SUM - Summerset Group

[BlackPeter]

Just while we are talking it appears SUM slipped below the 685 support level. Currently trading for 675. Next stop could be around 630;

I am sure there will be a good time again to BUY them ;):

[Beagle]

They built ~ 450 units in 2017 and are on track to build the same number again in 2018. As we all know, the same build rate doesn't really cut the mustard in this game and the company has a track record of increasing its build rate either every year or every second year, which is great provided the market is there for the extra units. By my reckoning then seeing as there was no build rate uplift this year we are due for one to be announced for FY19, probably with the annual result announcement in February 2019. If I recall correctly Julian Cook mentioned at the February 2018 results presentation that they're looking to expand their build rate to ~ 600 units per annum over the next 2-3 years. If they can't sell 450 units per annum how are they going to sell 600 units per annum ? Is the market really going to grow to this extent over the next couple of years or is it getting somewhere near saturation already ? Thoughts ?

That said this correction has been pretty swift...maybe once we're back to the half price reversion Couta1 theory to half RYM at ~ $6 this will be great buying again.

[macduffy]

If the much talked about grey tsunami is still building then this "pause" is really only that. Nothing - or at least not much - increases in a straight line! SUM may not be a great stock to trade but as a long term hold it's still one of my favourites.

[Maverick]

If the much talked about grey tsunami is still building then this "pause" is really only that. Nothing - or at least not much - increases in a straight line! SUM may not be a great stock to trade but as a long term hold it's still one of my favourites.

The total pipeline of units is 9161. When divided by the extra number of units required each year (1800 and increasing to 2200 by year 2023) means there is enough pipeline supply to meet demand for about 5 years. That does not allow for any of the expected increased penetration over that time (Penetration is the ratio of 75 year olds opting to go to a village - currently 12.4 %).
It seems supply and demand is well balanced for the next five years. Beyond the 5 years demand increases further. No doubt more paddocks will be bought in the mean time.

Ryman produced 458 extra units last year which was their lowest new build rate since 2014 (in 2017 they produced 600), and yet despite that, they produced yet another record profit. So I don't subscribe to the idea that companies must be building ever more units to grow profits. (FYI, RYM have sold pretty well everything they built each year including 2018, unlike SUM which now seem to have 200 unsold units.

So my conclusion is that unit production is not overdone.There is plenty of forward looking aging/demographic statistics for everyone to smoothly adjust the "pipeline tap" as required.

SUM may well have empty units for now but I am not concerned. In fact I applaud them for pushing forward in anticipation what WILL be needed and fighting for more market share.

Disc holding SUM and a truck load of OCA

[Ggcc]

Well whatever has been explained, the price keeps dropping and who knows where it will end......... I still think the company will better their underlining profit from last year, otherwise we should have heard about that by now. Well at least one would think so. Luckily I don’t need the money right now, as I don’t want to sell now, when tomorrow it will fly back up if I sell.......

[Beagle]

The total pipeline of units is 9161. When divided by the extra number of units required each year (1800 and increasing to 2200 by year 2023) means there is enough pipeline supply to meet demand for about 5 years. That does not allow for any of the expected increased penetration over that time (Penetration is the ratio of 75 year olds opting to go to a village - currently 12.4 %).
I personally do not see an oversupply of units now or over the next five years.

Ryman produced 458 extra units last year which was their lowest new build rate since 2014 (2017 they produced 600), and yet despite that, they produced another record profit. So I don't subscribe to the idea that companies must be building ever more units to grow profits. (FYI RYM have sold pretty well everything they built each year including 2018, unlike SUM which now seem to have 200 unsold units.

So my conclusion is that unit production is not overdone.There is plenty of forward aging/ demographic statistics for everyone to adjust the "pipeline tap" as required.

SUM may well have empty units for now but I am not concerned. In fact I applaud them for pushing forward by anticipating what WILL be needed and fighting for more market share.

Good rebuttal. Holding costs are cheap,$125m recently borrowed at 4.2% locked in for 7 years, only just over $5m per annum to hold about 200 extra units assuming an average cost of $600K each. Directors were confident at the annual meeting that they would sell all units built and didn't seem concerned. If they can get an extra 5% development margin on 200 units with an average sale price of say $800K that's an extra $8m in development profit so provided they aren't holding those units more than 18 months the strategy they're employing could make common sense.

Fundamental's are getting more and more compelling by the day but TA looks like a real worry and it appears its now broken down through the 200 day MA.

[winner69]

Julian has sort of said 450 new sales this year ...wouldn't keep harping on about delivering 450 new units and how sales are aligned to deliveries

Add say 320 resales and expect underlying proft to be in excess of $115m


That's about 51 cents a share ....so at 660 on a PE of about 13


Getting close to OCA multiples .....maybe the market is finally coming to terms that retirement companies should only trade at about these multiples.....meaning both OCA and SUM are about fairly valued right now ....and ARV is catchoing up


RYM reigns supreme as on of the global leaders and valued differently because of that

And of course if the big crash does come expect further contraction in multiples

[Beagle]

Look for Julian to issue underlying FY18 profit guidance in November / December of about $100m and reaffirm they are on track to "deliver" 450 units. Remember that deliver is industry speak for completion of the unit, not delivery to new customers who have bought them. My expectation is they will struggle to get more than 400 confirmed sales this year and the unsold stockpile of units will increase further.

I'm expecting about 45 cps underlying earnings now, (anecdotal gossip of some discounting to get sales done will in my opinion trim their 2H development margin a little).

At $6.60 I have them on a forward PE of about 14.7. I have OCA on a forward PE of 10-11. Remembering that SUM deal predominantly in independent living units where people make lifestyle choices when they've sold their homes (average entry age about 80) and OCA is more needs based and average entry age is older and average unit price is cheaper I continue to believe RYM and SUM are more vulnerable to a real estate market downturn and OCA is more defensive and on considerably better metrics.

Looking at the TA, SUM now broken through 200 day MA and looking very sick. RYM very close to breaking down through 200 day MA. OCA still in a nice uptrend.
SUM fair value and RYM still overpriced in my opinion even after the recent decline from $14.00 to $11.79.
I wouldn't touch MET with all their old units and imbedded problems therein. That's how I see it. Continue holding stocks in an uptrend (OCA the only one of the 4 retirement stocks I follow). I suspect SUM and RYM will probably inflict more pain on holders in the near term before eventually resuming their long term uptrend again.

Disc: I only own OCA in this sector at present.

[Lewylewylewy]

Does anyone know if there's still a waiting list on SUM villages?

[RupertBear]

Look for Julian to issue underlying FY18 profit guidance in November / December of about $100m and reaffirm they are on track to "deliver" 450 units. Remember that deliver is industry speak for completion of the unit, not delivery to new customers who have bought them. My expectation is they will struggle to get more than 400 confirmed sales this year and the unsold stockpile of units will increase further.

I'm expecting about 45 cps underlying earnings now, (anecdotal gossip of some discounting to get sales done will in my opinion trim their 2H development margin a little).

At $6.60 I have them on a forward PE of about 14.7. I have OCA on a forward PE of 10-11. Remembering that SUM deal predominantly in independent living units where people make lifestyle choices when they've sold their homes (average entry age about 80) and OCA is more needs based and average entry age is older and average unit price is cheaper I continue to believe RYM and SUM are more vulnerable to a real estate market downturn and OCA is more defensive and on considerably better metrics.

Looking at the TA, SUM now broken through 200 day MA and looking very sick. RYM very close to breaking down through 200 day MA. OCA still in a nice uptrend.
SUM fair value and RYM still overpriced in my opinion even after the recent decline from $14.00 to $11.79.
I wouldn't touch MET with all their old units and imbedded problems therein. That's how I see it. Continue holding stocks in an uptrend (OCA the only one of the 4 retirement stocks I follow). I suspect SUM and RYM will probably inflict more pain on holders in the near term before eventually resuming their long term uptrend again.

Disc: I only own OCA in this sector at present.

I was thinking OCA was actually starting to trend down Mr Beagle :mellow:

[Beagle]

I was thinking OCA was actually starting to trend down Mr Beagle :mellow:
Depends which yardstick you use mate. Still trading above its 100 day MA which is my "go too" TA indicator but yes its broken down through the 30 day MA. Not many stocks have been immune to the recent sharemarket correction and with the NZX50 down ~ 8% from its recent high some degree of collateral damage has to be expected.

LLL - Yes there are waiting lists at some of SUM's villages and other villages the sales staff are struggling. Most people want to retire pretty close to where they used to live so the vacancy rate at some villages and long waiting lists at others is pretty ironic for shareholders and the people concerned.

[Lewylewylewy]

Well, i finally sold out. Terrible. I was thinking to get out when beagle jumped out, but decided to ride it out.

I finally made the move because the property market may have stalled, which was my original reason for the investment (property hedge attitude selling up my rentals). Makes little sense to hold with all that's possibly going on.

Might sit with a bit more cash for a while. There's only 1 stock that interests me as a long term hold currently, but even that one is not a great buy right now because there's some solution coming up.

[Lewylewylewy]

I do have concerns that what was previously an advantage for SUM is now a disadvantage, which is the in-house property development team as a fixed cost in a falling (static) market with an oversupply of unsold units.

Also, if sales are represented in underlying earnings (?), what will it look like if sales drop off?

[couta1]

I do have concerns that what was previously an advantage for SUM is now a disadvantage, which is the in-house property development team as a fixed cost in a falling (static) market with an oversupply of unsold units.

Also, if sales are represented in underlying earnings (?), what will it look like if sales drop off? And the question to ask is will the % of the grey tsunami going into the Care centre side of the village increase going forward, the answer is yes,so you could have more regular occurences of a build up of unsold stock.

[oldtech]

I have sold about 60% of my holding - decided to keep some because previous times when I've sold the SP has normally shot up! :)

But unfortunately my daughter's portfolio is well and truly in the red with this one, so have very little choice there but to ride it out.

[Lewylewylewy]

Tough position. Even as a long term dividend growth, it's a poor hold without the fancy big growth years.

I too, kept a small holding, just for kicks.

[Beagle]

I do have concerns that what was previously an advantage for SUM is now a disadvantage, which is the in-house property development team as a fixed cost in a falling (static) market with an oversupply of unsold units.

Also, if sales are represented in underlying earnings (?), what will it look like if sales drop off?

This is where on my understanding of the matter underlying earnings gets a little bit into murky waters....actually almost creative accounting if they're carrying a lot of stock that subsequently might need to be discounted below independent valuation in some sort of clearance sale. What they do with their development book is book a development profit for all units "developed" or in their terminology "delivered" during the year regardless of whether they're sold or not. The book entry of development profit "realised" is the difference between the cost price of construction and independent valuation at year end (for those units unsold) and the difference to sale price for the sold units. If the market starts to fall however, so called previously "realized" development profit from unsold units can be reversed to a certain extent. The Auckland market is flatter than the Canterbury plains at present. The foreign buyer ban which came into effect on Monday this week in tandem with the lower immigration recently announced could easily tip the scales downward. The board needs to urgently change its policy to fixed weekly fees for life and initiate some other sales strategies, like discounting weekly fees to those who sign up off the plans like Ryman do.
A disappointing Q4 sales number in my opinion could see a 5 handle notwithstanding the recent fall.

[winner69]

This is where on my understanding of the matter underlying earnings gets a little bit into murky waters....actually almost creative accounting if they're carrying a lot of stock that subsequently might need to be discounted below independent valuation in some sort of clearance sale. What they do with their development book is book a development profit for all units "developed" or in their terminology "delivered" during the year regardless of whether they're sold or not. The book entry of development profit "realised" is the difference between the cost price of construction and independent valuation at year end (for those units unsold) and the difference to sale price for the sold units. If the market starts to fall however, so called previously "realized" development profit from unsold units can be reversed to a certain extent. The Auckland market is flatter than the Canterbury plains at present. The foreign buyer ban which came into effect on Monday this week in tandem with the lower immigration recently announced could easily tip the scales downward. The board needs to urgently change its policy to fixed weekly fees for life and initiate some other sales strategies, like discounting weekly fees to those who sign up off the plans like Ryman do.
A disappointing Q4 sales number in my opinion could see a 5 handle notwithstanding the recent fall.

All very complicated eh .....and as you say a bit murky ...but remember the Summerset finance team win awards so you can trust them to do the right thing.

There’s one part of Oceania reporting I can’t really grasp ....it looks like the % difference between independent valuations and they sell for is applied across the whole portfolio (unsold ones)

Never mind

[Lewylewylewy]

Sometimes i like to look at sum as a property investment.

If sum are building units, selling, and slowly growing underlying earnings (in line with the build rate), im happy because they're building operation is increasing the nta and therefore value. The underlying profit growth can be unextraordinary and i wouldnt mind so long as there's nothing fishy going on to cause that like troughing or an unprofitable business model.

In that case, it's a property play with a nice little return from the business (which could be regarded as the perfect tenant). I also like the idea of owning a bunch of new brick houses.

Of course, with the potentially lower growth rate from lower sales, drop in property market (lower nta), and higher costs from building and not selling, the PE must surely contract.

Maybe I'll buy in one the PE is more favorable. Or maybe I'll wait until the property market looks like it could pick up again, or once global events cool off.

[winner69]

All very complicated eh .....and as you say a bit murky ...but remember the Summerset finance team win awards so you can trust them to do the right thing.

There’s one part of Oceania reporting I can’t really grasp ....it looks like the % difference between independent valuations and they sell for is applied across the whole portfolio (unsold ones)

Never mind

Beagle .....all what you said one or several reasons why real NPAT is better guide than this underlying profit thing .....and as such the increase in book value.

[Snow Leopard]

This is where on my understanding of the matter underlying earnings gets a little bit into murky waters....actually almost creative accounting if they're carrying a lot of stock that subsequently might need to be discounted below independent valuation in some sort of clearance sale. What they do with their development book is book a development profit for all units "developed" or in their terminology "delivered" during the year regardless of whether they're sold or not. The book entry of development profit "realised" is the difference between the cost price of construction and independent valuation at year end (for those units unsold) and the difference to sale price for the sold units. If the market starts to fall however, so called previously "realized" development profit from unsold units can be reversed to a certain extent....

I believe your understanding, if I am interpreting what you wrote correctly, is wrong here Beags.

The component of Underlying Profit related to new units is definitely only for new units sold.

A read of the FY17 results presentation will make this clear to you.

[Beagle]

I believe your understanding, if I am interpreting what you wrote correctly, is wrong here Beags.

The component of Underlying Profit related to new units is definitely only for new units sold.

A read of the FY17 results presentation will make this clear to you.

Happy to have another look at it when I get some spare time Snowy. Big volume today suggests someone sees value at this level. I know the generally pretty well regarded Harbour have them in their Australasian portfolio, (mind you they also have FBU in there too)

[Entrep]

No need to try and catch the bottom of this one. I think you will have plenty of time to get in once things turn.

[silu]

That's a vote of confidence. Dr Bismark buys 7,200 share on market @ $6.83

[Timesurfer]

I see Generate remain upbeat about SUM shares.


The weakest performing property and infrastructure holding was Summerset with a fall of -14.7%. While this is disappointing, even after this significant pullback Summerset was still up 23.4% for the calendar year to date making it the strongest performing Property and Infrastructure holding in 2018.

[winner69]

I see Generate remain upbeat about SUM shares.

Nice to see that they recognise Summerset for what it effectively is — a “Property and Infrastructure” company ....none of this healthcare / retirement sector stuff

[Timesurfer]

Nice to see that they recognise Summerset for what it effectively is — a “Property and Infrastructure” company ....none of this healthcare / retirement sector stuff

Indeed. Just as selling Big Macs is a front for buying up realestate.

[Beagle]

Ouch, just noticed the chart of SUM and it looks a bit like a head and shoulders with the formation of the right shoulder just completed. Some people reckon there's about a 90% probability these head and shoulders play themselves right out which would see SUM headed all the way back to $5.00 :eek2:

[Ggcc]

Ouch, just noticed the chart of SUM and it looks a bit like a head and shoulders with the formation of the right shoulder just completed. Some people reckon there's about a 90% probability these head and shoulders play themselves right out which would see SUM headed all the way back to $5.00 :eek2:
I was just thinking the share price was heading into cheap territory...... I still have a few thousand shares and will remain holding them as this sector will always remain doing well over the next ten years at least. Of course the “cheap territory” depends on their profit guidelines which hopefully be announced near Christmas.

[minimoke]

Stop loss at $6.40 on that one just hit as well. That's OK, I'll take my 35% profit and sit on the side lines for a while

[oldtech]

50-day EMA in the process of crossing the 200-day EMA ... will it bounce or will it plummet? Only time will tell ...

RYM is heading in that direction also but has some breathing space at the moment.

[BlackPeter]

Useful reminder ...

I do like SUM and used to hold for some time. Sold however out while the SP dropped from the MA100 to under MA200. While I kept them previously during their below MA200 phases, I think this time the risk is too high that they disappoint the market with their next sales numbers. Their last quarter would need to be outrageously good to make the promised 450 ... and while it would be nice, I am not sure this is the time for outrageously good results.

Pretty sure I will be back early next year - unless we enter a confirmed bear market (some people say it arrived already :eek2:) and stay there ... in that case it might take a bit longer ;);

[Brain]

[QUOTE=oldtech;738812]50-day EMA in the process of crossing the 200-day EMA ... will it bounce or will it plummet? Only time will tell ...


Or will it go sideways for a bit, go up and down for a while or slowly increase or decrease over time. Probably these crossings don’t really mean anything apart from flushing out some buyers and sellers that think the crossings are significant.

[BlackPeter]

[QUOTE=oldtech;738812]50-day EMA in the process of crossing the 200-day EMA ... will it bounce or will it plummet? Only time will tell ...


Or will it go sideways for a bit, go up and down for a while or slowly increase or decrease over time. Probably these crossings don’t really mean anything apart from flushing out some buyers and sellers that think the crossings are significant.

Its all about market psychology. As long as there are enough people who think these crossings are significant, they are.

[Beagle]

Summerset having an open day at all its Auckland villages this weekend. Trying to drum up SUM business for inclusion in Q4 sales.

[winner69]

Summerset having an open day at all its Auckland villages this weekend. Trying to drum up SUM business for inclusion in Q4 sales.

Hope they don’t discount and hurt margins

[Onion]

Stop loss at $6.40 on that one just hit as well. That's OK, I'll take my 35% profit and sit on the side lines for a while

But what do you do with the cash in the meantime? There are lots of shares in good companies going cheap compared to a couple of months ago.

Maybe SUM at $6.40 :).

[BlackPeter]

Summerset having an open day at all its Auckland villages this weekend. Trying to drum up SUM business for inclusion in Q4 sales.

Good on them. Doubt however that people who go the coming weekend on an open day and like what they see will manage to close the deal prior to Christmas - even if they (and the seller) are really keen; I hear it takes 3 to 4 weeks even if you have the money at hand, just to do all the legal stuff. Never mind first having to sell your house. This open day is clearly made to boost the Q1 and Q2 sales next year ...

[minimoke]

But what do you do with the cash in the meantime? There are lots of shares in good companies going cheap compared to a couple of months ago.

Maybe SUM at $6.40 :).SUM last sale as $3.29. I put sum cash into OCA and sum into RBC with left overs still waiting for a home.

[Bjauck]

Hope they don’t discount and hurt margins If surrounding properties have been dropping value (which could be happening in Auckland now) then discounting units,if there are quite a few empty ones, may be a good idea. There would probably still be decent margin at this stage.

[Beagle]

Good on them. Doubt however that people who go the coming weekend on an open day and like what they see will manage to close the deal prior to Christmas - even if they (and the seller) are really keen; I hear it takes 3 to 4 weeks even if you have the money at hand, just to do all the legal stuff. Never mind first having to sell your house. This open day is clearly made to boost the Q1 and Q2 sales next year ...

Fair comment. Pipeline is usually 3-4 months. Villages look nice in spring with gardens in full bloom. Just good marketing eh. No worries...Q4 sales are going to be humongous !

[Beagle]

Julian Cook might update the market with a FY18 profit forecast this week like he did about the same time last year. Shareholders should strap themselves in for a bumpy ride and have their sick bag at the ready as feedback I have been hearing is that Auckland real estate has been very slow and soft selling in recent months so I would expect that the gangbusters sales result that's needed for Q4 to make the years result good won't be as robust as needed.

[oldtech]

Julian Cook might update the market with a FY18 profit forecast this week like he did about the same time last year. Shareholders should strap themselves in for a bumpy ride and have their sick bag at the ready as feedback I have been hearing is that Auckland real estate has been very slow and soft selling in recent months so I would expect that the gangbusters sales result that's needed for Q4 to make the years result good won't be as robust as needed.

... gulp ...

Thanks for the heads-up Beagle ... I think. Will stock up on paper bags this arvo.

[artemis]

November Auckland for sale listings on Trademe up 9% on previous November. As of today there are over 12,000 Auckland listings there so 9% is a significant number. I doubt that the number of buyers, deposit and serviceability sorted, has suddenly increased anything like that much. Also expect there are fewer investors buying atm while waiting to see what additional costs and rules this government has coming.

So yes, sales will slow though how much that will impact retirement village sales who knows. Until numbers emerge.

[Ggcc]

It looks like this stock is the only retirement stock going up today. The rest have either stayed level or are on their way down......... I hope I have not jinxed it.

[Beagle]

Last year they released upgraded profit guidance on 19 December. If nothing is released this week I would see that as concerning if I was a shareholder.

[minimoke]

It looks like this stock is the only retirement stock going up today. The rest have either stayed level or are on their way down......... I hope I have not jinxed it.????? Todays high has been $6.10 which is down 5 cents

[peat]

Last year they released upgraded profit guidance on 19 December. If nothing is released this week I would see that as concerning if I was a shareholder.

I'm convinced you want to buy back in Beagle!

[Beagle]

I convinced you want to buy back in Beagle!

All my sources suggest real estate in Auckland has been very, very hard sell this quarter and its the big Auckland developments at Ellerslie and Hobsonville they're looking to sell down. I read into the fact that they have not provided a forecast as things are pretty tough for them. OCA on considerably better metrics and are more needs based (defensive) as opposed to most entrants to a SUM village being an optional lifestyle choice based on the proviso they can sell their home for what they want.

Selling out completely at very close to the $8 top was one of my best decisions of 2018.
Could be headed back to $5 in 2019 and will run the ruler over it again if it does.

[winner69]

All my sources suggest real estate in Auckland has been very, very hard sell this quarter .....

.

But Barfoot and Thompson said recently “Strong performance from Auckland housing market as it heads into the year end".

They seem pretty happy

Good on you for getting out at 8 bucks odd ....needs to go up 30% from current price to get back to 8 bucks (maybe it never will)

[BlackPeter]

Good on you for getting out at 8 bucks odd ....needs to go up 30% from current price to get back to 8 bucks (maybe it never will)

Come on - already in the despair phase?

I am sure they will get back to that price and higher ... but it might take a handful of years until the bear is over and property booming again ....

[winner69]

A reminder

Humongous sales number announced next week

Might even give some earnings guidance ....underlying earnings $100m plus

Recovery in share price likely

[BlackPeter]

A reminder

Homongous sales number announced next week

Might even give some earnings guidance ....underlying earnings $100m plus

Recovery in share price likely

No doubt the data will be released ... but are you sure about the share price recovery?

Pretty sure they would need some very creative accounting to satisfy the 2018 forecasts ...

[couta1]

A reminder

Humongous sales number announced next week

Might even give some earnings guidance ....underlying earnings $100m plus

Recovery in share price likely Yeah right, Q4 sales disappoint equals SP thumping.

[Ggcc]

I am not one to follow what MarketScreener values a company at, but current average valuations of Summerset are $7.76 in comparison to Ryman which are valued at $10.80 and Oceania at $1.19. Both Summerset and Oceania are fairly valued at this point and I find Summerset's drop is mainly due to pre Bear Market trends which could continue. If this bear market does take hold, I feel Summerset and Ryman will take the biggest hits. I must admit, I feel this is a correction and not a Bear Market (but don't quote me and I could be wrong). I think the price has been already built in for Summerset on slower sales and we might see a further drop only if the Bear Market is upon us.

[Beagle]

I'm convinced you want to buy back in Beagle!

No this is off my radar now. I am convinced the bear is here and OCA is the most defensive choice in this sector.

[couta1]

No this is off my radar now. I am convinced the bear is here and OCA is the most defensive choice in this sector. Yep and the Couta ratio theorum says SUM only worth $5.90 based on the figures given in the above post not $7.76.Lol

[Beagle]

Yep and the Couta ratio theorum says SUM only worth $5.90 based on the figures given in the above post not $7.76.Lol

The extremely well respected and legendary Couta1 reversion theory says 5:1 OCA v SUM, so SUM is only worth $5.30 but I would not be a buyer at that price because most purchases of SUM units are discretionary lifestyle choices made only if and when people can sell their homes for what they want for them.

[limmy]

Picked up some this morning at $6.11.
I'm investing in the long term as I normally do.
I consider it to be a good buy, with PE at only 6.37 and Div yield of 2.14%

[couta1]

The extremely well respected and legendary Couta1 reversion theory says 5:1 OCA v SUM, so SUM is only worth $5.30 but I would not be a buyer at that price because most purchases of SUM units are discretionary lifestyle choices made only if and when people can sell their homes for what they want for them. Yes which highlights how undervalued OCA is compared to the current SUM price, OCA should be $1.22 which we know is about right but the market needs more wake up time.Lol

[winner69]

The extremely well respected and legendary Couta1 reversion theory says 5:1 OCA v SUM, so SUM is only worth $5.30 but I would not be a buyer at that price because most purchases of SUM units are discretionary lifestyle choices made only if and when people can sell their homes for what they want for them.

The theorem re OCA v SUM hasn’t been tested over a long enough period to be ‘proved’ yet

Way it’s going likely the ratio will end up like 6 (or even more) OCA for 1 SUM (but a 10:5:1 split looks sexier)

[Beagle]

Shareholders will be anxiously awaiting Q4 sales numbers. Astute observers will have noticed that cash flow growth has been a LOT slower than underlying profit growth in the last 2 years. They've got away with that so far by issuing a lot of cheap debt but that can't go on forever.
I remain of the view that its a BIG mistake not to have fixed weekly fees for life when almost every other company in this sector does.

[Ggcc]

Shareholders will be anxiously awaiting Q4 sales numbers. Astute observers will have noticed that cash flow growth has been a LOT slower than underlying profit growth in the last 2 years. They've got away with that so far by issuing a lot of cheap debt but that can't go on forever.
I remain of the view that its a BIG mistake not to have fixed weekly fees for life when almost every other company in this sector does.
You may be correct with this and I value your input with these companies, as well as Couta with insider knowledge. On that note I have done a guess as to what the sales figures will look like. I am guessing at 135 new sales and about 102 resales. This brings a Total of around 237 sales, plus the 447 already sold and a Total for 684 for the year. I am hoping for more new sales, but I am trying to be realistic..... DYOR and I would love to hear other guesses.

[Beagle]

I'm too scared to guess mate because on the balance of probabilities one looks like an idiot within a very short time frame lol

[Maverick]

You may be correct with this and I value your input with these companies, as well as Couta with insider knowledge. On that note I have done a guess as to what the sales figures will look like. I am guessing at 135 new sales and about 102 resales. This brings a Total of around 237 sales, plus the 447 already sold and a Total for 684 for the year. I am hoping for more new sales, but I am trying to be realistic..... DYOR and I would love to hear other guesses.
I`m up for it. After looking back the last 4 years of performance and mixing in a flat property market here are my (fairly conservative) estimates;
new sales for the quarter -85
resales for the quarter -75
I also predict they will make c. 100 m FY 2018 = 45 cps @ average PE of 16.3 = share price of $7.33
I think think the general investors withdrawal of retirement stocks is overdone. Time is linear and there are plenty of , every increasing -old stubborn , intolerant rich guys who will fill our offerings- where else will they live - with their kids?.
The retirement village juggernaut is not over for a very long time.
I will mostly be using the result tomorrow as a bell weather for OCA. After all you just can't have too many of them.
(disc - have 15% sum)

[winner69]

Hey Maverick that 45 cents eps you came up with is about as the same as beagle came up with for Ryman

Share prices a bit different eh ....it’s not fair.

[Beagle]

I'd be surprised if they made an underlying profit of $100m. If they were confident of a strong profit increase over FY17 I think its almost certain we would have seen a forecast to that effect in late December 2018, like we did the previous year. The fact that we didn't speaks for itself and probably carries far more weight than anything else.

Auckland market really tanked in the last quarter of 2018. I think that's just getting started and there's a fair chance we'll follow Sydney down (which has fallen 9% in the last year) so I see price pressure on new units and resales. On the other side of the coin there is no let-up in the rate of construction cost inflation with Auckland the worst market by a long way. I foresee compressed development margins going forward, the beginning of which might be starting to make itself evident in 2H FY18.

SUM's business model is still primarily independent living which relies on discretionary lifestyle based decisions to buy which are contingent on new entrants selling their homes for what they want.
OCA's business model is primarily needs based late stage care which is reliant on motivated vendors meeting a need and selling their homes for whatever they can get.
Highly motivated and realistic vendors are the ones actually selling their houses in the current Auckland market from what I hear....whereas on the other hand there's a lot of dreamers wishing the good days would return.

Some may want to have a somewhat diversified exposure to this sector but I don't see the need and the forward metrics, business model and defensive properties of OCA make for a far more compelling investment proposition in my opinion. I think the demand-supply characteristics of the market in terms of what OCA are offering and SUM are, are more in favour of OCA going forward.

[Maverick]

I'd be surprised if they made an underlying profit of $100m. If they were confident of a strong profit increase over FY17 I think its almost certain we would have seen a forecast to that effect in late December 2018, like we did the previous year. The fact that we didn't speaks for itself and probably carries far more weight than anything else.

Yes , totally agree on this Beagle. Historically they have upgraded their guidance between October and December each and every year except this one. Certainly raised a BIG flag as you have pointed out.

However, even despite this , until I see the actual underlying profit result next month I find it hard to accept that their business model has suddenly slowed so rapidly from years of gangbuster growth. Just because of Auckland property flattening?

As you know my perspective is from Wanganui, a town with no property growth (until the last few years because you Aucklanders have seen the light and are moving down). So, from my perspective ,the fact Auckland property growth has ceased does not in itself mean disaster for the underlying business of retirement villages. Life can actually function well without house growth. So I just don't see why the SUM train should suddenly stop. (but all will be revealed one way or another)

Of course I totally agree with you OCA comments but Kelly McGuinness insists I hold something else other than OCA. Happy wife , happy life.

[BlackPeter]

However, even despite this , until I see the actual underlying profit result next month I find it hard to accept that their business model has suddenly slowed so rapidly from years of gangbuster growth. Just because of Auckland property flattening?


Actually - the running 12 month total of their sales numbers peaked in Q4 2017 (total of 682 unit sales in a 12 month window). This number is flatlining since the Q4 2017 peak in the 650'ies and the new sales (12 month window) to Q3 have been only 333.

They would need an outrageously good Q4 2018 to fullfill the markets sales expectations for 2018 ... and how likely is that given the recent development of the Auckland housing market? I guess I know, they only forecasted to "deliver" another 450 new units - but even if they do, what good is it if they can't sell them? There still must be some empty new units around they delivered in 2016 ... ?

Question is - is the market disappointment already priced in or will the SP further drop? While I don't know whether we can buy after the announcement cheap SUM shares, in my view they will be cheaper than now.

[Beagle]

Actually - the running 12 month total of their sales numbers peaked in Q4 2017 (total of 682 unit sales in a 12 month window). This number is flatlining since the Q4 2017 peak in the 650'ies and the new sales (12 month window) to Q3 have been only 333.

They would need an outrageously good Q4 2018 to fullfill the markets sales expectations for 2018 ... and how likely is that given the recent development of the Auckland housing market? I guess I know, they only forecasted to "deliver" another 450 new units - but even if they do, what good is it if they can't sell them? There still must be some empty new units around they delivered in 2016 ... ?

Question is - is the market disappointment already priced in or will the SP further drop? While I don't know whether we can buy after the announcement cheap SUM shares, in my view they will be cheaper than now.

Very unlikely. New sales have disappointed for 6 quarters now...more than enough for any seasoned investor to ask, is this a trend ?
Why are people apparently shying away from buying a SUM unit ? That is the $64m question !
SUM directors were very confident at the last annual meeting there was no issue with their increased inventory level's and made reference to historical inventory norms when SUM were listed. They were confident they would sell them and they talked about how with multi level developments it was harder to sell until the whole block was completed as nobody is especially keen on living in a construction zone.

Their narrative with the Q4 sales result is something I will find incredibly interesting as well as the result itself. I don't want to be a prophet of doom but the warning signs with new sales over the last 6 quarters are hard to ignore. Maybe they will have an absolute "blinder" of a quarter and everything is fine but they would have had a very good idea what the Q4 sales result was likely to be in late December and yet chose not to give any profit guidance for FY18, unlike both previous years...that's got to be a worry and I would be fretting if I was a shareholder.

[Maverick]

Very unlikely. New sales have disappointed for 6 quarters now...more than enough for any seasoned investor to ask, is this a trend ?
.......yet chose not to give any profit guidance for FY18, unlike both previous years...that's got to be a worry and I would be fretting if I was a shareholder.

Do you recon that the fact they haven't upgraded their forecast this year is because they are only obliged to notify the NZSX of upgrades using their NPAT result rather than the underlying profit figures? (which is the number we tend to be concerned with in this forum.)
I can fully understand their NPAT not increasing much, which would not be a concern to me.
Maybe tomorrow the great mystery will be revealed?

[Beagle]

I see where you are coming from mate but I don't think that has anything to do with it. Fact is to the best of my recollection they have not at any stage in 2018 had an official 2018 profit forecast in the market for the year so their requirement to update doesn't apply. I hope the fact that they didn't issue one isn't as worrisome as it appears at face value. Maybe they're just being conservative this year and will surprise everyone ?

[winner69]

5
Do you recon that the fact they haven't upgraded their forecast this year is because they are only obliged to notify the NZSX of upgrades using their NPAT result rather than the underlying profit figures? (which is the number we tend to be concerned with in this forum.)
I can fully understand their NPAT not increasing much, which would not be a concern to me.
Maybe tomorrow the great mystery will be revealed?

When SUM do issue guidances it is for underlying profit (with a note that NPAT is more difficult to forecast etc etc). They did provide a H1 guidance last year.

If they do 700 sales in total I reckon underlying profit will be over $100m plus ...plenty of past years gains to be realised.

[Maverick]

Thanks Winner. I reckon the market is in for a pleasant surprise on this one. I know that's against the superior wisdom on this forum but I just can't see it going off the rails this fast in such a target rich environment backed up with great history

[winner69]

Thanks Winner. I reckon the market is in for a pleasant surprise on this one. I know that's against the superior wisdom on this forum but I just can't see it going off the rails this fast in such a target rich environment backed up with great history

Agree ....$100m plus underlying profit on the cards. Not too bad compared to last years $82m

[Beagle]

Thanks Winner. I reckon the market is in for a pleasant surprise on this one. I know that's against the superior wisdom on this forum but I just can't see it going off the rails this fast in such a target rich environment backed up with great history

Okay, I'll play "Goose". Hope its $110m+ as that'll light the afterburner on OCA :)

[artemis]

Summerset #5 on the top 200 residential builders list. All the listed retirement village companies are high on the list. SUM not far behind #1 Ryman with similar number and value of projects.

Interesting to see the average value of projects. Some are obviously apartment blocks.

www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12175472

[Maverick]

Okay, I'll play "Goose". Hope its $110m+ as that'll light the afterburner on OCA :)
...ohhhh ... do behave

[winner69]

Okay, I'll play "Goose". Hope its $110m+ as that'll light the afterburner on OCA :)

Conversely if it’s a ‘shocker’ and only $90m odd there is bound to be an ‘aftershock’ with the OCA share price tumbling under the buck mark

[Beagle]

Conversely if it’s a ‘shocker’ and only $90m odd there is bound to be an ‘aftershock’ with the OCA share price tumbling under the buck mark

Different business model's mate. Very different.

[winner69]

Different business model's mate. Very different.

But the market doesn’t understand that ....Oceania seen just another sector player and share price goes with the ebb and flow of the whole sector,

A bit like Heartland share price being tainted by Aussie banks.

[Beagle]

But the market doesn’t understand that ....Oceania seen just another sector player and share price goes with the ebb and flow of the whole sector,

A bit like Heartland share price being tainted by Aussie banks.

Yes...Its an interesting situation. On one hand the market appears fully cognisant of the fact that ARV's care based model is very different (SP barely affected by the recent sector weakness) but at this stage despite OCA's model being most closely aligned with ARV the market doesn't appear to in any way want to acknowledge OCA's defensive healthcare business model as being materially different to MET, RYM or SUM.

I find this more than a little curious ?...any thoughts anyone ?

[peat]

Yes...Its an interesting situation. On one hand the market appears fully cognisant of the fact that ARV's care based model is very different (SP barely affected by the recent sector weakness) but at this stage despite OCA's model being most closely aligned with ARV the market doesn't appear to in any way want to acknowledge OCA's defensive healthcare business model as being materially different to MET, RYM or SUM.

I find this more than a little curious ?...any thoughts anyone ?

Is it because their pipeline for growth is actually coming from property development same as MET RYM or SUM and not the care beds side of the business.
in the attached pic the total existing care is 2604 . The number post development is 2917 - a mere 12% increase.
Whereas the independent village units total goes from 1089 to 2225 - more than doubling.

10237

Discl - holding at 4.2% of equity portfolio.

[winner69]

Is it because their pipeline for growth is actually coming from property development same as MET RYM or SUM and not the care beds side of the business.
in the attached pic the total existing care is 2604 . The number post development is 2917 - a mere 12% increase.
Whereas the independent village units total goes from 1089 to 2225 - more than doubling.

10237

Discl - holding at 4.2% of equity portfolio.

As I understand converting care beds to care suites is a good move .....and what will make the Oceania model special.

[Maverick]

Good point Peat.
You have amalgamated the care suites and care bads as if they are the same. As you have correctly said the net total of them now is 2604 and the post development total is 2917.
Breaking down the figures within they are shifting and decommissioning from the less profitable care beds to the very profitable care suites. That's where residents stay for c3.5 years while contributing 30% of the value in fees. (compared to villas contributing 30% of the capital value over c7.5 years) Also the care beds are being overhauled to "premium " beds. again, adding value.

As far as adding 1086 (doubling) villas at the same time , I would expect OCA have worked out the correct ratios that offer the desirable continuum care. Looking at the guys running OCA I have trust they have it worked out well. (but I am only assuming this)10239

Here is a nice graphic from their latest presentation to show the difference between the main players

[winner69]

This continuum of care thing ....does any operator extend their services to the retirement village in the sky?

[percy]

This continuum of care thing ....does any operator extend their services to the retirement village in the sky?

Most probably receiving [undisclosed] referral fees.
Things could change should IVC take a 20% holding.

[Beagle]

Is it because their pipeline for growth is actually coming from property development same as MET RYM or SUM and not the care beds side of the business.
in the attached pic the total existing care is 2604 . The number post development is 2917 - a mere 12% increase.
Whereas the independent village units total goes from 1089 to 2225 - more than doubling.

10237

Discl - holding at 4.2% of equity portfolio.

Business model transformation is a 6 year process (about 5 years to go). Currently fairly defensive but not really recognised by the market which seems a little anomalous so I guess I have to conclude its the Macquarie factor holding them back. Holding 16% portfolio position and looking forward to seeing the back of Macquarie eventually.

[Maverick]

OCA is becoming a virus. Taking over the stock picking competition , now overrunning the SUM thread. You know if we all don't quadruple our dough this year Beagle it will all be your fault.;)

[Baa_Baa]

@Maverick, surprised that chart hasn't been referenced before it's a good one eh. Notwithstanding no qualifier on the chart of when the 'future' is, it shows OCA's divergent business strategy from other providers and confidence in at least maintaining profits from aged care while actually decreasing combined care beds/suites by 14% (and changing the ratio markedly) and ploughing differential into growing independent units.

So that's a big reduction in aged care beds for a big growth in aged care suites and independent units. Remember these are %'s of growing numbers of beds/units. It is quite a contrast from the proven ratios of other very successful listed aged care providers except ARV who seem to have seen the care suites opportunity as well. Assuming their data is correct, its from the public investor information, it will be interesting to see how the OCA strategy plays out and whether or not the other listed companies identify the care suites niche and shift their ratios as well.

[Xerof]

I find this more than a little curious ?...any thoughts anyone ?


I maintain it's a distribution play, as commented upon a few times before. As you say, can't wait for Macca to finish, but given there's still a fair slice of the pie to digest, I'm not holding my breath for the funds to take their foot off their throat, nor am I holding actually, but I will again in due course, of course

JMO

Oops, I am talking OCA on SUM. but then, so is everyone else:D

[winner69]

At least NEW sales in Q4 were higher than pcp. The tide has turned ...the downtrend has finished ...whew.

Delivered 454 new units ,.thats good

Main thing is Julian is pleased - Summerset CEO Julian Cook said he was pleased with sales over the final quarter, and the good levels of sales being achieved across the country. “The fourth quarter of 2018 saw us achieve our highest new sales in the last two years, and was the second highest quarter ever for the Group,” Mr Cook said.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SUM/329279/293472.pdf


http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SUM/329279/293472.pdf

[BlackPeter]

At least NEW sales in Q4 were higher than pcp. The tide has turned ...the downtrend has finished ...whew.

Delivered 454 new units ,.thats good

Main thing is Julian is pleased - Summerset CEO Julian Cook said he was pleased with sales over the final quarter, and the good levels of sales being achieved across the country. “The fourth quarter of 2018 saw us achieve our highest new sales in the last two years, and was the second highest quarter ever for the Group,” Mr Cook said.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SUM/329279/293472.pdf


http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SUM/329279/293472.pdf

Pretty impressive numbers - but still less than last year, where they sold a total of 682 units (382 new and 300 re-sale) vs 640 this year (339 new and 301 re-sale).

Particularly considering that they "deliver" 450 units per year - the number of empty units is clearly increasing ...

[BlackPeter]

Pretty impressive numbers - but still less than last year, where they sold a total of 682 units (382 new and 300 re-sale) vs 640 this year (339 new and 301 re-sale).

Particularly considering that they "deliver" 450 units per year - the number of empty units is clearly increasing ...

and here is the picture:

10247

Not sure which way to flip it to turn it into an uptrend ...

[winner69]

With 40 less sales in 2018 than 2017 (6% less) hard to see them making that $100m Underlying Earnings I hoped for now. I think if it was going to be a boomer result Julian couldn’t have resisted mentioning it.

My guess now - $85m to $90m (v $82m pcp)

No worries though ....heaps of finished units just awaiting the paper work.....isn’t that julia means when he says ‘minimal uncontracted stock available’ ...all sold

F19 the boomer year

[winner69]

and here is the picture:

10247

Not sure which way to flip it to turn it into an uptrend ...

I only said NEW sales (downtrend) had stopped going down

Pretty sad looking lines though in the context of all those deliveries.

[winner69]

More units occupied than a year ago but resales own

People not leaving fast enough these days

[777]

More units occupied than a year ago but resales own

People not leaving fast enough these days

Must be global warming. It is the cause of everything supposedly.

Whoops, I mean climate change.

[winner69]

SUM sales still looking pretty good (since being listed)


BP . up trend still in place

[Beagle]

Resales ostensibly unchanged despite the company being 450 units bigger than last year.
2017 New build exceeded new sales by 68 units
2018 New Build exceeded new sales by 115 units (Anyone seeing a pattern here ?)

Why would they bother to increase the build rate with so much unsold stock ? Is this the third year in a row that they will target the same build rate of 450 ?
How is this growth per se ?

I would think underlying profit will be ~ flat compared to last year. Seeing these sales numbers explains why they didn't issue a profit forecast last year. No point forecasting if profit is barely changed is there.

Julian confident they will sell their inventory in 2019....same story I heard at the annual meeting about unsold inventory left over from 2017 build. What happened to their confidence they would sell the unsold 2017 units.

Bottom line, unsold inventory has risen very sharply for the second year in a row and is now going to start to really hurt profit growth.
Units too expensive ? People having trouble selling their Auckland homes to buy in ? People demanding fixed fees for life but SUM think they know better and prospects simply shopping elsewhere ?

Lots of questions. Good thing is its not a complete disaster so should be no rub off on other retirement companies that are growing strongly like OCA.
Every year they take pride at the annual meeting in telling shareholders SUM is N.Z. fastest growing retirement company...wonder what they'll say this year ?

Disc: Not holding and not looking to buy back in.

[LAC]

Happy with that. Will pickup a few more if the market disagrees;) Dont see OCA dropping now so get in quick at the current prices IMHO

[winner69]

Beagle ....build rate and sales dont make such sense ...esp when Julian always give the impression that they sell pretty quickly after completion (like they will sell in the next quarter statements)

I think Julian is getting too loose with the truth these days

[Beagle]

Beagle ....build rate and sales dont make such sense ...esp when Julian always give the impression that they sell pretty quickly after completion (like they will sell in the next quarter statements)

I think Julian is getting too loose with the truth these days

I can't see professional investors and institutions being happy with the numbers or the narrative once they've had a good look at it.
Delivered implies practical completion and issuance of code of compliance. RYM presell the vast majority of their units. One wonders why the 133 units Julian says were delivered in December were not sold and new entrants moved in or at least half of them ? Are they playing a little loose with what "delivered" means or does no one want all these new units ? New steam powered abacus has officially had a hissy fit and tells me SUM's don't seem to add up ?
Maybe Julian gives some more colour around this stock situation with the annual result but until then...

[Maverick]

Beagle ....build rate and sales dont make such sense ...esp when Julian always give the impression that they sell pretty quickly after completion (like they will sell in the next quarter statements)

I think Julian is getting too loose with the truth these days
Now don't you think you guys are being too harsh? The result is perfectly acceptable to me, I`m very happy with it, for sustained, orderly growth for countless years ahead.
Julian points out 133 of the new homes were delivered in December. I`m picking that in the past with your frothing market up there people were more inclined to pre-buy something "off the plans". But these "cooler" days your average buying style has returned to "lets go and walk through it first" , hence the new lag in sales and need for empty inventory.

All the other reasons suggested (on this forum) for slow resales are all fixable if required so I`m not ready at all to ditch this company. I still think 100m underlying profit is still on the cards.

I accept I`m alone in my views.

[winner69]

got the old spreadsheet updated with the latest sales data

Underlying earnings $93.6m I reckon for 2018

[LAC]

I accept I`m alone in my views.

You are not alone - they may be shy of 100m but I find the results acceptable. It was better than I was expecting to be honest. May be the tortoise but in the long run she'll be ok:)

[Antipodean]

Considering the dramatic changes generally going on in the world - an increase in Q4 new sales is a good result. Q4 shows a 5.7% increase compared to pcp. The 2018 year overall was held back by lower Q1 and Q3.

Fixed fees for life, similar in a way to level life insurance premiums, are not always the best outcome for either customer or company.

[macduffy]

I think that Maverick's pretty close to the mark in implying that we've talked ourselves into over-optimistically expecting the "grey tsunami" into delivering an ever - accelerating level of volume and profitability for the retirement village industry. I'm happy with the result and hold a few SUM - but I favour OCA a tad more and hold more of them!

:)

[Beagle]

No amount of corporate spin can sugar coat this...its a poor result. The SP has a 5 as the first number in the not too distant future. You read it from me first.
Great short and double down on OCA in my opinion but I don't short so I'll leave that to someone else.

[Ggcc]

There seems to be a lot of silence here as the price keeps going up for now while OCA stands still. I may reduce my shareholding, that is because I am heavy in retirement stocks and not that the company is performing well or not well. I am invested in both SUM and OCA

[oldtech]

I'm wary of reading too much into one or two days of price rises ... from Dec 21 to Dec 28 the SP rose from 6.15 to 6.48, then promptly turned back and fell to 6.11.

My daughter has a chunk of money invested in SUM so I would love for the trend to turn ... just not convinced that it is.

[Beagle]

I'm wary of reading too much into one or two days of price rises ... from Dec 21 to Dec 28 the SP rose from 6.15 to 6.48, then promptly turned back and fell to 6.11.

My daughter has a chunk of money invested in SUM so I would love for the trend to turn ... just not convinced that it is.

RYM been behaving like a good traders stock lately too.

[winner69]

Maybe this is why SUM sales not that robust

DECEMBER HOUSE SALES FALL TO SEVEN-YEAR LOW

http://www.sharechat.co.nz/article/c0a214e7/december-house-sales-fall-to-seven-year-low.html?utm_medium=email&utm_campaign=December%20house%20sales%20fall%20to% 20seven-year%20low&utm_content=December%20house%20sales%20fall%20to%2 0seven-year%20low+CID_2b74394b0d0b44092d997a9f822ecb62&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticlec0a214e7decemb er-house-sales-fall-to-seven-year-lowhtml

[Beagle]

You beat me to it mate and not a surprise to me at all. I was involved as a trustee in a major farm sale close to Auckland for development in the last quarter of last year...extended contract that contained many complex commercial clauses (running to over 20 pages) including the usual due diligence. Can't name the parties for obvious reasons but the buyer pulled the pin in late December and I believe this is because many of their other developments are experiencing very, very slow sales. I heard from another client late last year, (the general manager of one of the major Australian owned franchises) that many developers in Auckland are really struggling to sell down their properties and some banks are getting titchy and requiring them to rent out houses to get some cash flow to service their debt !

No surprise to me that SUM are struggling to sell down their Auckland units and this problem won't go away any time soon in my opinion. They will also be struggling to contain rampant development cost inflation in the Auckland area as well, along with the struggle every other Auckland developer has to try and find subby's who have some clue of what they're doing at anything other than a usurious price. Its not a good game to be in at the moment and more developers will go to the wall in 2019, you mark my words.

[mcdongle]

You beat me to it mate and not a surprise to me at all. I was involved as a trustee in a major farm sale close to Auckland for development in the last quarter of last year...extended contract that contained many complex commercial clauses (running to over 20 pages) including the usual due diligence. Can't name the parties for obvious reasons but the buyer pulled the pin in late December and I believe this is because many of their other developments are experiencing very, very slow sales. I heard from another client late last year, (the general manager of one of the major Australian owned franchises) that many developers in Auckland are really struggling to sell down their properties and some banks are getting titchy and requiring them to rent out houses to get some cash flow to service their debt !

No surprise to me that SUM are struggling to sell down their Auckland units and this problem won't go away any time soon in my opinion. They will also be struggling to contain rampant development cost inflation in the Auckland area as well, along with the struggle every other Auckland developer has to try and find subby's who have some clue of what they're doing at anything other than a usurious price. Its not a good game to be in at the moment and more developers will go to the wall in 2019, you mark my words.

Ties in with what i am seeing and hearing from other builders in Christchurch..

[couta1]

She's sub $6, getting reverted back to fair value.

[Beagle]

She's sub $6, getting reverted back to fair value.

Yes I noticed the other day it was brushing up against the top of the 50-60% band of RYM's price and sure enough, as sure as night follows day its reverted back to the middle of that range yet again.

[artemis]

.... Its not a good game to be in at the moment and more developers will go to the wall in 2019, you mark my words.

Hi Beagle! I think you are correct about slow sales in Auckland (and elsewhere) and problems ahead for developers. But is there data?

I am putting together a submission to the Finance and Expenditure Select Committee concerning the proposal to ring-fence rental property losses (part of the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill).

One of the points I want to make is that traditionally residential property investors have bought many of the new build apartments, though more likely middle and low end. It is obvious to anyone living in these blocks that most are tenants. (Friend of mine lives in a 90 unit mid range complex in Wellington. 2 are owner occupied.)

If these investors know they are going to have to dip into their tax paid income rather than offset rental losses against other income, they will think twice about buying. Yep, some developers will be in trouble.

I would like to point the Select Committee to relevant data, but where? Anyone have any thoughts? I will suggest they do their own research, but will they?

[minimoke]

I will suggest they do their own research, but will they?No.

They rely first on their policy position. They then fall back a bit on advice from their Ministry who are tasked with supporting the Minster. Treasury will provide some other info. Select Committees are just about giving the appearance of a transparent and open government - but in fact they arent.

[artemis]

No.

They rely first on their policy position. They then fall back a bit on advice from their Ministry who are tasked with supporting the Minster. Treasury will provide some other info. Select Committees are just about giving the appearance of a transparent and open government - but in fact they arent.

Yeah, probably. This in today's Herald makes no mention of the impact on the construction sector but it does say supply and demand are broadly in balance. No shortage then ....

"Market indications are that a significant number of new listings will hit the market in February further increasing the already strong level of buyer choice," said Thompson.


https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12200986

[Beagle]

No amount of corporate spin can sugar coat this...its a poor result. The SP has a 5 as the first number in the not too distant future. You read it from me first.
Great short and double down on OCA in my opinion but I don't short so I'll leave that to someone else. Posted 10 January and sure enough now starts with a 5.

Hi artemis - All anecdotal to the best of my knowledge. SUM directors mentioned at the annual meeting last year construction cost inflation is running at around 10% per annum in Auckland and with building 450 units per annum I would think they'd know.

A certain large company that I can't name pulled out of a major land deal with one of my clients just before Christmas ostensibly I believe because they are under pressure with very slow sales on their other finished developments. I'm trustee on that trust and I've been talking to very senior people in one of the major commercial agencies and they are worried. Chinese land banking is a thing of the past, they're simply not in the market anymore. Market ostensibly changed direction in a big way when the foreign buyer regulations changed on 22 October.
Another very senior guy with a different Australian owned agency told me some developers are being told by their banks to rent units out to get some cash flow to service the debt because sales have slowed down. Developers were told to do this "or else", apparently.

The speed of the decline in Sydney and Melbourne has increased lately with price declines of 1.4% (nearly 17% per annum) in January for Sydney and 1.3% for Melbourne. ASB economists think there a strong correlation between Sydney and Auckland prices with a 6-9 month time lag. Declines in Auckland are coming, I am sure of that. Its much harder to get a mortgage now, much, much harder and that's having an effect as well.
Any change to taxation rules including ring fencing of tax losses and / or a CGT will only exacerbate the size of future falls but I think Cindy and her Kindy want that
so they can trumpet they are doing their bit for the "have nots" They are going to send the economy into a recession they way they are going, you read it from me first.

[oldtech]

Posted 10 January and sure enough now starts with a 5.

... and back to 6. :cool:

[Beagle]

... and back to 6. :cool:

All the proof you ever need that every dog has its day. I was right for one day lol

[oldtech]

All the proof you ever need that every dog has its day. I was right for one day lol

:lol::lol::lol:

[winner69]

Very impressive set of numbers out today

I’d even say generally more robust numbers than some other recently released sector reports. I think some will be ‘surprised’ at the $98m underlying earnings number

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SUM/330947/295456.pdf

[winner69]

Thanks Winner. I reckon the market is in for a pleasant surprise on this one. I know that's against the superior wisdom on this forum but I just can't see it going off the rails this fast in such a target rich environment backed up with great history

A pleasant surprise it was eh

[bull....]

sales volumes starting a new trend? will be able to tell after next yr if the trend is down or stalled. as i mentioned with oca margins are under pressure in the retirement sector and summerset has re affirmed this today

[oldtech]

I am unsure how to interpret these results, would be keen to hear from those with better insight than me (which is most people on this forum ...)

Underlying profit well up, by 21%. BUT BUT BUT ... net profit before and after tax well down (10%/11%).

Looking at the appendix, this seems to be due to a lower figure for "fair value movement of investment property"; IE 209.9 vs 234.5. Is this basically saying the property market has slowed, therefore the increase in value on the property is lower?

Other points I see:

Sales of occupation rights down by 6%
Two newly acquired sites announced today:

- Milldale: 6.0 hectare site in a new suburb on the Hibiscus Coast
- Waikanae: 25.5 hectare site close to Waikanae Beach and golf club (estimated village size of 8.0 hectares)

Not sure how I feel about the prospects for Milldale - it's located just a little further from the shops than I would have thought suitable for a retirement village.

[Maverick]

I am unsure how to interpret these results, would be keen to hear from those with better insight than me (which is most people on this forum ...)

Underlying profit well up, by 21%. BUT BUT BUT ... net profit before and after tax well down (10%/11%).

Looking at the appendix, this seems to be due to a lower figure for "fair value movement of investment property"; IE 209.9 vs 234.5. Is this basically saying the property market has slowed, therefore the increase in value on the property is lower?

Other points I see:

Sales of occupation rights down by 6%
Two newly acquired sites announced today:

- Milldale: 6.0 hectare site in a new suburb on the Hibiscus Coast
- Waikanae: 25.5 hectare site close to Waikanae Beach and golf club (estimated village size of 8.0 hectares)

Not sure how I feel about the prospects for Milldale - it's located just a little further from the shops than I would have thought suitable for a retirement village.
Oltech, this is a fundamental thing that is really important to understand in this sector. It's a good question that you need to get sorted.
Basically "net profit" includes current property valuations.
"Underlying profit" is the profit of the actual business operation with property value gains or losses stripped out.
In this sector the only number I pay attention to is the underlying. Otherwise any company has the potential to do a "bob jones"(I presume from "Oldtech" , you were around in the eighties) , where all you need to do is revalue everything up on paper and say how well things are going.

[RTM]

Oltech, this is a fundamental thing that is really important to understand in this sector. It's a good question that you need to get sorted.
Basically "net profit" includes current property valuations.
"Underlying profit" is the profit of the actual business operation with property value gains or losses stripped out.
In this sector the only number I pay attention to is the underlying. Otherwise any company has the potential to do a "bob jones"(I presume from "Oldtech" , you were around in the eighties) , where all you need to do is revalue everything up on paper and say how well things are going.

Thanks Maverick. I was not totally clear either.

[Maverick]

I'm VERY happy with this result. Contrary to bulls opinion , I see margins not under pressure at all. Margins rising from 28%to 33% says the oposite.
The 100 unsold units Is the obvious red flag but as I've said before ,IMO, now the impulsive rushing to sign up has left the property market , it's now back to normality where housing stock ready to sell is required.
Plus I prefer SUM style of not dropping margins for the sake of filling units up as fast as they can to look good to us shareholders.
The healthy occupancy rates suggest plenty of demand.
With the price on a stunning Pe of 15 considering it's proven growth path this company is great value long term.
I can't see this or any retirement village share price rising meaningfully for a long time as it's become clear that people's mindset link this industry solely to property prices, and it is unwavering.
However , these businesses are proving solid growth DESPITE flagging property values in some areas. Eventually years from now, buyers will return .
I'm into SUM and of course donkey deep in OCA because of the underlying profit and dividend growth that will keep coming.
I see this as a great, solid and predictable result from SUM.

[bull....]

I'm VERY happy with this result. Contrary to bulls option , I see margins not under pressure at all. Margins rising from 28%to 33% says the oposite.
The 100 unsold units Is the obvious red flag but as I've said before ,IMO now the impulsive rushing to sign up has left the property market , it's now back to normality where housing stock ready to sell is required.
Plus I prefer SUM style of not dropping margins for the sake of filling units up as fast as they can to look good to us shareholders.
The healthy occupancy rates suggest plenty of demand.
With the price is on a stunning Pe of 15 considering it's proven growth path this company is great value long term.
I can't see this or any retirement village share price rising for a long time as it's become clear that people's mindset link this industry solely to property prices, and is unwavering.
However , these businesses are proving solid growth DESPITE flagging property values. Eventually years from now, buyers will return . I'm into SUM and of course donkey deep in OCA because of the underlying profit and dividend growth that will keep coming.
I see this as a great, solid and predictable result from SUM.

actually margins are up because of cost cutting , not the underlying margins from sales prices

[oldtech]

Oltech, this is a fundamental thing that is really important to understand in this sector. It's a good question that you need to get sorted.
Basically "net profit" includes current property valuations.
"Underlying profit" is the profit of the actual business operation with property value gains or losses stripped out.
In this sector the only number I pay attention to is the underlying. Otherwise any company has the potential to do a "bob jones"(I presume from "Oldtech" , you were around in the eighties) , where all you need to do is revalue everything up on paper and say how well things are going.

Thanks Maverick, makes perfect sense.

Yep, I was around in the 80's but not really paying a lot of attention to the markets etc at the time ... I am an oldtech compared to some of the young whipper-snappers in my office, but at 49 have a few more years left to learn about this stuff yet I hope ... :t_up:

[dabsman]

actually margins are up because of cost cutting , not the underlying margins from sales prices

So you are saying the 28% to 33% margin increase is a result of spending less on building in a time of huge construction cost increase and property market vagueness? If anything it demonstrates incredibly good knowledge of what will sell and where it will sell and a business who knows how to develop real estate. I dont know much but I'm happy with this result. In the end they dont build widgets so they have to keep on building regardless of property market movements and in the end everyone is getting older so these will sell either today tomorrow or next year and I will be a happy holder when they do

[Beagle]

http://www.sharechat.co.nz/article/b88560cf/summerset-annual-profit-falls-as-property-market-slows-underlying-earnings-still-strong.html?utm_medium=email&utm_campaign=Summerset%20annual%20profit%20falls%2 0as%20property%20market%20slows%20underlying%20ear nings%20still%20strong&utm_content=Summerset%20annual%20profit%20falls%20 as%20property%20market%20slows%20underlying%20earn ings%20still%20strong+CID_7d4a0e5a5de7e5e83980df3f 550359c6&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticleb88560cfsummer set-annual-profit-falls-as-property-market-slows-underlying-earnings-still-stronghtml

SUM mixed feelings about this one. Historically, looking at the result there's no argument this was a credible result and SUMwhat (sorry couldn't resist) above my expectations. Expanding into Australia at present...one wonders if that is really wise but I must say I do think the board and Julian have got their heads screwed on pretty well so I guess this will be a leap of faith.
Development margins forecast to head back down to 20-25% in the medium long term, (from last year's record level) gives a heads up about the changing nature of the real estate market.
Much slower growth in embedded value this year.
Land acquisitions look to be in good area's...got to be happy with that assuming one or both of them don't turn out to be another Boulcott street fiasco.
No argument with their long term track record since listing and annual compound underlying earnings growth of 43% is a superb track record but house prices have roared ahead over that period too.
I would like to see SUM (sorry I know its getting tired now) evidence of the current unsold stock level being sold before accepting at face value the 133 units delivered in December couldn't be settled due to timing as forgive me but I am pretty sure I heard the same song before about this timing thing last year and yet annual sales for 2018 were materially down on 2017.
Cash flow up just 5% which is the second year in a row that cashflow growth has been uninspiring paints a different view of real progress.
I think its a HOLD at the current price for those that don't think the real estate market is going to materially deteriorate and / or Cindy's Kindy won't climb into this sector at some stage.
Historical underlying PE of 14.4 suggests fair value for this stage of the cycle. I remain of the view RYM is seriously overpriced.
Disc: I put my paw up for a very small holding this morning.

[Snow Leopard]

Oltech, this is a fundamental thing that is really important to understand in this sector. It's a good question that you need to get sorted.
Basically "net profit" includes current property valuations.
"Underlying profit" is the profit of the actual business operation with property value gains or losses stripped out.
In this sector the only number I pay attention to is the underlying. Otherwise any company has the potential to do a "bob jones"(I presume from "Oldtech" , you were around in the eighties) , where all you need to do is revalue everything up on paper and say how well things are going.

This is at best badly worded and at worst incredibly misleading.

For your benefit I would suggest that revisit the accounts, presentations etc.

Underlying profit includes realised gains on new sales and resales (& you need to understand the gain is from previous sale).
Unrealised gains in the IFRS profit have a link to the realised gains and you ignore that at your peril.

Time for lunch, bye.

[Beagle]

SUM people reckon all this distinction between IFRS, underlying profit, embedded value e.t.c. is just nonsense gobbledegook. Its a property company for goodness sake and seeing as the international accounting standard's known as International financial reporting standards (IFRS) includes full revaluation on everything that hasn't changed hands during the year let's just run with that and be done with it !

How could these expert boffins that have fellowships in their various countries accounting professional bodies and have brains far bigger than yours or mine possibly be wrong and who are we to say they are ? What could possibly go wrong with accepting the esteemed professional's expert profit measurement methodology at face value ?
On that basis net profit is $214.5m which on 225.4m shares gives eps of 95.2 cps. At $6.33 the shares are on a historical PE of just 6.6 so must be dirt cheap !!

[RupertBear]

SUM people reckon all this distinction between IFRS, underlying profit, embedded value e.t.c. is just nonsense gobbledegook. Its a property company for goodness sake and seeing as the international accounting standard's known as International financial reporting standards (IFRS) includes full revaluation on everything that hasn't changed hands during the year let's just run with that and be done with it !

How could these expert boffins that have fellowships in their various countries accounting professional bodies and have brains far bigger than yours or mine possibly be wrong and who are we to say they are ? What could possibly go wrong with accepting the esteemed professional's expert profit measurement methodology at face value ?
On that basis net profit is $214.5m which on 225.4m shares gives eps of 95.2 cps. At $6.33 the shares are on a historical PE of just 6.6 so must be dirt cheap !!

Has SUM been rerated BBB Mr Beagle?! :p

[Snow Leopard]

Done the first pass through the full year reports.

Last year was 96 pages long with the financials beginning on Page 33.

This year is a 140 behemoth with an extra 39 pages of pretty pictures before the financials start of Page 72.

That is your first warning sign.

That the company itself is flagging that margins are somewhat extraordinary and they expect them to normalise is your second warning sign.

Forward P/E of 10 that is your third.

Cash flow is the life blood of every company. Follow the money.
Value SUM off of that.

[value_investor]

Solid result but based on a growing rate in development margin of new units but for how long will be interesting. A lot to like in this report but a lot more for me to ponder going forward. The number of sales was down YoY and they've really kept their cards close to their chest in terms of revealing how sales are going in the current FY. I'm not sure how development margin maintains in future with a stagnant market in Auckland, but this was also touched on in their annual report with development margin expected to go down to 20-25% which I assume is fair.

There would be a overhang of unsold units but the Chair and CEO report notes that their is currently still good demand for them in the current year. I'm interested to see the Q1 sales numbers just to alleviate any doubts. This is likely to be more of a short term issue with the peak saturation of retirees still not here yet.

I do note that SUM now have the largest land bank in the country and were the largest builders in FY18. What I gather from the land banking is that there is still low hanging fruit in regional areas for land to be acquired at this stage. I'm sure with them exclaiming the build rate will go up to 600 in the next few years that this can only be a good thing.

My view on price - Ultimately can't complain with a good result such as this. I am cautiously optimistic in terms of selling in the new year but there are many variables at work. I wouldn't be upset getting in at this price since I am long term, and at current PE of 14.5 its perhaps better value than a lot of overvalued stocks on the NZX. I'll hold my small position for now and look to accumulate this year as opportunities present.

[winner69]

This seems good

Summerset aims to become New Zealand's first retirement village operator with Dementia Friendly Accreditation, chief executive Julian Cook said.

[couta1]

This seems good

Summerset aims to become New Zealand's first retirement village operator with Dementia Friendly Accreditation, chief executive Julian Cook said. Just corporate spin mate, I would rank SUM behind OCA and RYM for overall care standards and that includes Dementia.

[Beagle]

Solid result but based on a growing rate in development margin of new units but for how long will be interesting. A lot to like in this report but a lot more for me to ponder going forward. The number of sales was down YoY and they've really kept their cards close to their chest in terms of revealing how sales are going in the current FY. I'm not sure how development margin maintains in future with a stagnant market in Auckland, but this was also touched on in their annual report with development margin expected to go down to 20-25% which I assume is fair.

There would be a overhang of unsold units but the Chair and CEO report notes that their is currently still good demand for them in the current year. I'm interested to see the Q1 sales numbers just to alleviate any doubts. This is likely to be more of a short term issue with the peak saturation of retirees still not here yet.

I do note that SUM now have the largest land bank in the country and were the largest builders in FY18. What I gather from the land banking is that there is still low hanging fruit in regional areas for land to be acquired at this stage. I'm sure with them exclaiming the build rate will go up to 600 in the next few years that this can only be a good thing.

My view on price - Ultimately can't complain with a good result such as this. I am cautiously optimistic in terms of selling in the new year but there are many variables at work. I wouldn't be upset getting in at this price since I am long term, and at current PE of 14.5 its perhaps better value than a lot of overvalued stocks on the NZX. I'll hold my small position for now and look to accumulate this year as opportunities present.

You Sir have hot the nail directly on the head. I couldn't agree more.

[Tiddlywinks]

You Sir have hot the nail directly on the head. I couldn't agree more.

Beagle you've been dogging SUM for months...

[Beagle]

Done the first pass through the full year reports.

Last year was 96 pages long with the financials beginning on Page 33.

This year is a 140 behemoth with an extra 39 pages of pretty pictures before the financials start of Page 72.

That is your first warning sign.

That the company itself is flagging that margins are somewhat extraordinary and they expect them to normalise is your second warning sign.

Forward P/E of 10 that is your third.

Cash flow is the life blood of every company. Follow the money.
Value SUM off of that.

Mr Market disagrees with your assessment.
What IF....the story about 133 units delivered in December too late to settle was true and they had a ripper FY19 Q1 sales result. All the sceptics would have red faces then including me.

Despite the toughest construction market (arguably ever) they still delivered all the units they said they would, in fact they have never failed a delivery target ever in their history. They still deliver a record development margin in this construction market...that beggars belief.
43% compound annual underlying earnings growth since they listed about 7 years ago. Who else has ever done that ?
Got to give credit where its due.
One thing about this company, the numbers sure SUM up and are very impressive.

[Baa_Baa]

Mr Market disagrees with your assessment.
What IF....the story about 133 units delivered in December too late to settle was true and they had a ripper FY19 Q1 sales result. All the sceptics would have red faces then including me.

Despite the toughest construction market (arguably ever) they still delivered all the units they said they would, in fact they have never failed a delivery target ever in their history. They still deliver a record development margin in this construction market...that beggars belief.
43% compound annual underlying earnings growth since they listed about 7 years ago. Who else has ever done that ?
Got to give credit where its due.
One thing about this company, the numbers sure SUM up and are very impressive.

Welcome back Beagle.

[Maverick]

I've been thinking a bit on this report. There's something I can't get my head around. I'd appreciate any enlightenment.
we are told: (I am only using villa figues with tenure lenghts keep things simple)
Total resales fy2018 was 301.
average stay in a villa is 8 years.(mentioned in the general blurb)
average stay in a villa fy 18 was 5.3 years.(mentioned in the last few pages)
it takes about 3 months to resell a unit.

to my way of thinking , the full fy2018 number of resales (301)should equal the full unit stock level somewhere from 8 - 5.3 years ago (actual was 1646 units in 2012). Ie they are now , on average, up for resale as our tenants have finished their average tenure.

Here is my problem,you have to go back to fy 2000 to get to that low 300 stock level.

i can only conclude that in fy 2000 sum were leasing to 60 - 65 yr olds who are only now expiring , say, at 80- 85 years old. (18 yrs later in 2018)

We know know the current average new comer arrives at 78 years old and is only staying 5.3 years.
If I am right......This recent " super charged churn" means SUM is behaving more like OCA but with villas rather than care suits. When added to the large volume of units being added particularly in the last six years then SUM,s DMfees should start to sky rocket.

I can't see it any other way but I have been wrong before. ....am I missing something?

[Beagle]

Sorry mate I am not entirely sure where you are coming from.
Looked up last year's annual report
Total resales of occupation rights FY18 301, FY17 300, FY16 244, FY15 245, FY14 172, FY13 174, FY12 164
Development margin growth over the years has been very impressive
12%, 13.2%, 15.7%, 20%, 22.2%, 27.3% and 33% for 2018.
Disc: I have been accumulating a few, very slowly.
Haven't had time to read the full report for FY18 yet but the headline numbers impressed me sufficiently to look at taking a modest stake again.
Snow Leopard tells me there's lot of pictures...so I am hoping some are of happy residents with their dogs.
I think where some confusion might be arising is that they've built a lot of units in recent years. In the long run resales will jump significantly, yes I couldn't agree more.
We could plausibly see a similar sized jump this year as was the case between FY16 and FY17 noted above. Maybe 340-350 resales this year ?

[Maverick]

Sorry mate I am not sure where you are coming from.
Looked up last year's annual report
Total resales of occupation rights FY17 300, FY16 244, FY15 245, FY14 172, FY13 174, FY12 164
Development margin growth over the year has been very impressive
12%, 13.2%, 15.7%, 20%, 22.2%, 27.3% and 33% for 2018.
Disc: I have been accumulating a few, very slowly.
Haven't had time to read the full report for FY18 yet but the headline numbers impressed me sufficiently to look at taking a modest stake again.
Snow Leopard tells me there's lot of pictures...so I am hoping some are of happy residents with their dogs.
Thanks for responding Beagle.
Let me try another way to explain my quandary.....
Sum had 1646 total units in
2012. The average occupation of a resident is somewhere around 6 -8 years.so...... shouldn't (averaged out more or less) all of those 1646 units now be resold in 2018. Not just 301 as actually recorded.
Either loads are now sitting empty.But we are told they resell well. So that means in 2012 the average tenure was a lot longer.ie ...the tenants were younger so they are still living on them.
Check out the last three or so pages of graphs on the invester presenation where the pictures should help make sense of what I'm trying to say.
Again. I'm not saying I'm right but I can't see any other reason for the low resales.

[Beagle]

Will try and find SUM time to have a good look over all the material in the next few business days mate. (Been donkey deep with all the info with AIR today).

[winner69]

Thanks for responding Beagle.
Let me try another way to explain my quandary.....
Sum had 1646 total units in
2012. The average occupation of a resident is somewhere around 6 -8 years.so...... shouldn't (averaged out more or less) all of those 1646 units now be resold in 2018. Not just 301 as actually recorded.
Either loads are now sitting empty.But we are told they resell well. So that means in 2012 the average tenure was a lot longer.ie ...the tenants were younger so they are still living on them.
Check out the last three or so pages of graphs on the invester presenation where the pictures should help make sense of what I'm trying to say.
Again. I'm not saying I'm right but I can't see any other reason for the low resales.

Are you grappling with the number of resales in any one year is always about 10% (plus or minus a few) of the number of units at the beginning of the year.......intuitively suggests a longer tenure than the charts shows eh.

We need oldguy to sort this out ...what happened to oldguy ...he was a guru in these mattters

[Maverick]

Are you grappling with the number of resales in any one year is always about 10% (plus or minus a few) of the number of units at the beginning of the year.......intuitively suggests a longer tenure than the charts shows eh.

We need oldguy to sort this out ...what happened to oldguy ...he was a guru in these mattters
Ok..I've figured out my error of thinking. Been talking to a good mate (who's nickname is truely "goose" - no surprises there) and my fault is to consider the TOTAL SUM volume to be fully resold 6 yrs later during one year. In fact, doh, its spread over six years so 2012 volume of 1646 total SUM units divided by a six year tenure = 274 units sold p/a. Which is approximately about right.
sooo.... I can now deduct that 6 years from now the DMFees will be today's total units of 3732 units divided by six years will be = 622 units.
it would be safe to assume that you could draw a graph between now and then to estimate how many resales will occur in the following six years.
I' m sorry to take up so much sharetrader space to figure this out but I got there eventually.
the trick now is to forward calaculate the growing DMFs and add expected new sale margins and resale margins to get the expected underlying profits . That shouldn't be too hard but not tonight.
thankyou Beagle and Winner for responding.

[Beagle]

You've made a "Goose" of yourself, sorry mate, couldn't resist :p

[Maverick]

You've made a "Goose" of yourself, sorry mate, couldn't resist :p I'm sure it won't be the last time

[winner69]

Ok..I've figured out my error of thinking. Been talking to a good mate (who's nickname is truely "goose" - no surprises there) and my fault is to consider the TOTAL SUM volume to be fully resold 6 yrs later during one year. In fact, doh, its spread over six years so 2012 volume of 1646 total SUM units divided by a six year tenure = 274 units sold p/a. Which is approximately about right.
sooo.... I can now deduct that 6 years from now the DMFees will be today's total units of 3732 units divided by six years will be = 622 units.
it would be safe to assume that you could draw a graph between now and then to estimate how many resales will occur in the following six years.
I' m sorry to take up so much sharetrader space to figure this out but I got there eventually.
the trick now is to forward calaculate the growing DMFs and add expected new sale margins and resale margins to get the expected underlying profits . That shouldn't be too hard but not tonight.
thankyou Beagle and Winner for responding.

Probably growing at 25%pa at least

Maybe greater rate than OCA

No wonder beagles back in

Cool eh

[Beagle]

FA - Wonder what the forward PE is now ?...probably about 12 (I don't have an underlying forecast for FY19 yet)
TA - Interesting image 10357

[oldtech]

Beagle, I see you are using 30 day/100 day MA rather than 50/200. Have you found these work better?

[Beagle]

Beagle, I see you are using 30 day/100 day MA rather than 50/200. Have you found these work better?
100 day MA is my go to TA tool for the retirement sector mate. Can't say if it works better than anything else, sorry. It hasn't broken through to the upside yet but I think its going too based on compelling FA. It was a very good result and surprised me a bit.

[oldtech]

Thanks Beagle :)

[Beagle]

Annual report.http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SUM/330947/295388.pdf
SUM pretty impressive long term graphs in there. If track record of consistent strong growth counts for something then there's no denying their batting average.
Cash flow growth lately not quite so impressive but I am going to go out on a limb here and say I think it'll improve very nicely this year.
Management and the board have their heads well screwed on. Very pleased to have SUM back in my portfolio.

[Beagle]

100 day MA is my go to TA tool for the retirement sector mate. Can't say if it works better than anything else, sorry. It hasn't broken through to the upside yet but I think its going too based on compelling FA. It was a very good result and surprised me a bit.

Clear break up through the 100 day MA now, see attached image 10363

[Ggcc]

Clear break up through the 100 day MA now, see attached image 10363
Glad I held on rather than transfer over to
OCA which my heart was telling me to do. It should be $7 within a few months at this pace

[winner69]

Yes beagle, it’s all looking good on the Summerset front

Not surprising because that was a pretty stunning full year report - much more robust set of numbers than some others in the sector

Ggcc says 7 bucks soon ...maybe even more I reckon

[Maverick]

FA - Wonder what the forward PE is now ?...probably about 12 (I don't have an underlying forecast for FY19 yet)
TA - Interesting image 10357
i'll put hand up for that. I've done a load of calcs and come up with about an EPS of around 60 cents fy2019. This figure is heavily dependant on clearing most of the 133 stock delivery from late December. Personally I don't see why they won't as they have said things are trucking along well. Looking back SUM have had a pretty good record of doing what they said they would. Perhaps even an excellent record.
So at $6.60 that's a forward PE of 11.

[Beagle]

i'll put hand up for that. I've done a load of calcs and come up with about an EPS of around 60 cents fy2019. This figure is heavily dependant on clearing most of the 133 stock delivery from late December. Personally I don't see why they won't as they have said things are trucking along well. Looking back SUM have had a pretty good record of doing what they said they would. Perhaps even an excellent record.
So at $6.60 that's a forward PE of 11.

That would make it the cheapest PE its ever been on since listing ! Technical analysis also looks very encouraging. Just on one month to go until we see evidence of Q1 sales.
If that's a strong number...

[winner69]

i'll put hand up for that. I've done a load of calcs and come up with about an EPS of around 60 cents fy2019. This figure is heavily dependant on clearing most of the 133 stock delivery from late December. Personally I don't see why they won't as they have said things are trucking along well. Looking back SUM have had a pretty good record of doing what they said they would. Perhaps even an excellent record.
So at $6.60 that's a forward PE of 11.

Those earnings are likely

A PE of 11 ....about as cheap as OCA ....I know which one I’d prefer on those multiples based on each of thems latest reports. .....and the preferred one doesn’t sound like a blue sea

[Beagle]

I am more cautious around the sell down timeframe of the 133 units "delivered" in December 2018.
We've seen this movie before and if I remember correctly there were about 70 that were delivered late in 2017 that were tagged with the same (delivered too late in the year to be sold) line. So were these 70 actually sold, well yes and no. SUM don't separately identify them but their sales for 2018 were materially lower than 2017 despite the 70 extra stock.

Early in 2018 I predicted $100m underlying profit for the year, (subsequently revised as the real estate market and volume cooled later in the year). First forecast was almost bang on the money. Once we have Q1 sales data in early April and here the annual meeting narrative in late April I think that should give some worthwhile information to make a forecast for FY19. Until then I will simply say I think the company is somewhat undervalued and that I have been accumulating them. I note that in FY18 they made an underlying profit of 43.74 cps. I put an awful lot of stock on prior track record and I think SUM have an exceptional one and deserve to be on a multiple slightly higher than the market is currently crediting them with, (notwithstanding the slowing Auckland real estate market).

If Q1 sales are really good and the narrative at the annual meeting is positive I think there is a very good chance we will see a material rerating of SUM probably back towards its previous high of $8.00.

[couta1]

Those earnings are likely

A PE of 11 ....about as cheap as OCA ....I know which one I’d prefer on those multiples based on each of thems latest reports. .....and the preferred one doesn’t sound like a blue sea OCA will still be the better overall return 5 yrs from now IMO plus their care provision is superior which is important to me.PS-SUM is a property development company with a dash of care added on whereas OCA is a care company with a dash of property added on at this point in time.

[Maverick]

I am more cautious around the sell down timeframe of the 133 units "delivered" in December 2018.
We've seen this movie before and if I remember correctly there were about 70 that were delivered late in 2017 that were tagged with the same (delivered too late in the year to be sold) line. So were these 70 actually sold, well yes and no. SUM don't separately identify them but their sales for 2018 were materially lower than 2017 despite the 70 extra stock.

Early in 2018 I predicted $100m underlying profit for the year, (subsequently revised as the real estate market and volume cooled later in the year). First forecast was almost bang on the money. Once we have Q1 sales data in early April and here the annual meeting narrative in late April I think that should give some worthwhile information to make a forecast for FY19. Until then I will simply say I think the company is somewhat undervalued and that I have been accumulating them. I note that in FY18 they made an underlying profit of 43.74 cps. I put an awful lot of stock on prior track record and I think SUM have an exceptional one and deserve to be on a multiple slightly higher than the market is currently crediting them with, (notwithstanding the slowing Auckland real estate market).

If Q1 sales are really good and the narrative at the annual meeting is positive I think there is a very good chance we will see a material rerating of SUM probably back towards its previous high of $8.00.
I totally agree with your sage wisdom Beagle on waiting to see how quarter one sales go. Turns out there is no need to hurry on these behemoths.
As far as the surplus 70 ish units from FY17 being delivered late in that year, there is nothing wrong with your memory . So now we have a net 115 units on top of that (2017) to sell. So either stock is banking up or it's simply a timing thing.
If it's resale issues ( which I personally don't think it is based on SUM generally delivering on or above expectations) then the whole sector is a worry.
If it's a timing issue , as SUM says it is , then SUM is in for a great fy19 as it's sitting on lots of stock to sell. SUM say these units are selling on average in 3months.

[Maverick]

The trouble for me with trying to line SUM up OCA is that SUM has a maturing, predictable business model and have a large historical set of accounts whereas OCA are in the middle of serious mega-renovations with little history of their new, up-specking direction.
i won't bang on about OCA on this thread but my response to yours Winner is that SUM appears to be presenting better value tha OCA "right now " and you are probably right, BUT, Couta's opinion is also very likely correct, that when OCA emerges from the chrysalis it is currently in then 3-5 years from now OCA will be in a field of its own in a superior (if not slightly monopolistic) position than your bog standard retirement village.
So I guess buy SUM now and switch to OCA later. Personally, I won't play that game as I don't think switching around like that generally works out better than the long game, plus , who wants IRD pricking their ears up.

[RTM]

The trouble for me with trying to line SUM up OCA is that SUM has a maturing, predictable business model and have a large historical set of accounts whereas OCA are in the middle of serious mega-renovations with little history of their new, up-specking direction.
i won't bang on about OCA on this thread but my response to yours Winner is that SUM appears to be presenting better value tha OCA "right now " and you are probably right, BUT, Couta's opinion is also very likely correct, that when OCA emerges from the chrysalis it is currently in then 3-5 years from now OCA will be in a field of its own in a superior (if not slightly monopolistic) position than your bog standard retirement village.
So I guess buy SUM now and switch to OCA later. Personally, I won't play that game as I don't think switching around like that generally works out better than the long game, plus , who wants IRD pricking their ears up.

No one has to bet on one or the other. It’s quite OK to own them both.

[Beagle]

We've seen this movie before and if I remember correctly there were about 70 that were delivered late in 2017 that were tagged with the same (delivered too late in the year to be sold) line. So were these 70 actually sold, well yes and no.
Had another look at FY17 results presentation and it would appear my memory is not especially sharp. Was a different narrative and although units were delivered towards the end of the second half it wasn't anything like as tight as what is suggested this time with the 133 units and therefore I take a less jaundiced view on said 133 units. Would still be good to see a cracking good Q1 sales result though to confirm sales are on track for a really good FY19. We've certainly had ripper weather this summer which should be helpful with progress both with construction and sales activities.
For mine: SUM and OCA have quite different business models. I see them as good complimentary holdings. 1H FY19 result for OCA was a little on the disappointing side and FY18 SUM result easily surpassed my revised expectations.

[dobby41]

No one has to bet on one or the other. It’s quite OK to own them both.

Yes - someone gets it.

[Beagle]

I'm sure almost all get it but there's certainly a lot of merit and interest in comparing the business model's and nuances of each operation.
I think one cannot overlook the fact that SUM's track record is arguably the finest of any company listed on the NZX, (underlying earnings have grown at a compound annual average rate of 43% since listing just over 7 years ago). Who else has achieved anything like that ? Certainly RYM didn't in their early years.
No secret I am a numbers man and the numbers with this one are really impressive. Track record counts for a LOT in my book.
OCA have the overhang of Maquarie and have a track record of just on 2 years. Time will tell how they go but certainly their business model is a very good one and the directors have a lot of skin in the game. Whether Earl Gasparich has the mettle to control costs tightly I am not quite so sure. A nice guy but I kind of like the tougher more commercial side of Julian Cook too.
Disc: I have now moved to a roughly equal investment position in each. Slightly more capital in SUM.

[Beagle]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SUM/331494/296247.pdf

Well regarded Harbour Asset Management adding SUM more.

[BlackPeter]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SUM/331494/296247.pdf

Well regarded Harbour Asset Management adding SUM more.

So it was them pushing the price up - yesterday was one of the days where any bid hoping on a bit of interday weakness failed. Bastards!

[Beagle]

So it was them pushing the price up - yesterday was one of the days where any bid hoping on a bit of interday weakness failed. Bastards!

Safe to say they have deeper pockets than you and I !

[Maverick]

So it was them pushing the price up - yesterday was one of the days where any bid hoping on a bit of interday weakness failed. Bastards!
"During the past four months, as part of normal on-market trading activity Harbour AssetManagement Limited purchased a total of 1,947,811 SUM ordinary shares "
not to sure it was just yesterday. They spotted the bargain a wee while ago me thinks.

[BlackPeter]

"During the past four months, as part of normal on-market trading activity Harbour AssetManagement Limited purchased a total of 1,947,811 SUM ordinary shares "
not to sure it was just yesterday. They spotted the bargain a wee while ago me thinks.


During the past four months, as part of normal on-market trading activity Harbour Asset
Management Limited purchased a total of 1,947,811 SUM ordinary shares for $12,220,886
and sold a total of 599,201 SUM ordinary shares for $3,800,782. In addition, as part of
normal on-market trading, First NZ Capital Securities Limited has borrowed 30,760 SUM
ordinary shares as at the date of this relevant event.



You are right - they just managed to go on Tuesday over the 1% threshold which triggered the report.

Interesting to see that SUM was moving over the last 4 months in a channel with quite strong support at $6 and resistance somewhat above $6.50 - and yes, they accumulated the last 4 months. So, that's what they see as bargain price.

Just one other snippet from the announement - can anybody make sense out of the roughly 31k shares FCNZ is disclosing to have borrowed? I guess one hand (Harbour) supporting the stock and the other hand (FCNZ) shorting it does not seem to be at facevalue such a flash strategy ... and 31k shares is as well a pretty minute amount to make any significant impact on the market - or is it possible that FCNZ was shorting SUM (with more shares, which they returned by now, i.e. didn't had to disclose) to drive the price down and allow Harbour to buy on the cheap?

Would it be thinkable Harbour and FCNZ working in harmony for one entity to benefit from the downwaves (by shorting) and the other entity to buy at rock bottom ... and bringing the pice up for the next short cycle to start?

Not saying they did that - but would it be thinkable?

10369

Confused ... :confused:

[Maverick]

I'm in awe of your computer skills BP,Do you have a teenager helping you?
i don't wish to stunt any insightful conspiracy comments on your graph but on a slightly different matter I just can't reconcile why RYM has a slightly forward Pe of 24 (profit only officially indicated at this stage) while SUM has an actual Pe of 14. Go figure?

yes yes , rym has loads of history and it's graphs are all super smooth growth dream charts ,so that Pe is perhaps warrented ( maybe in a different country or market mood.) However SUM have also build up a similar set of constant ,silky smooth , growth charts. They have a lot of years under their belt now too.

I would never expect such a yawning PE gap between to similar companies producing the same goods and results. Therefore either RYM has to come down , SUM has to be rerated up , or we just have ourselves a Toyota over a Ferrari (when they both have the same job of taking the kids to school)

[couta1]

Maverick you need to tap into the Couta relativity ratio to be in tune with the force when it comes to RYM/SUM, for years Beagle has been waiting for a consistent lasting disturbance in the force to no avail,like a dog chasing it's tail.

[winner69]

I'm in awe of your computer skills BP,Do you have a teenager helping you?
i don't wish to stunt any insightful conspiracy comments on your graph but on a slightly different matter I just can't reconcile why RYM has a slightly forward Pe of 24 (profit only officially indicated at this stage) while SUM has an actual Pe of 14. Go figure?

yes yes , rym has loads of history and it's graphs are all super smooth growth dream charts ,so that Pe is perhaps warrented ( maybe in a different country or market mood.) However SUM have also build up a similar set of constant ,silky smooth , growth charts. They have a lot of years under their belt now too.

I would never expect such a yawning PE gap between to similar companies producing the same goods and results. Therefore either RYM has to come down , SUM has to be rerated up , or we just have ourselves a Toyota over a Ferrari (when they both have the same job of taking the kids to school)

RYM seen as the premium / bigest stock in the sector (NZ)....best in breed or similar phrase

RYM on the Boston Consulting list of one of the great wealth creators globally over many years

RYM is held by global instos and investors and they seem happy holding reasonable chunks

This makes RYM desirable and it’s multiples have always been higher than its peers in NZ ....relative PEs are what matters and I doubt whether that will change any day soon.


In saying that there have been times when PE has been outrageously high and subsequent 3 year returns have been poor ...and conversely times when PE has been below average and thats been good buying times.

Get the picture .....life isn’t always logical or straight forward.

Like why does SUM have higher multiples than OCA

[Beagle]

Just to expand a bit on that for the newbies on here. Couta1 has this theory called the Couta1 relativity theory that says SUM will inevitably revert to a trend line channel of 50-60% of the share price of RYM.

Now I for one must admit this theory has proved remarkable resilient in recent years to my huge surprise especially seeing as SUM have consistently been growing underlying earnings much much faster than RYM. Indeed as Maverick has observed the price relativity of these companies is such that they each earn a similar underlying eps now and the price is almost entirely based on the market according RYM nearly double the forward PE.
My good friend Couta takes great pride in espousing the merits of his relativity theory and how its proved to be so correct over the years whenever we catch up.
Of course with me being a numbers man as long as SUM keep growing eps faster than RYM I think one day his relativity theory will be busted wide open, a bit like his one on TRA which says it should be $3.80 :lol:
The same thing will happen one day with this SUM / RYM thing but until them I humor him with acknowledging his prowess. (The things you do for your mates) :)

RYM is vastly overpriced for this stage of the real estate cycle. I called this emphatically at $14 last year and was the only one to do so. I still think its considerably overpriced.
RYM never grew earnings at an average rate of 43% per annum in its first 7 years of operations. The numbers say SUM has built an enviable track record, (probably unmatched on the NZX to the best of my recollection). I think Harbour recognise a value growth stock when they see one.

Yes BP I think they were working the trading range for a while there and yes I think we now have a breakout.

One could make some sort of argument that OCA as a relative newcomer to the market and with a less well proven track record might in some respects deserve a slightly below average sector forward PE until they prove themselves, (I like their business model, their board and management and think they have excellent long term prospects) but that same argument holds no water whatsoever with SUM.

Nobody in their right mind would question SUM's track record since listing so does it deserve a below sector forward PE rating ?. Definitely not in my opinion.

[BlackPeter]

I'm in awe of your computer skills BP,Do you have a teenager helping you?

Is it that bad? No, no teenagers at home anymore - and our youngest passed already the magical thirty and certainly does not teach me computing skills ;);


...
i don't wish to stunt any insightful conspiracy comments on your graph but on a slightly different matter I just can't reconcile why RYM has a slightly forward Pe of 24 (profit only officially indicated at this stage) while SUM has an actual Pe of 14. Go figure?

yes yes , rym has loads of history and it's graphs are all super smooth growth dream charts ,so that Pe is perhaps warrented ( maybe in a different country or market mood.) However SUM have also build up a similar set of constant ,silky smooth , growth charts. They have a lot of years under their belt now too.

I would never expect such a yawning PE gap between to similar companies producing the same goods and results. Therefore either RYM has to come down , SUM has to be rerated up , or we just have ourselves a Toyota over a Ferrari (when they both have the same job of taking the kids to school)

RYM is basically in the same category of blue chip investments as e.g. AIA, FPH, MFT and similar. They are basically used as pseudo bonds and large foreign funds bought in and pushed the price up. The risk I can see in that is what's happening if the NZD starts for whatever reason to drop - all the foreign funds would concurrently line up at the exit - which is when the magic couta formula could get a major dent ;):

SUM is a good company, but I don't think they are in that league yet. But sure - something to look forward to :), but obvioulsy in that case the same risks would apply ...

Anyway - my assumption is that RYM and SUM will over the years come closer together PE wise, and it probably will be a combination of RYM giving and SUM taking ...

[Beagle]

Anyway - my assumption is that RYM and SUM will over the years come closer together PE wise, and it probably will be a combination of RYM giving and SUM taking ...

^^^^^ This, I agree 100%. If I could reliably borrow the scrip for several years I'd be more than happy to double down on SUM and take the same short position in RYM to hedge my additional investment. Couta1's relativity theory will be confined to the annuals of folk lore history in due course.

[couta1]

Keep dreaming guys.PS-SUM companies need a lot more work on the care side of their business to match certain other companies.

[freddagg]

The money is in property development, not in looking after tax payer funded old people.

[tuaman]

The money is in property development, not in looking after tax payer funded old people.

spot on!:t_up::t_up::t_up::t_up::t_up::t_up::t_up::t_up ::t_up::t_up:

[LAC]

Holder in all 3 but I like the development and resales part of the business.

[couta1]

The money is in property development, not in looking after tax payer funded old people. True but I view things from the inside and having the best quality care clouds my buying perspective in this sector.

[Beagle]

True but I view things from the inside and having the best quality care clouds my buying perspective in this sector.

My view is unsullied by working in the sector. Like any good Beagle I simply concentrate on who's going to give me the biggest feed :D

[couta1]

My view is unsullied by working in the sector. Like any good Beagle I simply concentrate on who's going to give me the biggest feed :D Yes and we understand each other's perspective purrfectly and can agree to disagree.

[winner69]

blackPeter


Anyway - my assumption is that RYM and SUM will over the years come closer together PE wise, and it probably will be a combination of RYM giving and SUM taking ...


Yes maybe closer together but there will still be a big gap between the two at the end of the day

[winner69]

The money is in property development, not in looking after tax payer funded old people.

But these tax payer funded old people in Oceania care suites die quicker .....higher churn rate of the units (known as short tenure in the trade) ....excessive profits for Oceania

Then again some might say the deal around these care suites is heavily weighted in favour of Oceania making excessive profits and maybe these types of ‘arrangements’ will come under scrutiny one day

[RRR]

https://abcnews.go.com/US/64-year-plans-spend-golden-age-holiday-inn/story?id=61299655

Retire in a hotel or a motel..

[IAK]

https://abcnews.go.com/US/64-year-plans-spend-golden-age-holiday-inn/story?id=61299655

Retire in a hotel or a motel..

I prefer the Cruise Liner option. Spend your golden years traveling around the world, and when you've had enough, or run out of money, just jump overboard! Lol.

[Ggcc]

High turnover today and price heading up. Someone sees value

[Beagle]

High turnover today and price heading up. Someone sees value

Yes, turnover at 1.16m shares more than 5 times the daily average of 203K. Almost like some institution knows something about Q1 sales. I hate it how they can get often organise company visits and small shareholders can't normally. Harbour Asset management don't have to travel far to visit Summerset in Wellington do they ! They are known to have been adding lately.

[Beagle]

Another big volume day with 5x the normal volume done already. Interesting situation as technical analysis clearly looks good and fundamental analysis suggests the shares have never been cheaper on a forward PE basis. Disc: Back to being one of my biggest NZX listed investment positions.

[winner69]

Another big volume day with 5x the normal volume done already. Interesting situation as TA clearly looks good too.

Index rebalancing day they say

[Beagle]

Index rebalancing day they say
No that's tomorrow in the closing match process mate. 9x the average daily volume done now.

[oldtech]

Does anybody have any idea why there was such a big drop this morning? Plunged to $6.560 at one point.

[winner69]

No that's tomorrow in the closing match process mate. 9x the average daily volume done now.

Huge volume in SPk as well as sb9 mentioned rebalancing

[babymonster]

looking for dip my toes in the retirement village sector after recent downturn.. any suggestions? i was in Rym 2 yrs ago but sold after 20% profit (too early). thinking about either sum or met, will do my own research later but any ideas are appreciated.

[Blue Skies]

looking for dip my toes in the retirement village sector after recent downturn.. any suggestions? i was in Rym 2 yrs ago but sold after 20% profit (too early). thinking about either sum or met, will do my own research later but any ideas are appreciated.

imho, medium, long term, you can't go wrong with any of them, but OCA most undervalued at moment.
Award winning care & cheerful, committed, engaged staff (have been v impressed by them), huge assets, very smart management with lots of skin in the game, and lo & behold some of them have been adding to their existing large holdings at present sp levels.
And a good dividend yield.
Disc hold both SUM & OCA & not selling either.

[BlackPeter]

looking for dip my toes in the retirement village sector after recent downturn.. any suggestions? i was in Rym 2 yrs ago but sold after 20% profit (too early). thinking about either sum or met, will do my own research later but any ideas are appreciated.

I think there is plenty of information in the relevant threads.

In a nutshell: MET looks cheap at face value, but there might be good reasons for that (leaking homes ...); SUM and OCA do have different business models (and are therefore quite uncorrelated) but look at this stage in my view both certainly worthwhile to consider. OCA might be a steal at current prices. RYM is the gold standard and priced accordingly. Less risks, less rewards. ARV: may or may not be worthwhile to research, I have not really a view on them (but a bad first impression ;) ...

As always - nobody can predict tomorrows share prices and even good looking companies might slip further ...

Disc: hold some SUM, lots of OCA and INA on the ASX ...

[sb9]

First NZ have lightened their holding.

[BlackPeter]

First NZ have lightened their holding.

I guess with their holding size it does make sense for them to sell into uptrends. They might have bought these shares for below $3 and just wanted to realise some of their gains.

Nice to see that the share price keeps rising ... :t_up:

[Beagle]

SUM the proven long term performer rides to my rescue to give me some much needed happiness...what a marvellous track record it has since it listed way back in 2011 !

[babymonster]

Thanks all.

[Timesurfer]

Generate were singing their praises in the last update and have been adding to their portfolio recently “at the expense of another - more expensive - aged care stock”

[minimoke]

After selling out last year at $6.40 to preserve my capital during a plunge I've re-entered the SUM family at $6.67 this evening. I'm a bit full of OCA and dont really want any more exposure there so figure I have to put SUM of my SML money SUM where else. My money is now on SUM doing better than SML. Lets see how this pans out!

[RupertBear]

After selling out last year at $6.40 to preserve my capital during a plunge I've re-entered the SUM family at $6.67 this evening. I'm a bit full of OCA and dont really want any more exposure there so figure I have to put SUM of my SML money SUM where else. My money is now on SUM doing better than SML. Lets see how this pans out!

Hope you are not part of that Bowling Club Mini! :p

[Beagle]

After selling out last year at $6.40 to preserve my capital during a plunge I've re-entered the SUM family at $6.67 this evening. I'm a bit full of OCA and dont really want any more exposure there so figure I have to put SUM of my SML money SUM where else. My money is now on SUM doing better than SML. Lets see how this pans out!

Welcome back mate. SUM stocks have proven management and a very well respected board, others have earned no respect after blindsiding shareholders and half the board are appointments from Bright Dairy who have their own agenda.

[Beagle]

Sizeable fall for SUM on Friday yet RYM did well. Back into the middle of the Couta1 50-60% relativity range now so probably good buying at ~ $6.50.
Forward PE only about 12 on my very early preliminary estimated 2019 underlying profit of $120m.
Probably the lowest forward PE the shares have ever traded on. TA looks reasonably supportive too.
Might park some former SML money here too....good companies with attractive metrics and TA and a consistent track record of growth and a well respected board are not exactly in over abundance on the NZX.

[BlackPeter]

Summerset expanding in the South Island and bought land in Rangiora and Blenheim. I'd see this as a good thing - both are nice places where retirees like to settle, though admittedly - they could have done a better job to review the annoucement before publication ;):

https://www.nzx.com/announcements/332408


Summerset has purchased land to build retirement villages in Rangiora, north of Canterbury, and Blenheim.



Hmm - last time I checked Rangiora was part of North Canterbury, NOT north of Canterbury ...



Mr Cook said Waimakariri District’s 75+ population was forecast to increase by 30% and Blenheim’s 26% over the next four years.



That's an amazing growthrate - "75+ population increasing by 30% over the next 4 years". I am wondering whether they put some aging agent into the water :);

Not sure, though what they really wanted to say - maybe they got the order of magnitude wrong? Lets hope that it was not the CFO who reviewed this announcement ...

[Beagle]

Multiple recent land acquisitions, (two others announced at the time of the annual result in late February), show SUM are gearing up for quite some considerable growth in the years ahead. I like how they're planning to execute that in regional N.Z. as the Auckland construction market is and will be under substantial pressure for many years. Happy holder.

[Grimy]

That's an amazing growthrate - "75+ population increasing by 30% over the next 4 years". I am wondering whether they put some aging agent into the water :);
.[/QUOTE]
Maybe a heck of a lot of 71-74 year olds live in the area...….

[macduffy]

That's an amazing growthrate - "75+ population increasing by 30% over the next 4 years". I am wondering whether they put some aging agent into the water :);
.
Maybe a heck of a lot of 71-74 year olds live in the area...….[/QUOTE]

Indeed they do. Both are preferred retirement locations, a la Tauranga/Mt Maunganui.

[Beagle]

Be interesting to see how their Q1 sales have gone.

Decided I felt I needed to do my bit to lift revenue for AIR and go and have a chat with Julian to see how things are going so winging my way down to the SUM annual meeting on 30 April. Heading down on the 9.00 a.m. flight to Wellington and if anyone wants to catch up and have a good chin wag with this dog, don't be shy, let me know :) Pretty sure Couta1 will be around so I'm sure there will be the usual drinkies afterwards.

[Maverick]

Be interesting to see how their Q1 sales have gone.

Decided I felt I needed to do my bit to lift revenue for AIR and go and have a chat with Julian to see how things are going so winging my way down to the SUM annual meeting on 30 April. Heading down on the 9.00 a.m. flight to Wellington and if anyone wants to catch up and have a good chin wag with this dog, don't be shy, let me know :) Pretty sure Couta1 will be around so I'm sure there will be the usual drinkies afterwards.
Cheers for the reminder Beagle, I've got every intention of firing up the Honda and popping down there too. Will be nice to see you again and maybe meet the lengdary Couta too.

[Beagle]

Cheers for the reminder Beagle, I've got every intention of firing up the Honda and popping down there too. Will be nice to see you again and maybe meet the lengdary Couta too.

Cool, look forward to catching up again :)

[Ggcc]

Come on who wants 300,000 plus shares fess up

[couta1]

SUM getting reverted to the mean aye winner, currently on a 52.6% ratio to RYM, hope it doesn't get inverted.

[Beagle]

BUY Its now a SCREAMING BARGAIN !!!!!!!

[Baa_Baa]

SUM getting reverted to the mean aye winner, currently on a 52.6% ratio to RYM, hope it doesn't get inverted.

Today was a very tidy technical bounce off the converged 50 and 100 DMA's and the short term rising trendline from Feb. Not sure if that's a screaming buy, but the resident FA spokesperson reckons it is. To me it just says if you cleverly bought 6-6.50 (or lower historically) then hold in the meantime. The 200MA looms above at 6.94, let's see if it can bust that old chestnut, if it does then the money will pile back in. Still aways from $8 where it looks like the market reckons it got a bit ahead of itself, despite the divis.

[RupertBear]

Recent drop may be related to Craigs dropping SUM from their private wealth portfolio in favour of RYM...or not...:confused:

[winner69]

SUM getting reverted to the mean aye winner, currently on a 52.6% ratio to RYM, hope it doesn't get inverted.

And reverting to the SUM:OCA ratio of 1:6

[winner69]

Sales for Q1 soon ......might be a terrific number ...than might not be

Doesn’t really matter which way as numbers weighted to second half of the year anyway

[Baa_Baa]

Recent drop may be related to Craigs dropping SUM from their private wealth portfolio in favour of RYM...or not...:confused:

It will be related for sure, just difficult to judge quite how much of an influence, there's plenty of members and 4-5x as many lurkers here who subscribe to Craigs, many without the insights to make their own decisions (or even taking notice), so they follow the advice, right or wrong. Might see a shift from SUM to the preeminent RYM that sets the sector investment standards, despite the sector commentators here who have differing views. Always best to run with the money, be dispassionate or involved. Works out better in the long run imho.

[Maverick]

Sales for Q1 soon ......might be a terrific number ...than might not be

Doesn’t really matter which way as numbers weighted to second half of the year anyway
Hey Winner, these particular sales figures matter a lot because SUM had a surplus 133 late deliveries from December that held back their FY18 result. If things are hunky dory then the new sales should be up a lot this quarter as it normally takes about three months to sell a new villa (at least that's the case with ARV).
so ....
A.if the new sales are not significantly up then it will be the first real sign of the property market slowing up or over supply.
B. If new sales are significantly up then SUM is continuing on its fantastic growth path and we should see a fy 19 profit of about $130 million.

[Maverick]

Of the 133 late December fy18 deliveries there is actually only a net 113 surplus above normal stock levels ( by my calcs). If it takes three months avaerage to sell a villa then half of the 113 should have sold = 56
I would normally expect the first quarter sales somewhere around 75.
my expectations are for this quarter sales to be 75+ 56 =131.
Thats a huge call I know , so it will be very interesting to see how it actually works out.
IF , and that's a big IF, the sales are anywhere close to 131 that will be a huge jump from normal. So then the share price should surely see some nice action.( and just maybe ARV + OCA ).

[winner69]

Of the 133 late December fy18 deliveries there is actually only a net 113 surplus above normal stock levels ( by my calcs). If it takes three months avaerage to sell a villa then half of the 113 should have sold = 56
I would normally expect the first quarter sales somewhere around 75.
my expectations are for this quarter sales to be 75+ 56 =131.
Thats a huge call I know , so it will be very interesting to see how it actually works out.
IF , and that's a big IF, the sales are anywhere close to 131 that will be a huge jump from normal. So then the share price should surely see some nice action.( and just maybe ARV + OCA ).

Jeez that 131 is nearly double last year’s 68

Oyster and chips for lunch down the beach if that is the case

WOW

[Beagle]

Jeez that 131 is nearly double last year’s 68

Oyster and chips for lunch down the beach if that is the case

WOW

Yeap, save it up for 30 April and Couta1 and I will come and join you :)

[LAC]

131:eek2: wow that would insane but unrealistic from the sales performance over the last few results. A great long term hold and they will just build and sell as the demand grows over time. But expecting doubling of sales wont happen (I wish it does lol) but be prepared for satisfactory sales, the residential markets have turned significantly. So much so that even I have looked at buying property because of value.

[Beagle]

Hey Couta1. RYM $12.49 now as I type. Mid point of your world famous Couta1 reversion theory at 55% suggest fair value for SUM is $6.87.
SUMwhat cheap eh :) TA looks okay and FA looks fantastic. Share buy-back of over 500,000 shares to happen on or around 5 April, see company news recently and Q1 sales due imminently. All the encouragement one should need eh mate :)
A really good Q1 sales result could see this burst up above $7 almost in the blink of an eye...

[macduffy]

Interesting speculation on Q1 sales these days. Just remember though that sales require demand as well as completion of units.

[winner69]

Less total sales in Q1 than last year ...hmm

I think Maverick has a puzzle to solve (properly this time)

No worries though ....’consistent with last year ‘ and ‘tracking well ‘ and we know sales are weighted to second half of year

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SUM/332995/297965.pdf

[minimoke]

“We continue to have low levels of homes for resale available, with 40 uncontracted homes at 31March compared to 53 at the end of 2018,” said Mr Cook.

[BlackPeter]

“We continue to have low levels of homes for resale available, with 40 uncontracted homes at 31March compared to 53 at the end of 2018,” said Mr Cook.

Well, I guess looking at the sales trend (below a rolling total over the last 4 years) - it is hard to identify any uptrend in the sales numbers.

10442

On the other hand - they did deliver a good number of additional units every year and the number of uncontracted units is minute - i.e. the problem can't be a lack of demand.

Maybe this is indicating that people like SUM units that much that they just live a bit longer (reducing the unit resales) in them ... but this would be a good thing, wouldn't it? Maybe an idea for their marketing department to utilise.

On the other hand - while the total annual sales numbers did hardly change since 2015 (well - 574 end of Q1 2016 to 634 this quarter) - EPS went up from 39 cents in 2015 to 97 cents in 2018. This is a revenue CAGR of more than 30% despite only slightly increased sales numbers.

Maybe we can forgive a company with a forward PE of less than 10 if the earnings growth stays just around or slightly above a CAGR of 30 ... though obviously - they could do better, couldn't they ;)?

[Beagle]

Sales result is okay...people taking longer to sell their houses in Auckland is expected. I'm looking forward to hearing the narrative at the annual meeting and discussing things with Julian afterwards. I like how they're acquiring a lot of land in provincial New Zealand and I would expect that has been happening at very attractive prices.

[sb9]

Market doesn't like reported numbers.

[winner69]

Market doesn't like reported numbers.

Share price just reverting to 50% of Ryman's ...just a little way to go

Fairly valued now

[winner69]

Market doesn't like reported numbers.

Maverick panic selling in a bid to bet the rush to the exit


New sales only half what he expected .....sure to be disappointed

[LAC]

Market doesn't like reported numbers.
Il be waiting with my hands out:)

[winner69]

Total sales of 137 is lowest / worst quarter sales since Q1 2016

[bull....]

Market doesn't like reported numbers.

yep slowing property markets are not good for these retirement stocks

[couta1]

Share price just reverting to 50% of Ryman's ...just a little way to go

Fairly valued now Hopefully not the dreaded inversion aye winner.

[bull....]

a look at the charts shows it was in a down trend , the bump up recently was due to it being oversold. a break below 6 would be very bearish

[Beagle]

What some of us have learned before is not to read too much in to one quarters sales result. The company still posted very good profit growth in FY18 despite lower sales.
Its just taking longer for people to sell their homes so they can move into a SUM unit. This shouldn't come as a surprise to anyone.