a link to the IRD determination. I was going to cut and paste the link to said determination here but I won't because really for such a modest price those that are specifically interested in this matter should just join and then feel free to debate the point to your hearts content in the NBR forum which fully reported the matter. I think to be fair to SUM shareholders this is a case of horses for courses. The NBR forum with rebuttal statement by RYM is the fair and correct place to debate this further in my opinion. Doing so without reading the full rebuttal statement by RYM and considering the IRD determination in detail would be just ill informed and therefore basically worthless debate in my carefully considered opinion.

[Bjauck]

...Actually I'd prefer they didn't pay dividends at all. I agree. They are a growth company, I think they should reinvest the funds used for dividends unless they are in a position to attach imputation credits.

IRD rulings provide a measure of certainty for companies and long term investment decisions. I guess it would be counterproductive for NZ to rescind them. Perhaps general tax issues and tax possible reform belong to a different thread.

[Beagle]

https://www.nbr.co.nz/article/three-retirement-villages-23b-profit-zero-tax-th-p-202055

[bohemian]

HI Roger. NBR have a pay Wall on this, can you please give us the gist of what it's about.

[Elles]

See Roger's previous post.

[Bjauck]

HI Roger. NBR have a pay Wall on this, can you please give us the gist of what it's about.

There is a NZ Herald item that refers to the NBR article. As it pertains to other retirement stocks as well, I have posted a link to it here (http://www.sharetrader.co.nz/showthread.php?9221-Retirement-Sector-Valuation-Criteria&p=663695&viewfull=1#post663695) on a (perhaps) more appropriate thread (Retirement Sector Valuation Criteria) http://www.sharetrader.co.nz/showthread.php?9221-Retirement-Sector-Valuation-Criteria&referrerid=11527

There may be other threads that relate to all retirement companies.

[couta1]

Interesting article in the Herald today titled "Wage rises has down sides" If someone could put it on here as an attachment please as it's a very good article. (I'm still a dinosaur when it comes to this attaching stuff)

[noodles]

Interesting article in the Herald today titled "Wage rises has down sides" If someone could put it on here as an attachment please as it's a very good article. (I'm still a dinosaur when it comes to this attaching stuff)
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11843354

[Beagle]

My sense is the combination of the Oceania float and Infratil selling down its stake in MET have together sucked close to half a billion dollars of capital out of the market in the last month in this sector. High quality companies are not immune to the laws of supply and demand and when you get that much supply of scrip in the retirement sector it had to have an effect.

I feel however we're coming to the end of that effect with Oceania listing shortly on 5 May, some stags will take profits and reinvest in the best of breed in this sector, (which in terms of growth is definitely SUM in my opinion) and the current price represents a good opportunity to take advantage of a supply demand imbalance.
Disc: Bought more this morning and looking forward to catching up with some of my friends at a very positive annual meeting tomorrow.

My estimate of underlying profit for FY17 is for ~ 25% growth to 32 cps which is based on a 12.5% uplift in build rate and a circa 20% uplift in resale profit from higher volume and higher embedded value per unit. Puts SUM on a 2017 PE of only 16.2 times my forecast FY17 earnings. Historically this has traded in the low - mid 20's PE.
Fears of a serious correction in the housing market and the potential impact on SUM are well and truly overdone in my opinion.

[percy]

Added to our SUM this morning @ $5.21,having sold out of RBD on Monday.
Also sold the balance of my HLG holding,which will add to my cash holding.

[Leftfield]

Added to our SUM this morning @ $5.21,having sold out of RBD on Monday.
Also sold the balance of my HLG holding,which will add to my cash holding.

I have learned a lot from your posts Percy and think you have made some wise decisions here. Well done and thanks for sharing!

[Beagle]

I trimmed some HLG at $3.40 ex divvy after having increased my holding cum divvy at $3.34 but I wouldn't be a seller at the current price. A good hold for 13.5% gross divvy yield at $3.20 in my view. That said SUM vs HLG over the medium term in terms of total shareholder return looks like a pretty one sided horse race to me :)

[Lewylewylewy]

Govt punished stats on working age today. Numbers show an increase in people turning 60 over the next 20 years. That's excluding the massive over 70yo bracket which covers a larger age range than the older stats. Not sure if that means there will be a drop or an increase in home requirements in future.

[JeremyALD]

Thoughts on the shareholder day? I got some warm fuzzies reading their report. You can tell they really love and believe in the company and its purpose which is a nice feeling as an investor. Everything seems on track anyway, they did mention challenges in the Auckland construction market rising costs which they expect to continue. Again stated performance of SUM is not linked to property market.

[Joshuatree]

Anyone at the meeting to give us a live update;). Certainly not a rush to buy & s/p down 1% today atp. Meeting started at 1pm from what i read.

Add on . You are there Jeremy ?If so thanks.

[kiwico]

There was a major focus on cleaners during the voting part of the AGM... I assume what was a union man kept harking on about what increase the cleaners should get (specifically those that clean up the sputum) now the caregivers are getting an increase.

[kiwico]

Plus the potential for looking at building in Oz given how well their main rival Ryman was doing over there (which prompted a shareholder remark on WHS' lack of success on their trip over the Tasman. The Chair made clear it should not be assumed they will build in Oz as there are still opportunities here given the land banking sites they still have in NZ.

[JoeGrogan]

Cheers for the updates Kiwico

[JeremyALD]

Anyone at the meeting to give us a live update;). Certainly not a rush to buy & s/p down 1% today atp. Meeting started at 1pm from what i read.

Add on . You are there Jeremy ?If so thanks.

No Josh I've just read the report. Roger will gives us a detailed update I'm sure!!

[Joshuatree]

Thanks guys. S/P ended up down 10c ,125,000 through. Was it because costs are rising?

[777]

From the Herald

Summerset grapple with wage increase

By Rebecca Howard

5:02 PM Thursday Apr 27, 2017

Summerset Group's board came under pressure regarding its plans for wage-earners who won't benefit from a recent government-funded lift in caregiver wages at its annual meeting in Wellington, but said it plans to be proactive.

Earlier this month the government announced it would implement a historic pay equity pay deal for aged and residential care workers worth $2.05 billion of extra pay over four years for some 55,000 people - close to 2 per cent of the total New Zealand workforce.

Summerset chief executive Julian Cook said "we are very pleased that a settlement has been reached and that wages for caregivers and the funding to match this will come into place shortly." However, several shareholders questioned what the company was going to do about the workers who won't benefit from the deal as well as the potential flow-on effect with other workers, such as nursing staff given the reduced pay gap.


Directors Grainne Troute and Andrew Wong - both elected Thursday - were asked what they were going to do to ensure that the benefits of the equal pay settlement extended to other staff.

Troute underscored it as a challenge the board "will be grappling with" and the need to be able to attract the best quality of staff applies to all areas of the business while Wong said that people will be looking at what they earn and what it means for the jobs they do and "we will have to respond to that if we want to get the best people to do the jobs we are asking them to do."

Chairman Rob Campbell, also re-elected Thursday, stressed that the board hasn't seen the detail of the settlement and said that "some of these matters are matters for negotiation." He recognised there "will be flow-ons but exactly what those flow-ons will be I don't think anyone on the board is really in a position to say at this stage."

Cambell emphasised the company will be proactive and said "we don't see the future of this business as being dependent on low wages or exploitation. We want to have a business that is based on paying people fairly and equitably and we will do that," he said.

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The gender pay gap could be closed in the next five years, Diversity Works CEO Bev Cassidy-Mackenzie says.
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In the year to December 31, Summerset's employee expenses totalled $40.5 million and made up more than half of its $71.1m in operating expenses.

Across town in a pre-Budget speech the Wellington Chamber of Commerce, Finance Minister Steven Joyce today downplayed the potential ripple effect of the government's move into other sectors. "The barrier is rightly set high because a flow-on to other sectors would mean going back to the old relativities that these workers have just won the right to get away from."

According to Joyce, "if you have a number of employers and you have people being competed for with different employers you tend to find a rate which is effectively a market hourly rate rather than something that's a bit artificial" where there's a central funding body such as the government in the case of the caregiver settlement.

Looking ahead, Summerset did not offer any new guidance at the annual meeting but did warn that it was beginning to see some impact from capacity constraints in the construction market.

"Auckland based developments are currently being delivered in a construction market which is feeling much strain," said chief executive Julian Cook. The company is insulated to some degree as it acts as the main contractor on site, but "we are not immune from these pressures completely. We have seen one-to-two month delays on some projects and have also seen cost pressures coming through," said Cook. Contractor availability is also an issue given the high workload in the market.

It remains on track for a retirement unit build of around 450 units this year, however, "shareholders should be aware that these issues exist," he said.

In calendar 2016, Summerset improved its development margin to 22.2 per cent from 20 per cent benefiting from internal management and design of its construction sites, and its larger scale. Today, Cook said there was clearly more pressure on the construction process but "we are expecting the development margin to be there or thereabouts what we are delivering."

The shares were trading down 1.3 per cent at $5.22 but have gained 19 per cent over the past year.

[JeremyALD]

From the Herald

Summerset grapple with wage increase

By Rebecca Howard

5:02 PM Thursday Apr 27, 2017

Summerset Group's board came under pressure regarding its plans for wage-earners who won't benefit from a recent government-funded lift in caregiver wages at its annual meeting in Wellington, but said it plans to be proactive.

Earlier this month the government announced it would implement a historic pay equity pay deal for aged and residential care workers worth $2.05 billion of extra pay over four years for some 55,000 people - close to 2 per cent of the total New Zealand workforce.

Summerset chief executive Julian Cook said "we are very pleased that a settlement has been reached and that wages for caregivers and the funding to match this will come into place shortly." However, several shareholders questioned what the company was going to do about the workers who won't benefit from the deal as well as the potential flow-on effect with other workers, such as nursing staff given the reduced pay gap.


Directors Grainne Troute and Andrew Wong - both elected Thursday - were asked what they were going to do to ensure that the benefits of the equal pay settlement extended to other staff.

Troute underscored it as a challenge the board "will be grappling with" and the need to be able to attract the best quality of staff applies to all areas of the business while Wong said that people will be looking at what they earn and what it means for the jobs they do and "we will have to respond to that if we want to get the best people to do the jobs we are asking them to do."

Chairman Rob Campbell, also re-elected Thursday, stressed that the board hasn't seen the detail of the settlement and said that "some of these matters are matters for negotiation." He recognised there "will be flow-ons but exactly what those flow-ons will be I don't think anyone on the board is really in a position to say at this stage."

Cambell emphasised the company will be proactive and said "we don't see the future of this business as being dependent on low wages or exploitation. We want to have a business that is based on paying people fairly and equitably and we will do that," he said.

Academic Paul Moon initiaded last week's open letter about threats to free speech in New Zealand universities. Photo / Richard Robinson
Political Roundup: Freedom of speech vs PC culture
North Korea has a massive US army on its border performing war manoeuvres. Photo / AP
Your Views: Readers' letters
The gender pay gap could be closed in the next five years, Diversity Works CEO Bev Cassidy-Mackenzie says.
How to close the gender pay gap
In the year to December 31, Summerset's employee expenses totalled $40.5 million and made up more than half of its $71.1m in operating expenses.

Across town in a pre-Budget speech the Wellington Chamber of Commerce, Finance Minister Steven Joyce today downplayed the potential ripple effect of the government's move into other sectors. "The barrier is rightly set high because a flow-on to other sectors would mean going back to the old relativities that these workers have just won the right to get away from."

According to Joyce, "if you have a number of employers and you have people being competed for with different employers you tend to find a rate which is effectively a market hourly rate rather than something that's a bit artificial" where there's a central funding body such as the government in the case of the caregiver settlement.

Looking ahead, Summerset did not offer any new guidance at the annual meeting but did warn that it was beginning to see some impact from capacity constraints in the construction market.

"Auckland based developments are currently being delivered in a construction market which is feeling much strain," said chief executive Julian Cook. The company is insulated to some degree as it acts as the main contractor on site, but "we are not immune from these pressures completely. We have seen one-to-two month delays on some projects and have also seen cost pressures coming through," said Cook. Contractor availability is also an issue given the high workload in the market.

It remains on track for a retirement unit build of around 450 units this year, however, "shareholders should be aware that these issues exist," he said.

In calendar 2016, Summerset improved its development margin to 22.2 per cent from 20 per cent benefiting from internal management and design of its construction sites, and its larger scale. Today, Cook said there was clearly more pressure on the construction process but "we are expecting the development margin to be there or thereabouts what we are delivering."

The shares were trading down 1.3 per cent at $5.22 but have gained 19 per cent over the past year.

I think that is a negatively slanted article based on what I've heard. I like their approach that they'll be proactive and pay for top talent, what more can they say on the matter? The SP went up over 2% yesterday so it hasn't really 'fallen' as a result of the meeting.

[Xerof]

Journalists are sad b'stards aren't they?

[kiwico]

Journalists are sad b'stards aren't they?

The focus on the cleaners [Directors Grainne Troute and Andrew Wong - both elected Thursday - were asked what they were going to do to ensure that the benefits of the equal pay settlement extended to other staff.] was weird.

Clearly the man asking the questions had a union background with the questions being asked when Grainne Troute was being put forward for director. This was a little ironic as 99% of proxies held by the Chairman were for Grainne.

It is recognised that the caregivers are underpaid but it appeared that this increase would be fully funded by the Government. When Grainne first answered the question about other workers such as cleaners an older woman piped up stating the question had not been answered and so round two started.

On the other hand, if the cleaners have not increased productivity should a pay increase in excess of inflation be available?

This comes across as a journo trying to find a none story.

[kiwico]

Incidentally the increase in total directors fees from $600k (effective from 2014) to $650k was also questioned despite it being made clear this was for potential additional costs (such as paying a director the agreed chair fee of $7,500 for chairing a new committee) rather than an increase in the amount paid to any director for the role(s) they are currently undertaking.

Not agreeing it at the AGM would have meant the board would have to contact shareholders at a later date if there was a new committee etc (and so an additional $7,500 required to pay the chair of sch new committee).

[kiwico]

On the question of whether AGMs should still be in person, which was touched on briefly by the chair (but in passing rather than expressing a preference), listening to a number of well-paid individuals reading out prepared statements does not appear to require an AGM to be in person. But it is always good to see the board (and meet them if you don't need to head back to work as I did) as well as to put questions to them in person.

We just need to stop cleaners becoming the focus.... (other than perhaps for Spotless and the like)

[percy]

"Auckland based developments are currently being delivered in a construction market which is feeling the strain."
I would point out there is no longer any strain in the Christchurch construction market.

[trader_jackson]

wage costs aside (as I think an overwhelming majority of these rises will be covered, even when thinking about flow on effects to other jobs and their pay) what sounds more concerning to me is the below...

SUM are very heavy Auckland based. Despite a little price increases in Auckland housing market, and developments 'feeling the strain' (I read this as slower delivery and higher cost), they still seem to think they can maintain their development margin (of about 22%) and still increase the build rate to 450 units pa? (not to mention interest rates on borrowings likely beginning to increase, alongside them borrowing more than ever before). Despite these factors, no change to profit forecast (I think)?

Sounds like they are trying to pull a rabbit out of a hat, but, then again, they do have very good track record of producing results so will be interesting to see.

Hopefully SUM are not pulling a CVT and say "there will be no impact" [of new chinese regulations] then produce a terrible result not long after... or a FBU and say one thing, then a couple weeks later come out and say another, much worse, thing.

[percy]

hmm this does sound potentially concerning as SUM are very heavy Auckland based.

Despite a little price increases in Auckland housing market, and developments 'feeling the strain' (I read as slower and higher cost), they still seem to think they can maintain their development margin (of about 22%) and still increase the build rate to 450 units pa? (not to mention interest rates on borrowings likely beginning to increase, alongside them borrowing more than ever before). Despite these factors, no change to profit forecast (I think)?

Sounds like they are trying to pull a rabbit out of a hat, but, then again, they do have very good track record of producing results so will be interesting to see.

Hopefully SUM are not pulling a CVT and say "there will be no impact" [of new chinese regulations] then produce a terrible result not long after... or a FBU and say one thing, then a couple weeks later come out and say another, much worse, thing.
After 20 successfull years that is not going to happen.

[trader_jackson]

After 20 successfull years that is not going to happen.

Yes, I don't think it will happen either, but a downgrade or 'good times becoming less good', could.

[percy]

Yes, I don't think it will happen either, but a downgrade or 'good times becoming less good', could.

No not with their widespread land bank.
Builders and construction people in ChCh will move to where the work is.
Their "model" is now proven and robust.
No borrowings other than for developments,means they are well positioned.

[troyvdh]

Dear Xerof....obviously you are a trump supporter....

[Lewylewylewy]

wage costs aside (as I think an overwhelming majority of these rises will be covered, even when thinking about flow on effects to other jobs and their pay) what sounds more concerning to me is the below...

SUM are very heavy Auckland based. Despite a little price increases in Auckland housing market, and developments 'feeling the strain' (I read this as slower delivery and higher cost), they still seem to think they can maintain their development margin (of about 22%) and still increase the build rate to 450 units pa? (not to mention interest rates on borrowings likely beginning to increase, alongside them borrowing more than ever before). Despite these factors, no change to profit forecast (I think)?

Sounds like they are trying to pull a rabbit out of a hat, but, then again, they do have very good track record of producing results so will be interesting to see.

Hopefully SUM are not pulling a CVT and say "there will be no impact" [of new chinese regulations] then produce a terrible result not long after... or a FBU and say one thing, then a couple weeks later come out and say another, much worse, thing.

Perhaps they have fixed their rates. Projections are only a year out, not too hard to predict. Besides, rates won't go up much in a year.

[JoeGrogan]

Thanks guys. S/P ended up down 10c ,125,000 through. Was it because costs are rising?

Why did the share price fall two weeks ago from $5.45 to $5.10? there was no news whatsoever to justify a 6.8% drop over the duration of 1 week. In addition, on March the 29th it hit $5.25 after a nice rally then dropped to $5.17 the next day. again for no apparent reason. It seems convenient to blame todays drop on just the AGM. Perhaps it was just sellers who missed out on the last run to $5.40 wanting to lock in some profit before it drops back down again.

Just to clarify: i'm not saying that the AGM results had no effect at all on todays drop, however, my point is that there is never a definitive answer for why the market reacts the way it does.

[troyvdh]

Dear Joe....welcome to the share market..an irrational beast it is...My best advise I can give you is look at the trajectory of the SP....over weeks ..months...look at the volumn...not shares but the dollar value...I would guess (sadly0 that a majority of folk in the SM treat same as a casino..in ...and out for a quick profit...be cautious...look at the dollar trading value....go well

[Vaygor1]

Why did the share price fall two weeks ago from $5.45 to $5.10? there was no news whatsoever to justify a 6.8% drop over the duration of 1 week. In addition, on March the 29th it hit $5.25 after a nice rally then dropped to $5.17 the next day. again for no apparent reason. It seems convenient to blame todays drop on just the AGM. Perhaps it was just sellers who missed out on the last run to $5.40 wanting to lock in some profit before it drops back down again.

Just to clarify: i'm not saying that the AGM results had no effect at all on todays drop, however, my point is that there is never a definitive answer for why the market reacts the way it does.


Hi Joe.

Troyvdh has provided good advice there.

As an analogy, the price one would hypothetically get for ones house can easily vary by more than your examples every day/week/month depending upon (amongst other reasons) the the time of the year, the number of people looking to buy, and their respective needs, drivers, and cash positions...and this in combination with the vendors needs, desires, and level of urgency to sell.
The thing is that with a house, these fluctuations are invisible on a day by day basis.. there is no daily tender or daily auction on any given house to enable such a measure to be undertaken.
But with the sharemarket, a company's market worth is measured and available for scrutiny every day... the trick is to not get hung up about it... institutions, consortiums, trusts, individuals etc all buy & sell for literally an endless combination of reasons, and as such these variations to which you refer are nothing out of the ordinary.

Select companies with sound fundamentals with good growth prospects, work out a good-value share price (aka a bargain) to buy in at using your own sets of measures, and then enjoy the ride once you have secured your position. Best of luck to you and keep posting. :)

[Joshuatree]

Why did the share price fall two weeks ago from $5.45 to $5.10? there was no news whatsoever to justify a 6.8% drop over the duration of 1 week. In addition, on March the 29th it hit $5.25 after a nice rally then dropped to $5.17 the next day. again for no apparent reason. It seems convenient to blame todays drop on just the AGM. Perhaps it was just sellers who missed out on the last run to $5.40 wanting to lock in some profit before it drops back down again.

Just to clarify: i'm not saying that the AGM results had no effect at all on todays drop, however, my point is that there is never a definitive answer for why the market reacts the way it does.

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.

[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.:D

[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

[couta1]

Something new I learnt yesterday was that Sum give $780 worth of shares to all employees(Yes Percy that includes cleaners) which they own outright after 3 years of employment, nice touch. PS-Percy ,the Union was out to highjack the meeting which SUM of us managed to put a stop to from the floor.

[percy]

Something new I learnt yesterday was that Sum give $780 worth of shares to all employees(Yes Percy that includes cleaners) which they own outright after 3 years of employment, nice touch. PS-Percy ,the Union was out to highjack the meeting which SUM of us managed to put a stop to from the floor.

Thanks Iceman and Couta1.
Sounds to me the Union overstepped the mark.
Not a good idea.

[Beagle]

You did a great job of speaking up and pulling the Union rep(s) into line mate. Well done. A real pleasure catching up with you, Iceman and others.

[Bjauck]

Something new I learnt yesterday was that Sum give $780 worth of shares to all employees(Yes Percy that includes cleaners) which they own outright after 3 years of employment, nice touch. PS-Percy ,the Union was out to highjack the meeting which SUM of us managed to put a stop to from the floor. A nice touch. I think it would be a good idea for more NZ companies to provide share ownership schemes for all employees. It would help align interests. I think German-style co-detemination with union representatives on company boards could have its advantages too - to help get rid of the old "us" and "them" .

Summerset benefits for staff: https://www.summerset.co.nz/careers/working-at-summerset/why-summerset-2/summerset-benefits/

[forest]

Something new I learnt yesterday was that Sum give $780 worth of shares to all employees(Yes Percy that includes cleaners) which they own outright after 3 years of employment, nice touch. PS-Percy ,the Union was out to highjack the meeting which SUM of us managed to put a stop to from the floor.

Hi couta, thanks for that info I was not aware of this. Do you know If those are new shares (dilluting) or that the company buys shares on market for this purpose?

[couta1]

Hi couta, thanks for that info I was not aware of this. Do you know If those are new shares (dilluting) or that the company buys shares on market for this purpose? Diluting as far as I'm aware as Rob Campbell did mention that the scheme comes at a cost to shareholders.

[NZSilver]

Plenty of uncertainty around this issue at the moment!

[artemis]

Good equal pay article here by Eric Crampton on some of the complexities of choosing comparison groups and thereby setting prices. He discusses a somewhat similar arrangement in Canada in the 1980s - interesting but not a shining example it is fair to say.

'Value and price do not derive simply from the skill involved in some type of labour, or from the working conditions, or from inherent responsibilities. What matters instead is how much consumers value another bit of the final product or service, and how many people are willing to provide the labour to supply it.'

https://nzinitiative.org.nz/insights/opinion/what-is-your-labour-really-worth/

[Beagle]

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

As you've suggested mate the caliber of the board is very impressive. They seem determined to provide a top quality living environment for their residents, a fine example of which is their new initiative with market leading quality living arrangements for dementia patients. Makes this a feel good investment as far as I'm concerned.

The company makes no money from the day to day operation of its villages, something all stakeholders including employees need to be cognisant of.

[couta1]

Hey Roger, still plenty of cheap shares on offer. Disc-Still accumulating.:D

[trader_jackson]

Hey Roger, still plenty of cheap shares on offer. Disc-Still accumulating.:D

Sounds like everyone is buying, look forward to seeing a few SSH notices ;)

Share price the same as what it was 15th August last year, give or take a cent... I guess you've been busy buying these past 9 months couta1?

It has only gotten 'cheaper' over that period (PE wise)... surely its all about to take off?

[Beagle]

As previously posted, SUM's forward PE for YE 31/12/2017 based on my forecasted underlying profit of $70m is 16.2.

Ryman made $158m underlying profit in the year ended 31 March 2016. If they can achieve 15% underlying earnings growth to be announced later this month they will make $181.7m underlying earnings in the year to 31 March 2017 and if they can generate another year of 15% underlying earnings growth for the subsequent year they will make $209m in the year ended 31 March 2018 which on 500m shares on issue = Underlying earnings of 41.8 cps.
At $8.69 a couple of minutes ago this puts RYM on a 31 March 2018 forward PE of 20.8 which is the cheapest they have been for several years.

Given their respective growth rates over the last 5 years a fair question to ask is does RYM's track record warrant a PE premium to SUM ?

[silu]

I am OK with RYM having a higher PE because of its exposure in OZ.

discl. hold SUM, RYM & MET

[couta1]

I am OK with RYM having a higher PE because of its exposure in OZ.

discl. hold SUM, RYM & MET Yes, you have to allow a higher PE due to the compounding effect of the Aussie expansion, once it starts kicking into play. More growth potential commands a higher PE

[Beagle]

SUM 48% growth average over 5 years v RYM 15-16% growth average is a pretty compelling divergence in historical growth.

I respectfully disagree on RYM's Australian expansion giving them potential for more growth. SUM have stated they'll look at Australian expansion themselves in due course and have more years land bank supply currently on hand, (suitable development sites are shaping up as one of the key constraints for the industry in my opinion).

I think where RYM do have an advantage is utilizing their own building company to control the development cost, this could be advantageous in the Auckland market in particular where SUM might be more exposed to higher external contractor costs. That said I'd imagine RYM will need to be paying top dollar to hang on to their best building staff for the foreseeable future.

I do expect their respective growth rates to converge somewhat in the near future but still that leaves the question of whether a PE premium is warranted for RYM given their systems are already pretty much perfected whereas there's still some potential for enhanced procurement and construction efficiency for SUM to come in my view and Julian Cook alluded to that point during the meeting in response to my question.

I also feel there's potential for more premium pricing to be obtained by SUM if they can unlock the pricing power of fixed weekly fees for life. This is something I discussed with Julian after the meeting and something I intend to follow him up on by e.mail in due course.

[stoploss]

SUM 48% growth average over 5 years v RYM 15-16% growth average is a pretty compelling divergence in historical growth.

I respectfully disagree on RYM's Australian expansion giving them potential for more growth. SUM have stated they'll look at Australian expansion themselves in due course and have more years land bank supply currently on hand, (suitable development sites are shaping up as one of the key constraints for the industry in my opinion).

I think where RYM do have an advantage is utilizing their own building company to control the development cost, this could be advantageous in the Auckland market in particular where SUM might be more exposed to higher external contractor costs. That said I'd imagine RYM will need to be paying top dollar to hang on to their best building staff for the foreseeable future.

I do expect their respective growth rates to converge somewhat in the near future but still that leaves the question of whether a PE premium is warranted for RYM given their systems are already pretty much perfected whereas there's still some potential for enhanced procurement and construction efficiency for SUM to come in my view and Julian Cook alluded to that point during the meeting in response to my question.

I also feel there's potential for more premium pricing to be obtained by SUM if they can unlock the pricing power of fixed weekly fees for life. This is something I discussed with Julian after the meeting and something I intend to follow him up on by e.mail in due course.

Roger to look at the other side of the coin if there is room for "enhanced procurement efficiency " from SUM .If they are not doing the building themselves there is the possibility of a blowout in costs on a build , a la FBU dropping cash on projects , so at some stage they maybe able to do this better .However in the meantime they could be open to a blowout or two ....

[Beagle]

Roger to look at the other side of the coin if there is room for "enhanced procurement efficiency " from SUM .If they are not doing the building themselves there is the possibility of a blowout in costs on a build , a la FBU dropping cash on projects , so at some stage they maybe able to do this better .However in the meantime they could be open to a blowout or two .... FBU's issue is that their contracts are generally fixed price. As Julian said at the annual meeting SUM set their own retail price.
Those moving into a nice brand new Auckland SUM unit in future might have to accept the reality that building costs in Auckland right now are very high and that as to be reflected in the price.
Price resistance could be an issue in the future which is why I'll be talking again to Julian about the pricing power of fixed weekly fees for life.

[couta1]

I keep chasing this mother down but it doesn't want to find it's bottom, Ryman doing good Roger, get that cider ready mate, still a few weeks to go until it's result so it should hit my target price.:D PS-Might have to sell some Sum if I accumulate too many (Probably not possible) Sum must be one of the only true value stocks left in this current bubbly NZX. PPS-Not at all worried if I end up XXXOS in Sum.

[Beagle]

$9.20 before report day for RYM, (Roger short / Couta1 long)...looking forward to my free cider after next years SUM annual meeting or maybe earlier if we catch up and go skiing at Queenstown this winter :). The SP action on SUM is at odds with my assessment of fair value but I'm not worried about it mate and am more than happy to hold for long term growth. SUM now have a good track record of doing what they say they're going to do in terms of forecast build rate and margins are on track as confirmed by Julian. Oceania list on Friday ? Might give the whole sector a lift, hopefully not over $9.20 for RYM :D

[trader_jackson]

FBU's issue is that their contracts are generally fixed price. As Julian said at the annual meeting SUM set their own retail price.
Those moving into a nice brand new Auckland SUM unit in future might have to accept the reality that building costs in Auckland right now are very high and that as to be reflected in the price.
Price resistance could be an issue in the future which is why I'll be talking again to Julian about the pricing power of fixed weekly fees for life.

In my view, I am not sure how successful one would be rising prices in a flat or declining market... SUM can set their prices of course, just like anyone, whether they achieve that sale price, given market dynamics, is a very different question

OCA's listing clearly seems to be helping 1 of the operators at least... good to see ARV climbing again on higher than usual volumes... not long till they'll be at all time high's I'm sure ;) You'd think, given OCA is soo undervalued to ARV we'll see a nice pop on the first day(s)?

[Beagle]

Anyone's guess t.j. Was priced at the bottom of the range and struggled to get support for years for very good reasons. Their growth forecast for FY 18 has a certain Tegal flavor about it that I don't like. This hounds nose is definitly picking up the distinct scent of creative marketing but you never know the public might "buy it" for a while just like they did when they were suckered in with Tegal.

[JoeGrogan]

$9.20 before report day for RYM, (Roger short / Couta1 long)...looking forward to my free cider after next years SUM annual meeting or maybe earlier if we catch up and go skiing at Queenstown this winter :). The SP action on SUM is at odds with my assessment of fair value but I'm not worried about it mate and am more than happy to hold for long term growth. SUM now have a good track record of doing what they say they're going to do in terms of forecast build rate and margins are on track as confirmed by Julian. Oceania list on Friday ? Might give the whole sector a lift, hopefully not over $9.20 for RYM :D

$9.20 before reporting day seems pretty bullish lol, think i'm with Roger on this one.

[sb9]

Notice decent pre-market transaction of 503,614 shares traded at $5.10.

More money leaving SUM and going to Oceania perhaps....hmmm

[couta1]

Notice decent pre-market transaction of 503,614 shares traded at $5.10.

More money leaving SUM and going to Oceania perhaps....hmmm Not guilty, couldn't buy that many without a margin account.:D PS-Hey Roger, that patient person got their 100k at $5.16. Looks like another good day to buy.

[trader_jackson]

Not guilty, couldn't buy that many without a margin account.:D PS-Hey Roger, that patient person got their 100k at $5.16. Looks like another good day to buy.

Fairly heavy volume for the first half hour... with sells outweighing buys... interesting... down at $5.15 now, lowest in a month I think... you must be going head over heels to buy as many bargain priced shares as possible ;)

[couta1]

down at $5.15 now, lowest in a month I think... you must be going head over heels to buy as many bargain priced shares as possible ;) Yep, buying in small parcels chasing the price down, feels just like when I chased the Air price down from $2.85 to obtain a $2.22 average .Be Greedy when others are Fearful.

[777]

Notice decent pre-market transaction of 503,614 shares traded at $5.10.

More money leaving SUM and going to Oceania perhaps....hmmm

There is also a big sell down in LPT 's this morning so possibly an institution adjusting their portfolio.

[trader_jackson]

Yep, buying in small parcels chasing the price down, feels just like when I chased the Air price down from $2.85 to obtain a $2.22 average .Be Greedy when others are Fearful.

Man the brokers must be loving you!
Not everyone has had so much success catching a falling nife

[Ggcc]

Bought the falling knife, but for a long term hold 😊

[macduffy]

Not quite a falling knife in my book, rather, someone's just waving it round a bit!

If my allocation of Oceania doesn't look like performing on Friday I might switch the funds into more SUM.

:)