SUM - Summerset Group

[rmbbrave]

AMP to list retirement village unit

AMP Capital Investors has confirmed plans to float Summerset Group, one of the country's biggest retirement village businesses, on the sharemarket.

AMP said today the share offer would open in August. AMP will retain 20 per cent of Summerset and sell new and existing shares comprising 80 per cent of the company. The fund manager bought the Paraparaumu-based Summerset for $125 million in late 2005.

Summerset was set up in 1994, and its first village opened in 1997. It now has 11 villages, including ones at Trentham, near Porirua, and at Paraparaumu, and wants to own 20 villages by 2011. It had 770 units at the end of last year and plans to increase that to 2086 within four years.

Summerset chief executive Norah Barlow said this week the company had net assets worth $200 million, with a "conservative" debt level.

Brokers First NZ Capital and ABN Amro Rothschild have been appointed joint lead managers of the float.

AMP's announcement today follows a Dominion Post story on Wednesday which said AMP was looking to list Summerset. Existing listed retirement village operators include Ryman Healthcare and Metlifecare

[Bling_Bling]

Would like more comments on this float. Is it worth having a look at or just another private equity selling their holding to the public?

[rmbbrave]

Nothing retiring about Summerset's float
5:00AM Friday July 20, 2007
By Liam Dann


The interior of one of the units at Summerset.
The NZX will get a much-needed shot in the arm with the float of AMP Capital's retirement business, Summerset, which is expected to list in September with a value over $350 million.

AMP Capital is to float 80 per cent of the business with the offer opening in August.

The $300 million expected to be raised makes it the biggest stock market float since 25 per cent of lines company Vector was listed in 2005.

NZX products group manager Geoff Brown described the float as a "healthy fillip" for the market.

Takeovers have wiped $12 billion of capital off the market in the past two years, with just $3 billion coming back by way of new listings.

Brown said the Summerset float was hugely positive, not just because of its size, but because it was in a sector with a great deal of investor appetite.

The fact that this was a private equity group selling back to the investing public was also a positive.

"It follows a similar process they undertook with Methven and I think that's great for the market."

Brown said Methven, a manufacturer of shower and tap fittings, had been a wonderful success.

Summerset, which has 10 villages providing accommodation for 1600 people, will join rival operators Ryman Healthcare and Metlifecare on the stock exchange.

It will be the third-largest retirement home operator by market capitalisation but aims to grow rapidly in the next few years.

It plans to have 20 villages complete or under development by 2011.

Villages are planned in Hastings, Waimauku, Warkworth, Karaka and Katikati.

Earlier this month, Summerset announced record pre-sales of $6.5 million for its $50 million Warkworth Village.

Chief executive Norah Barlow said at the time that the strong sales reflected the continued growth in demand for the lifestyle offered by retirement villages.

"While penetration rates for retirement villages have increased from 3 per cent in 1999 to around 4.3 per cent, they are still relatively low by international standards, which suggests demand will continue," she said.

With its head office at Paraparaumu near Wellington, Summerset was founded in 1994.

AMP Capital bought it for about $125 million in 2005.

Demographic trends are on the sector's side with the number of people aged over 65 - 512,000 as of 2006 - expected to grow to about 1.3 million by 2050.

But despite the growing market, analysts warn there are still risks in the sector.

It was possible for the level of development to outstrip demand depending on the number of competitors prepared to enter the sector. Operators needed to ensure they were targeting the most profitable segments of the market. Summerset claims to specifically target the middle-market segment.

There are also issues around the supply and price of land as the sector competes with other property developers.

Comparisons between competitors were not always easy to draw, said one analyst, who pointed out that Ryman and Metlifecare traded on vastly different price-to-earnings multiples.

Ryman, with 17 villages and two under construction, has a market capitalisation of $1.07 billion and trades on a multiple of nine times price to earnings (PE).

Metlifecare owns and operates 15 retirement villages, incorporating nine care facilities and seven hospitals.

It has a market capitalisation of $690 million and trades on a PE multiple of 26.

Metlifecare is in expansion mode, having this month announced the acquisition of a Christchurch retirement village and the development of a Takapuna site on the North Shore.

Chief executive Richard de Haast said the key to expansion was putting more residential units on sites it already owned.

With land prices so steep, it had to focus on internal growth and expansion, utilising its "land bank", particularly in areas with the biggest potential: Auckland and the Bay of Plenty.

Metlifecare is tightly held with more than 80 per cent of its stock i

[Hoop]

I'm all eyes and ears on this one. Will be following it carefully. Early days yet. Great booster for our little NZX, may even result in some spillover to other listed NZ stocks.

[AMR]

Definitely worth a look in, you can't deny the fundamentals of the industry look good.

[Snow Leopard]

and I am sure that it would be priced accordingly.

[Snow Leopard]

quote:Originally posted by rmbbrave

Nothing retiring about Summerset's float
5:00AM Friday July 20, 2007
By Liam Dann

...Ryman, with 17 villages and two under construction, has a market capitalisation of $1.07 billion and trades on a multiple of nine times price to earnings (PE).

Metlifecare owns and operates 15 retirement villages, incorporating nine care facilities and seven hospitals....

It has a market capitalisation of $690 million and trades on a PE multiple of 26.


NZX quotes a P/E of 9 for Ryman, heaven only knows how they worked that out. I would suggest the true (historical) number is also 26 or 16-17 if you had in the revaluation gains for property etc.

[Crypto Crude]

This morning ASB business was talking about this IPO.... and they were quite bullish about summerset... I would tend to agree with the whole long term view on baby boomers going into retirement and increased demand for this sector... BUT.... with property prices heated and likely to fall then this type of investment is likely to fall as it is correlated with housing market fall...
Ryman is in the same position...

In the mean time while we wait for property prices to correct, it will be a good solid investment... I have not looked into the details around the float, and I have not researched this company indepth, DYOR...
[8D]
.^sc

[Halebop]

Long term Demographic trends are positive for the sector.

Short term valuation criteria would be negative. As a commercial operator of real estate assets, NPV / DCF are sensitive to prevailing interest rates. I suspect AMP are trying to pick the top.

[OldRider]

Operation seems very much leveraged to property prices. We have two different couples who are family friends. One couple moved into one of the new villages perhaps a year ago, the others delayed, price this year for lease to occupy - $70,000 dearer than last year. Up about 20%

All my information is second hand from these people, and my interpretation my be a little confused, but it seems to me purchasers get a licence to occupy which must be surrended to the owning company on leaving, with repayment for lease at a discount to the original cost. Lease charges seem moderate, about $4000 annually, this apparently covers most outgoings one would pay for their own property - rates insurance maintenance of dwelling & grounds, so life is simple and thus the scheme has it's appeal.

Profitability seems to me to mostly come from increasing lease purchase price which would have some connection with current house prices, thus my initial conclusion.

[Yossarian]

i'll stick with AVE on the ASX. quality outfit, still trading at lower p/e's than the other main players...

[Dazza]

why sell? where are they using the funds ie the 300 mill they going to get out of this?

definately looking like they going for a kill, 100% gain in 2 years is very good....

[Bling_Bling]

It concerns me when private equity sell down most of their holdings in an IPO. Have to look at the propectus very carefully on this one to convince me. The only reason I am even looking into this is cos the sector is doing very well.

[AMR]

Would have to take a good look at the projections - reading the old Feltex thread has dampened my interest in this IPO.

What are their levels of debt?
Has the market peaked?

[foodee]

Looking from its market (client/customer/consumer) point of view, my feeling is that most of these people would want a 'total package' ie from retirement living to final care.
It appears from summerset website that they are swinging away from 24 hours care and concentrating more on 'serviced apartment' in their more recent development. Seems to indicate that 'age-care' is not as attractive.
Looks more like just a property play

[zyreon]

seems like it's worth a closer look, but we're all going to have to be very careful over the next couple of years as private equity starts selling out to the public. It's a cycle, and now that interest rates are on the rise the private equity boom will probably start to wane a little, thus having seen companies disapear we're likely to see companies return. Private equity is a good thing in general as it cuts out the fat, uses more efficient capital structures and in general adds value... but questions must be asked when the time comes to flick it off to joe-mom&pop-investor.

don't think it will offer much chance to make a quick buck on debut though.... *searches for a prospectus*

[Billy Boy]

I'm a little sceptical on this one.
I think AMP are selling at the top , They have the research teams etc.. They are only keeping 20%, why not keep a controlling interest?
Why would you sell a good earner if in fact it is/gonna be ??
Summerset is established sure but it's a small boy up against two bigger boy's. Takeover target maybe !!
We are in the dark at the moment, lets have a good look when all the splurb is out.
Cheers BB

[Yossarian]

takeover target? I think unlikely. Probably Metlife and ryman have already run their rulers over it and decided not at that price!

[Bling_Bling]

quote:Originally posted by Yossarian

takeover target? I think unlikely. Probably Metlife and ryman have already run their rulers over it and decided not at that price!



I agree. If it is a T/O target they wouldnt need to do a IPO. Not at these price.

[rmbbrave]

Quest for gold in golden years

Two financial giants are going head-to-head for $400 million of investors' cash in two retirement village floats.

Dutch finance group ING yesterday said it would float its villages in Epsom and Remuera, pitching itself against Australian heavyweight AMP to be first to the market with a share offer.

The floats will double the number of listed retirement village operators on the NZX. Ryman Healthcare and Metlifecare are the only current listed eldercare specialists, with a combined market capitalisation of $1.7 billion.

ING wants to raise $100 million from shares in its retirement business which will be called ING Real Living. The float will be managed by Forsyth Barr.

Last month, AMP NZ Capital Investors said it would float 80 per cent of its Summerset retirement village business, which was established in 1994 and owns a string of villages throughout New Zealand.

This float is expected to seek about $300 million, and is likely to be the year's largest.

AMP spokeswoman Jane Anderson could not give any further details on the Summerset float or say when the prospectus would be issued.

But it is understood AMP is aiming to have Summerset listed by September, and Real Living is scheduled to float in late September or early October.

ING, which is floating Real Living with Symphony Investments, said yesterday it was considering developing a further property in Remuera. The company's float would offer up to $100 million of stapled shares.

ING and Symphony are already in partnership, jointly controlling the manager of listed ING Property Trust.

Real Living will be chaired by former Metlifecare chairman Peter Fitzsimmons.

Ricky Ward of Tyndall Investment Management said the two new floats would provide alternatives for investors who could now only get exposure to the sector from two companies.

But some investment analysts said the ING float was far too small to attract interest from big institutions.


ING Real Living

* Raising $100 million.

* Villages in Epsom, Remuera.

* Another village planned.

Summerset

*Aiming to raise $350 million.

* 11 villages, 1600 retirees, 400 staff.

[winner69]

Shoeshine in the NBR gave his thoughts about this the other day ..... very interesting

You can get the independent advisors report when AMP took over Summerset in 2006 off the Companies Office website .... and even though a year or so old Shoeshine says probably hasn't changed much ..... and says that report is a precursor as to what the new IPO might look like.

One quote from that report was 'a potential list price (in an IPO) for Summerset shares would, in our opinion, inevitably trade at a discount to the PE multiplies currently being achieved by Ryman and Metlifecare' .... and so an IPO wasn't considered a good idea then etc

So what is AMPs $125M now worth?

[AMR]

From today's herald:

"On the local scene, AMP Capital pulled its proposed float of rest home operator Summerset in response to the market turmoil. In what would have been only the second IPO of the year, the float was expected to raise around $350 million."

[rmbbrave]

AMP pulls Summerset float
AMP Capital Investors has cancelled plans to float retirement village business Summerset on the sharemarket, blaming turbulence in global financial markets.

AMP had planned to sell 80 per cent of Summerset and hoped to raise up to $304 million. However, market testing of an indicative price range of $1.70 to $1.90 a share

failed to win enough support from share brokers.

AMP managing director Murray Gribben said this morning the float had been deferred after the NZX50 index fell 1.5 per cent yesterday and the Australian S&P200 dropped 3 per cent, mirroring recent international falls.

"Summerset is a quality business which AMP Capital Investors is very pleased to own," Mr Gribben said. "We believe that its inherent value exceeds what the market would be prepared to pay in the current volatile conditions. We are not willing to accept a lower price for the asset and are under no pressure to sell."

Existing shareholders would retain ownership and fund Summerset's development plans. Mr Gribben said AMP could reconsider floating Summerset in the future.

Yesterday the lead brokers of Summerset's float, First NZ Capital and ABN Amro Rothschild, delayed the book build by 24 hours. They said they were reassessing the pricing of the shares in light of "recent uncertainties in global financial markets." The delay would also allow more time to assess Summerset's ability to elect into the Government's new portfolio investment entities (PIE) tax regime, which comes into effect on October 1.

AMP bought Summerset for about $125 million in November 2005.

The promoters of a rival initial public offering by ING and Symphony Investments, of two Auckland retirement villages, are due to start talks with brokers on indicative interest over the next few days. Being managed by Forsyth Barr, the ING and Symphony float is looking to raise about $100 million.

[Snow Leopard]

Well it would appear to be back on again (http://www.nzherald.co.nz/markets/news/article.cfm?c_id=62&objectid=10755122) and with the current owners keeping a majority stake (insert your take on that here :confused:).

I am going a wandering for a while so it can happen without me, but you may (or may not) want to [invest/ignore/make some comment] on this.

regards
Paper Tiger
"I was born under a wandering star"

[CJ]

Well it would appear to be back on again (http://www.nzherald.co.nz/markets/news/article.cfm?c_id=62&objectid=10755122) and with the current owners keeping a majority stake (insert your take on that here :confused:).

I am going a wandering for a while so it can happen without me, but you may (or may not) want to [invest/ignore/make some comment] on this.is any once getting in on this. NO public pool from the looks of things and haven't seen it come through from ASB (haven't been looking though).

http://www.sharechat.co.nz/article/d67b1df0/summerset-bookbuild-comes-in-at-lower-end-of-expected-range-price-set-at-1-40.html

[percy]

I have asked my broker for a prospectus.This sector has been very kind to me.I hold RYM in NZ and ILF in Aussie.I did hold AVE in Aussie,and did well with MET [NZ]a good while ago. Reirement villages and medical supply businesses will keep doing well with the ageing population.l

[Xerof]

RYM are the rolls royce of this sector, Somerset's model is somewhat inferior. (I can't give you full details, but I was at an institutional presentation for the first attempted float a few years ago, and interest was only luke warm then, and consequently deferred) With the price being set at the lower end of the spectrum this time around, don't expect to stag it, but they will probably get this away OK

I'd be really interested to hear SAUCE's opinion on this one, as he knows the sector well by all accounts

[CJ]

my concern is that a PE fund is retaining a 50% stake. PE funds aren't long term holders so that is a huge overhang on the market.

they are probably maintaining 50% to ensure continuity of ownership required to carry forward tax losses - losses are of large value.

[QOH]

Any consensus on this float now ? Anyone interested, for some reason it doesn't inspire me to buy into it.

[percy]

my concern is that a PE fund is retaining a 50% stake. PE funds aren't long term holders so that is a huge overhang on the market.

they are probably maintaining 50% to ensure continuity of ownership required to carry forward tax losses - losses are of large value.

This was one of the reasons I decided not to take up any.I will hold all my Ryman.

[Balance]

This was one of the reasons I decided not to take up any.I will hold all my Ryman.

Not necessarily. Freightways is a good case in point of PE progressively selling out and investors have done well. Agree that's the exception though rather than the rule!

F

[percy]

Not necessarily. Freightways is a good case in point of PE progressively selling out and investors have done well. Agree that's the exception though rather than the rule!

F
Always exceptions.
The major reasons for not taking up Summerset,were;I believe RYM's model of doing ever thing in house is best.I believe RYM's reputation is the best.I believe RYM having more than half their units under 5 years old means there are huge earnings to come from resales.I have met CEO and CFO [and the directors at last AGM] and think a lot of them,and the way they run the business for the residents.They have grown the business without coming back to shareholders.Lastly I
found looking at Summerset made me realise RYM are superior.
thought RYM shareholders would be more stable in the next year or two.I suspose

[Sauce]

I thought the Summerset prospectus was one of the best I have read for quite some time. Hats off to the investment bankers in my opinion. All the relevant information was there, it was clear and easy to understand, and I thought they did a very good job of explaining the revenue model, which is not all that straight forward, the potential competitive advantages (I say potential because the company is not delivering anything close to excess returns at this point in time so technically is not operating within a true quantifiable competitive advantage) and the right amount of detail and historical financial data is supplied to answer most questions. I thought the description of the business and its cashflows was actually much better than that I have seen provided my Ryman.

On the other hand the quality of the investment opportunity itself is more questionable....

Summerset are (quite understandably) attempting to recreate the Ryman model in almost every aspect of their business, but there are a some key differences, both quantitative and qualitative, between the two businesses.

Qualitatively, with the focus on "internalisation of development and project management" you could be forgiven for assuming they are already vertically integrating their business in the manner that RYM are. But this is not the case. As Percy has already pointed out, RYM do every step of the construction process in house including the construction. Summerset are trying to "internalise" the design and project management - and it appears from the prospecus that even these steps will not be fully integrated for another two years. The actual construction is still contracted out.

However they are definitely going down the right path trying to emulate Rymans 'cookie cutter' system, with the full continuum of care, and and trying to bring as much of the process in house as possible. My understanding is that while it sounds easy, and Ryman certainly make it look easy, the reality is that doing this kind of development in house is actually very very difficult.

Quantitatively, you can immediately see the differences between the two businesses showing up in the development margins which are currently about 7% for MET (forecasted to be 12% this year) vs RYMs consistent development margins of around 20 - 25%.

Without analysing average unit prices of each business, it's seems pretty obvious that this massive difference will almost certainly be due in part to the truly integrated in house construction model RYM employ, the lower relative financing costs RYM have due to much lower gearing, the larger scale of RYMs villages, and finally RYMs superior bargaining power with suppliers.

Most importantly, it is critical to realise that from an investor’s perspective Summerset is simply not yet profitable. It's easy to get carried away from what’s really important to investors by focusing on the re-valuations of investment property which ends up on the income statement. This is the wrong way to look at these retirement village businesses. It is not cash income and does not reflect current available cashflow that investors can take out of the business.

It is also wrong to look at the operating cashflow, which simply reflects the cash taken in from the sale of ORAs, most of which cash is refundable. Therefore, while the operating cashflow is useful (free use of the funds) it does not reflect shareholders profit.

The only figure that is really meaningful to investors in the float is the "Underlying Profit". This is basically the "owner earnings" or the profit portion of all their cash flows that could, in theory, be paid out to shareholders.

Looking at summerset on this basis it they have made an economic loss every year. Of course it appears that they are on the brink of a true economic profit FY12 if the pro-forma results are to believed. And it should grow from here as their villages mature and they increase the build rate, and scale of new villages. But there is simply no comparison to the extreme profitability achieved by RYM which can ultimately be purchased at a much cheaper price currently at 2.70 - unless you believe that Summersets cashflows are going to surge dramatically in the next few years, it’s a no-brainer in my opinion.

THe reality is that there is plenty of room for a few quality players to achieve sufficient scale, without destroying anyone’s profitability, for the foreseeable future. Summerset appear to be on the right path - in my very laymans opinion they will need to focus on further integrating the construction process, and building larger and better located villages to achieve this. They might get there in the end, but right now, I believe the business is not worth the asking price based on the current level of true profitability to shareholders, and there is simply a much better and instantly more profitable option in RYMAN to bother with the risks involved investing in the Summerset IPO. The only argument I can see for buying the profitless imitator rather than the incumbent, is that it is coming off a lower base, but, I don't see a ceiling to growth for RYM yet so I believe its an invalid argument.

I also think Summerset is a superior business to METlifecare and a welcome addition to the NZX.

My thoughts for what its worth.

With regards,

Sauce

[Sauce]

I also note the following from the Summerset prospectus:

Firstly, there appears to be no mention of Villa or Apartment Occupancy rates - this would have been fascinating info - although they mention historical care bed occupancy of about 95% in the notes on pro-forma forecast assumptions. For all practical purposes RYM have 100% occupancy across all villages (something retarded like like 0.02pc vacancy at the full year). I think a comparison of vacancy rates would be quite insightful - it's a shame they didn't include this information.

Secondly, it's not totally clear but possibly an important insight comes from the following statement "pre-sales typically commence approximately six months prior to the first villa being completed, with typically over 25% of the units pre-sold by the time the Stage 1 units are ready to be occupied"

RYMs villages are generally 100% sold off the plans. Although the above statement is not totally clear, I suspect Summerset do not enjoy this level of demand, and it's most likely due to poorer location choice and not enjoying the same reputation that persists for RYM villages.

I have heard from within the industry that Summerset mostly does not enjoy prime locations. Anecdotally, I would have thought the Aotea location in Wellington is an average location indeed.

A bit of an 'educated guess' on my part with these points but if I was serious about analysing Summerset as a potential investment these are thoughts I would start exploring.

Cheers

Sauce

[Lizard]

Anecdotally, I would have thought the Aotea location in Wellington is an average location indeed.


Although surely with about 90% more sunshine than the next major village - Ryman's Malvina Major.... great view - when the cloud clears.... :)

[Lizard]

I believe RYM having more than half their units under 5 years old means there are huge earnings to come from resales

I looked at Summerset. Appeared they value their units on a similar basis to RYM, so, given Pr/NTA, Summerset looks cheap by comparison. However, cashflow wise, RYM have this big "bank" of capital gains on the books that will flow through to cash and allow them to keep building new villages out of op cashflow, even if we get flat property prices for another 2-5 years. On balance, I would rather own RYM than Summerset or MET at this point. (Although I'm not a huge fan of either at current prices)

[Xerof]

Thanks SAUCE for your insightful comments. I hope they are of benefit to ST readers who look to invest in this industry. Not my cup of tea, but you support my hunch that Rymans is the better horse in the race

Cheers

[Sauce]

Although surely with about 90% more sunshine than the next major village - Ryman's Malvina Major.... great view - when the cloud clears.... :)

That's true Lizard. I never liked the look of the Malvina Major village. It looks a lot like a giant east-facing disaster just waiting to leak like a sieve.

[Sauce]

Thanks SAUCE for your insightful comments. I hope they are of benefit to ST readers who look to invest in this industry. Not my cup of tea, but you support my hunch that Rymans is the better horse in the race

Cheers

Thanks Xerof. I think your intuition about RYM is spot on.

Regards.

Sauce

[Sauce]

I looked at Summerset. Appeared they value their units on a similar basis to RYM, so, given Pr/NTA, Summerset looks cheap by comparison. However, cashflow wise, RYM have this big "bank" of capital gains on the books that will flow through to cash and allow them to keep building new villages out of op cashflow, even if we get flat property prices for another 2-5 years. On balance, I would rather own RYM than Summerset or MET at this point. (Although I'm not a huge fan of either at current prices)

RYMs embedded gains makes up only a small portion of future cashflows. Indeed, Summerset will also benefit from a similar maturity from deferred development margin (they sell off the plans cheaper than they sell the finished product as do RYM) and from more general past unit inflation also - they have been in business since 1994. In fact they claim to have 119m of embedded gains from both management fees and unit inflation. So their cashflows will mature and grow as well as RYMs.

RYMs ability to build new villages from operating cashflow has more to do with the capital efficiency of the revenue model than the latent ("bank" of) capital gain. When each occupation license represents an interest free 5 - 7 year loan to the developer who can use that to build more units elsewhere, and the original occupant is paid out by the next incoming resident - that's the silver bullet.

Pr/NTA is a not a rational way to value the business/shares in the retirement village industry.

Regards,

Sauce

[Lizard]

Pr/NTA is a not a rational way to value the business/shares in the retirement village industry.


Given most of the property valuations are supposedly based on forecast cashflows, then it is. However, it doesn't mean they should trade on a Pr/NTA of 1 or below either. The difference is what discount rate you are happy with on your investment versus what discount rate they are using to value the units.

[Sauce]

Given most of the property valuations are supposedly based on forecast cashflows, then it is. However, it doesn't mean they should trade on a Pr/NTA of 1 or below either. The difference is what discount rate you are happy with on your investment versus what discount rate they are using to value the units.

Hi Lizard

That's a smart way to think about it: one could say well as an investor I am happy with a 10% return and these valuations were done using a discount rate of 15%, therefore a significant premium (1.5x) to book value is a fair price to pay. But I am quite sure it's not the right way to value these businesses.

As an investor you are buying an ongoing development business - not just a retirement village portfolio - you are concerned with their expansion, build rate and the cashflows from future villages, not just the cashflows from existing villages.

Then there is the issue of the false precision inherent in 40 year projections and the fact we can't actually see the data. Under GAAP when the revaluations ended up in the reserves rather than the income statement the valuations barely rated a mention in company commentary, and it would have been less confusing for investors if it had stayed that way - the industry executives I have spoken to share this view.

But most importantly, as an investor in the shares you need to value the business, not just the village portfolio. The most rational way to simplify this is to focus on the sustainability of the (cash) return on invested capital.

Its the cash profits, and the growth in those cash profits, which is important.

Regards,

Sauce

[Lizard]

Sauce,

The future villages are built out of cashflows from existing villages. Some businesses will give that to you in dividends you can re-invest either with them or elsewhere. Your choice. But counting both the cashflow and the growth that comes from re-investing it is double counting.

As for the other parts of the business model, as far as I can see, nursing care and amenities (with associated amenities fee) and village running costs are all very low margin parts of the model and produce relatively low returns on equity.

[mamos]

Say RYM is earning a 30% Cash ROE with 50% DPR. Cash flows equating to 15% of Equity will be paid out to shareholders as a perpetuity.

The other 15% will be retained in the business and compounded at a 30% ROE.

If you were to assume all the earnings were retained in the business and also counted the dividend flow then this would be double counting.

[Sauce]

The future villages are built out of cashflows from existing villages. Some businesses will give that to you in dividends you can re-invest either with them or elsewhere. Your choice. But counting both the cashflow and the growth that comes from re-investing it is double counting.

Hi Lizard,

Actually, if you use the valuers opinion of the stand alone value of each individual village as a proxy for a valuation for the business, you are NOT factoring the reinvestment of the cashflows. The valuers job is simply to value the underlying asset and the cash it generates. It is NOT their job to value what the company does with that cashflow - its reinvestment growth.

However, a business that can reinvest its cashflows at high rates of return on behalf of shareholders is worth a lot more than a business that pays those cashflows out as a dividend - that is what growth is all about.

If RYMAN decided to stop developing new villages and started paying out 100% of surplus cash as a dividend, the paper valuation of its existing villages would not change, but the value of the company would be dramatically lower - possibly even close to NTA if those valuations are accurate!! http://www.sharetrader.co.nz/images/smilies/wink2.gif

That really is fundamental business economics

Your point about dividends is spot on. The cashflows paid out as divis do not compound and must not be included in any growth calculations. But I definitely do not count the cashflows twice, I separate the dividends and the retained cashflows and value them differently. And the retained cashflows are only worth more than the dividends if the reinvestment return is greater than the cost of capital. There is no double counting at all.

Cheers

Sauce

[Sauce]

As for the other parts of the business model, as far as I can see, nursing care and amenities (with associated amenities fee) and village running costs are all very low margin parts of the model and produce relatively low returns on equity.

Hi again Lizard :)

On the contrary the care fees generate an excellent margin. In 2011 it was 15.4% and the margin has grown every year because the care fees grow as the villages mature (presumably because the original incoming residents get older and require more and more care so the mix of services required in the village changes). The care fee margin has grown consistently every year from 10% five years ago to projected margin of 16% this year.

The care fees are an important part in generating the 30% return on shareholders capital that RYM enjoys.

Regards,

Sauce

[Sauce]

Say RYM is earning a 30% Cash ROE with 50% DPR. Cash flows equating to 15% of Equity will be paid out to shareholders as a perpetuity.

The other 15% will be retained in the business and compounded at a 30% ROE.

If you were to assume all the earnings were retained in the business and also counted the dividend flow then this would be double counting.



Thanks Mamos, that's exactly right.

The reason its best to focus on the cash profits is because that is the cash that is available to us as investors, either reinvested for growth or paid out as a dividend. It encompasses cash generated from all aspects of the business.

But as you point out, they only retain 50% of cash profits in the business for reinvestment, so you must value the dividends and the reinvested cash flows separately. One half as a compounding calculation and the other as a perpetuity.

The hard part, or the "art" if you like, is determining how sustainable the "return on equity" is. As the business gets larger and larger it will be hard to keep lifting the build rate at the rate needed to sustain a 30% return on equity. Hence the early eye towards Australia even with so much growth still to come in NZ.

The other issue is their ability to maintain that growth rate without tripping themselves up - constructing and managing retirement villages and hospitals is a bit more complex than opening McDonalds or Wal-Mart stores!!

Regards,

Sauce

[macduffy]

Thanks, Sauce, for your continuing analysis of the "retirement" stocks. Confirms my own view that RYM leads the field here, both as operator and as an investment.

Regarding the Malvina Major village, while the site is far from ideal, being at the top of the Nauranga Gorge in one of Wellington's most notoriously damp and windy locations, I don't regard the buildings themselves as being prime "leaky" candidates. The original part was of course converted from the old Burma Lodge, built well before leak-prone designs became an issue. The more recent additions don't appear to be particularly susceptible to my layman's eye. Nicely pitched roofs; no concealed guttering. With a bit of luck they learnt the lessons and have avoided the pitfalls - but that may just be wishful thinking on my part, as a RYM shareholder!

[Sauce]

Thanks, Sauce, for your continuing analysis of the "retirement" stocks. Confirms my own view that RYM leads the field here, both as operator and as an investment.

Regarding the Malvina Major village, while the site is far from ideal, being at the top of the Nauranga Gorge in one of Wellington's most notoriously damp and windy locations, I don't regard the buildings themselves as being prime "leaky" candidates. The original part was of course converted from the old Burma Lodge, built well before leak-prone designs became an issue. The more recent additions don't appear to be particularly susceptible to my layman's eye. Nicely pitched roofs; no concealed guttering. With a bit of luck they learnt the lessons and have avoided the pitfalls - but that may just be wishful thinking on my part, as a RYM shareholder!


Hi Macduffy,

I am sure your right it was tongue and cheek. I was mostly agreeing with Lizards assessment of the location. I have an ingrained aversion to plaster clad housing so when I read the RYM annual reports I try very hard not to look at the pictures :)

I am more of a fan of the Rita Angus, its a handy location for the oldies and its made out of brick! ;)

Cheers
Sauce

[Sauce]

I am more of a fan of the Rita Angus, its a handy location for the oldies and its made out of brick! ;)



Just don't mention earthquakes :ohmy:

[ratkin]

I now hold SUM too :)

[ratkin]

A good result, though the stock hasn't moved.

It seems a little unloved by the market, or maybe it hasn't proved itself enough yet to warrant funds buying in.

More broker attention would help. Forsyth Barr cover SUM but I don't know if FirstNZ, HHG or Craig's do yet.

I had been tempted to sell down a bit, but on the basis of today's result, I think I am happy to hold this for a while.

I shouldnt worry , Ryman was the same many years ago , unloved and boring , the rat made a killing on that stock , hopefully this one will eventually follow suit

[ratkin]

Good to see one of the directors has been buying on market , even if the amounts are small

[percy]

And that's a great announcement from CEO Norah Barlow this morning.

https://www.nzx.com/companies/SUM/announcements/226217

“Sales are strong. Last year sales were the highest in the company’s history. We are on track to exceeding that record,” Mrs Barlow said.
Over the half year, Summerset completed 68 new units across four developing sites. Its full year target was 155 units.
“We have started building at our newest village in Dunedin and are in a good position to reach our full year target,” Mrs Barlow said.
“The company is in a robust position and the team has been working incredibly hard over this half year. We are expecting to exceed IPO forecasts if trading momentum continues. We will keep the market informed throughout the course of the year.

Most encouraging.Very positive future.

[Jim]

Most encouraging.Very positive future.

I thought they are paying out a small div but they push it to the FY

[Sauce]

The most significant news for SUM shareholders, in my opinion, is the increase in development/new sale margins. If this trend continues and they can close the margin gap between them and RYMAN it will be a good sign for investors.

[BIRMANBOY]

I cannot see them (retirement facilities) paying much in dividends because by their very nature...all excess cash will be used to grow their base business which is very cash reliant in having to fund new homes and properties... Constant forced growth means bugger all in dividends. Maybe in the future if they plateau out regards demand.
I thought they are paying out a small div but they push it to the FY

[CJ]

I cannot see them (retirement facilities) paying much in dividends because by their very nature...all excess cash will be used to grow their base business which is very cash reliant in having to fund new homes and properties... Constant forced growth means bugger all in dividends. Maybe in the future if they plateau out regards demand.Agree - Ryman has strong operating cashflows but it all goes back into development. Plus I dont think they pay much in the way of tax so they cant impute their dividends. [edit - just checked. Ryman doesn't impute at all which makes sense. The operating model of Retirement villages, especially historically when they use to be able to depreciate builds, meant they were always in a tax loss position.}

[percy]

I cannot see them (retirement facilities) paying much in dividends because by their very nature...all excess cash will be used to grow their base business which is very cash reliant in having to fund new homes and properties... Constant forced growth means bugger all in dividends. Maybe in the future if they plateau out regards demand.

RYM [and I expext SUM] pay out a small % of their profit.What you must consider is how wisely they put to use the money they don't pay out.If they can make 15% plus on that money you will enjoy great compounding profits,which will drive the SP.
If you can earn over 15% you are indeed best to look at company's that pay out most/or all of their profit.

[Sauce]

I cannot see them (retirement facilities) paying much in dividends because by their very nature...all excess cash will be used to grow their base business


Agree - Ryman has strong operating cashflows but it all goes back into development.

Actually I believe RYM have a very healthy dividend payout ratio of 50%.

The cashflows that are reinvested in villages over and above the other 50% of shareholders funds that is retained (not paid out as a dividend) represents cash from the refundable license to occupy, and could not be paid out as dividends anyway. It is this ability for RYM to "Recycle" its capital from village to village that allows it to generate such high returns.

Would you prefer they paid out 100% of underlying profits? Not me. The 50% "shareholder funds" they retain for growth are able to generate a 30% internal rate of return. This is BECAUSE they can recycle the capital by generating ever growing refundable occupancy right cashflows.

This is so so much better than getting more in the way of dividends, that you should consider losing your left arm to find businesses like it, particularly when the downside risk is reasonably limited (downside risk is arguable I suppose, but at least in my view).

As an owner, I know I can't get a 30% compounding rate of return if I am holding the cash, so I prefer them to keep as much of their underlying profits as they feel they can safely put to work at those excess returns. That said, from my perspective, Ryman (and perhaps SUM also) are, and will always be, a great payer of dividends. With those dividends growing fast.

Regards,

Sauce

[Sauce]

RYM [and I expext SUM] pay out a small % of their profit.What you must consider is how wisely they put to use the money they don't pay out.If they can make 15% plus on that money you will enjoy great compounding profits,which will drive the SP.
If you can earn over 15% you are indeed best to look at company's that pay out most/or all of their profit.

I agree percy well put. And their true economic returns is actually much higher than 15% (its run around 30 - 33% annually on shareholders funds invested at the start of each year).

Its a bit confusing because of the way they book revaluations on to the balance sheet, so you have strip those gains out to see what shareholders have had to contribute and then work out the return on that.

Cheers

Sauce

[Sauce]

I suspect perhaps what people are noticing is the low dividend yield which is more related to a high market value than a low payout ratio.

[BIRMANBOY]

If you think its dividend payout is "healthy" you havent looked very far. Helathy is relative to what? Its growth may be good and the future may be very good but the dividends are paltry. Two different things. Dividends I can spend.....growth I cant and I may not be around in 5 years so why put money in it?
Actually I believe RYM have a very healthy dividend payout ratio of 50%.

The cashflows that are reinvested in villages over and above the other 50% of shareholders funds that is retained (not paid out as a dividend) represents cash from the refundable license to occupy, and could not be paid out as dividends anyway. It is this ability for RYM to "Recycle" its capital from village to village that allows it to generate such high returns.

Would you prefer they paid out 100% of underlying profits? Not me. The 50% "shareholder funds" they retain for growth are able to generate a 30% internal rate of return. This is BECAUSE they can recycle the capital by generating ever growing refundable occupancy right cashflows.

This is so so much better than getting more in the way of dividends, that you should consider losing your left arm to find businesses like it, particularly when the downside risk is reasonably limited (downside risk is arguable I suppose, but at least in my view).

As an owner, I know I can't get a 30% compounding rate of return if I am holding the cash, so I prefer them to keep as much of their underlying profits as they feel they can safely put to work at those excess returns. That said, from my perspective, Ryman (and perhaps SUM also) are, and will always be, a great payer of dividends. With those dividends growing fast.

Regards,

Sauce

[Sauce]

If you think its dividend payout is "healthy" you havent looked very far. Helathy is relative to what? Its growth may be good and the future may be very good but the dividends are paltry. Two different things. Dividends I can spend.....growth I cant and I may not be around in 5 years so why put money in it?

You are talking about the low dividend yield. The yield is low because the market has bid the price up to the point that the yield is low. It is NOT related to retirement villages having a low payout ratio. A 50% payout ratio is high for company growing as fast as RYM.

It would be better to blame the fact that too many people are chasing RYMs healthy dividend and strong growth prospects, rather than label the retirement sector bad dividend payers.

Cheers

[percy]

If you think its dividend payout is "healthy" you havent looked very far. Helathy is relative to what? Its growth may be good and the future may be very good but the dividends are paltry. Two different things. Dividends I can spend.....growth I cant and I may not be around in 5 years so why put money in it?

Give yourself an incentive to be alive in 5 years time.
PS Thanks for your posts Sauce.

[BIRMANBOY]

Its got nothing to do with me...I just do what I'm told. An incentive would be something along the line of..."congratulations we have just discovered a cure for old age" Waiting for Ryman or SUM to stop spending money on new bedsits and return some decent dosh to the investors would too but I'm not holding my breath.
Give yourself an incentive to be alive in 5 years time.

[pierre]

"Dividends I can spend.....growth I cant and I may not be around in 5 years so why put money in it"

Ignoring tax implications for a moment, investing for capital growth or for dividend income seems pretty much the same to me - either way we're aiming to maximise the gain on our dollars.

If you think the SP will show significant growth but the company wont pay much of a dividend then why not simply take your return from the capital gain? Sell a few shares when you need a "dividend" and leave the remainder to carry on growing.

[BIRMANBOY]

If you look at the original post that may clear up any confusion. The yield is low..we agree on. SO that means any money you put in now gives a crap dividend. If you own the shares at a much lower price then it will look better. I can get much better returns from a dozen other shares and bonds. Any business that has to use their cash reserves to grow, whether its a retirement village or not, is going to be focussed on growth not dividends. As I have already said it may be a good long term grower but for the immediate future its a poor use of funds for someone wanting a decent dividend. Growth and dividends are like oil and water..dont mix very well.
You are talking about the low dividend yield. The yield is low because the market has bid the price up to the point that the yield is low. It is NOT related to retirement villages having a low payout ratio. A 50% payout ratio is high for company growing as fast as RYM.

It would be better to blame the fact that too many people are chasing RYMs healthy dividend and strong growth prospects, rather than label the retirement sector bad dividend payers.

Cheers

[Sauce]

Hi Pierre

I think thats a good point for us younger folk (to ejoy capital growth as well as divis) but for older characters I think its to risky to rely on realising capital gains because of volatility.

Birmanboy makes a very fair point in that if you are old you can't really hope to live off 2.5% minus tax pa even if its growing at 15% a year.

But i'm not sure he realises the dividend yield has less to do with RYMs dividend policy and more to do with the market premium for the shares.

Cheers

Sauce

[Sauce]

If you look at the original post that may clear up any confusion. The yield is low..we agree on. SO that means any money you put in now gives a crap dividend. If you own the shares at a much lower price then it will look better. I can get much better returns from a dozen other shares and bonds. Any business that has to use their cash reserves to grow, whether its a retirement village or not, is going to be focussed on growth not dividends. As I have already said it may be a good long term grower but for the immediate future its a poor use of funds for someone wanting a decent dividend. Growth and dividends are like oil and water..dont mix very well.

Hi Birmanboy. I totally agree with everything you just wrote except that last sentence, when its related specifically to RYM (as your original post did).

The reason I don't agree with your last point is because a 50% payout ratio is quite high. Indeed a 50% payout ratio would often feature in income portfolio's - but as you point out not at the price you have to pay currently for those dividends.

Otherwise, yes, thats true.

Cheers

Sauce

[Sauce]

PS Thanks for your posts Sauce.

I should have said Snap percy, because as I was writing my diatribe, you posted my all my exact points using but using 5% of the space compared to my long winded ramble.

[BIRMANBOY]

Firstly Pierre, there is a timing issue involved. Investing for growth involves how much time?? 2 years, 5, 10 I have no idea so I may be unlucky and have to wait five years before it returns a decent dividend. In the meantime I am getting anywhere from 5 to 10 % return fom other "good divvie producers". Growth is for young investors with plenty of time on the horizon. As to your suggestion of "selling a few shares" here and there. Impractical and cumbersome and brokerage costs will nullify any gains.
"Dividends I can spend.....growth I cant and I may not be around in 5 years so why put money in it"

Ignoring tax implications for a moment, investing for capital growth or for dividend income seems pretty much the same to me - either way we're aiming to maximise the gain on our dollars.

If you think the SP will show significant growth but the company wont pay much of a dividend then why not simply take your return from the capital gain? Sell a few shares when you need a "dividend" and leave the remainder to carry on growing.

[pierre]

Where would you put new money today RYM or SUM?

RYM is yielding 2.36% at today's price - SUM would have to pay 4.4cps this year to equal that return.

So, assuming we're going for growth, which company has the most potential for capital gain? RYM from its current SP of $3.56 or SUM from its price of $1.88?

[percy]

Firstly Pierre, there is a timing issue involved. Investing for growth involves how much time?? 2 years, 5, 10 I have no idea so I may be unlucky and have to wait five years before it returns a decent dividend. In the meantime I am getting anywhere from 5 to 10 % return fom other "good divvie producers". Growth is for young investors with plenty of time on the horizon. As to your suggestion of "selling a few shares" here and there. Impractical and cumbersome and brokerage costs will nullify any gains.

My mother "invested" $10,000 in AGC [then owned by Westpac] and enjoyed 6% divies[which she spent] .At the end of ten years she was repaid her $10,000.Had she invested the same $10,000 in Westpac she would have received approx the same amount in divies [not to start with],and her capital would have increased to over $24,000.

[pierre]

Good story Percy - a few bucks in brokerage costs to sell some shares each year to get her income would hardly have been noticed.

Still, just as well she put her dollars into AGC and not a "blue chip" like Blue Chip for example.

[Sauce]

Growth and dividends are like oil and water..dont mix very well.

RYM is probably very rare in that its growth requires a lot of capital, yet it features high dividends and growth without sticking its hands out for external capital.

But growth and dividends do not have to be mutually exclusive. There are a number of businesses with low capital requirements that spin off a ton of cash, have high dividend payout ratios, and high growth rates. But they also tend to have very high share prices that preclude them having good dividend yeilds because the market is willing to pay for the growth.

The likes of Trademe on the NZX and Monadelphous in AUS spring to mind but there are plenty of them.

No good to Birmanboy though, which is his point.
Cheers

[BIRMANBOY]

I realize the dividend is low....doesnt really matter why... although I do believe you if you say its more to do with market premium. Its like owning a car that doesnt go...doesnt matter if its because the engine is missing or the tyres are flat. Bottom line is it wont go...the dividend low...why is somewhat immaterial to me although I appreciate that as an owner of the share you are looking for reasons to hold on and growth factors are good I will give you that. I'll probably be a client myself very soon. Maybe I'll wish i had some shares then and I can get some extra bikkies at morning tea by impressing the staff I am a shareholder:)
Hi Pierre

I think thats a good point for us younger folk (to ejoy capital growth as well as divis) but for older characters I think its to risky to rely on realising capital gains because of volatility.

Birmanboy makes a very fair point in that if you are old you can't really hope to live off 2.5% minus tax pa even if its growing at 15% a year.

But i'm not sure he realises the dividend yield has less to do with RYMs dividend policy and more to do with the market premium for the shares.

Cheers

Sauce

[BIRMANBOY]

If IF and another IF..you're missing the point Percy....Timing is the key. What you dont realize is most older folk dont think in terms of 10 or 15 or 20 year horizons. They want a return NOW...why is understandable unless you are young and indestructible ...Like Percy?
My mother "invested" $10,000 in AGC [then owned by Westpac] and enjoyed 6% divies[which she spent] .At the end of ten years she was repaid her $10,000.Had she invested the same $10,000 in Westpac she would have received approx the same amount in divies [not to start with],and her capital would have increased to over $24,000.

[percy]

I realize the dividend is low....doesnt really matter why... although I do believe you if you say its more to do with market premium. Its like owning a car that doesnt go...doesnt matter if its because the engine is missing or the tyres are flat. Bottom line is it wont go...the dividend low...why is somewhat immaterial to me although I appreciate that as an owner of the share you are looking for reasons to hold on and growth factors are good I will give you that. I'll probably be a client myself very soon. Maybe I'll wish i had some shares then and I can get some extra bikkies at morning tea by impressing the staff I am a shareholder:)

Had you brought some RYM 5 or 10 years ago,you would be sitting at the top table enjoying hot sausage rolls,and freshly made muffins.!!!!!!

[ENP]

Why are NZ investors so obsessed about dividends?

I'd rather the company retains it's earnings and grow them for me, than paying it out to sit in my bank account so it can sit there until I do something else with it.

If a comapny is returning 15% or so return on it's retained equity, then by all means keep the dividend. I don't want it if you can make 15% on it for me.

[BIRMANBOY]

Yum Yum...I may just get some anyway since you have painted such a cozy picture. I know this isnt about RYM or SUM but will bore you with a "WHAT IF" story. I almost purchased a business on the ground floor of the World Trade Centre in New York a couple of years prior to 9/11. As fate would have it at the last minute I cancelled the sale. Timing is everything. I do believe RYM and SUM are good prospects even if the dividends are "insufficient for my needs"
Had you brought some RYM 5 or 10 years ago,you would be sitting at the top table enjoying hot sausage rolls,and freshly made muffins.!!!!!!

[JayRiggs]

Where would you put new money today RYM or SUM?

RYM is yielding 2.36% at today's price - SUM would have to pay 4.4cps this year to equal that return.

So, assuming we're going for growth, which company has the most potential for capital gain? RYM from its current SP of $3.56 or SUM from its price of $1.88?

I'm not sure about which company will have more capital gain, but on the dividend yield side of things, according to the Summerset Investment Statement and Prospectus, it says:
"Summerset intends to pay a first dividend of $4.3 million in respect of FY 2012."

So $4.3 million divided by 214,819,360 shares is 2cps (1.06% yield at today's price of 1.88), assuming I calculated it correctly.

[Sauce]

RYM will outperform in the longer run, and with less risk, in my opinion.

But SUM is the next best operator in the sector by a long way.

Regards,

Sauce

[CJ]

Agree the yeild is low.

The payout at 50% also seems reasonable, especially for a growth share but remember that their must be a fair chunk of non cash depreciation in their as well given their asset base so they are actually reinvesting a lot of cash.

Growth or dividends are interchangable and when added together, give you the return on your investment. I dont care which I get, as long as the total figure is postive and preferable above 10%, and ideally above 20% yoy.

[percy]

With thanks to Chris Lee;this week's taking Stock;
In Spain,the authorities are observing an increasing number of geriatric rest home residents being removed from the rest home,and re-situated to a family home,to enable their elderly parents' pensions to support younger families.

[JayRiggs]

Summerset have recently introduced their dividend reinvestment plan.
I was wondering if anyone is considering or signed up for the DRP?
If the first dividends aren't going to be that much, would it be wiser to hold off until dividends increase, or better to start off with DRP anyway?

[ratkin]

Summerset have recently introduced their dividend reinvestment plan.
I was wondering if anyone is considering or signed up for the DRP?
If the first dividends aren't going to be that much, would it be wiser to hold off until dividends increase, or better to start off with DRP anyway?

I nearly always go with the reinvestment option when available. If you expect the shares to increase in value over time, then reinvesting increases returns

[Jim]

My bet is 60% DRP and 40% cash.


Dscl. Hold SUM

[JayRiggs]

Cheers guys. I think I will go with the DRP, the future prospects look bright.
Most encouraging to see them win best Australasian retirement operator award for the 3rd year in a row.

Has anyone been accumulating at these prices?
I have been slowly buying from between 1.65 to 1.94.
The PE ratio off ASB Securities is 98.51. Would that mean the stock is extremely overpriced now?

[ratkin]

You probably sold twenty years too soon

[percy]

Do n't tell Sauce but I own shares in both.
Very important announcement by SUM.
Am I allowed to say both are "very well positioned" !!!!!!!!!!!!!!!!!! lol.

[NZSilver]

Have been keeping an eye on this one over the last few months, after todays announcement I bought in!

[CJ]

Also Ryman pays a healthy div, Compared to 'Smokin Cubans', I guess a 2.2% div would be considered healthy.

[ratkin]

. Ryman has a reputation for quality and waiting lists for its units so can still command price premiums, but Summersets villages are generally in the smaller centres and less premium locations... they would be more susceptible to declining asset values in a slump than Ryman

Your wrong to say that Ryman has more of a reputation for quality than Summerset , summerset has just taken out award for third year running.
i see no reason why the value of a summerset property would decline at a quicker rate

[Sauce]

Disagree Ratkin. Summerset have an excellent reputation and I admire what Norah and her team are doing, but there are a couple of differences that make me think Ryman is better.

1. Ryman villages are larger, and are mostly all built at once, so there aren't any facilities missing. I had the chance to tour a summerset village up in Warkworth around-4 months ago, and while the better part of 100 residential units were built for those in independent living (and had been for around a year-18 months), the aged care, restaurant, recreational facilities and similar were still being built. So Ryman can deliver the whole continuum of care and better facilities right from the get go.

2. Ryman offer dementia level care at their villages. Summerset are planning to deliver this, but presently can only look after residents with mild/moderate levels of cognitive impairment. This is a big selling point for Ryman in that a resident knows that once they move in, they can stay at the village until they eventually join the choir invisible. They don't need to move elsewhere.

3. Summerset have a design philosophy called "Lifemark", which essentially incorporates design changes in buildings to assist the elderly in living more easily, eg wider door frames, power points located at knee/hip height instead of ankle height. While these Lifemark design features are meant with the best intentions, there is also some resistance from residents and potential residents who feel its ugly and pandering (some of the old ladies considering villages are fiercely proud and don't like the idea of conceding weakness at bending over, or having ugly TV power cables running up the wall. You might think I'm nuts raising this, but I have done lots of homework.

I don't mean to raise the above to suggest Summerset is inferior or that I am negative. I like Summerset as a company, and am impressed with what they are doing. They deserve their awards. I just have seen a lot of evidence to suggest that Ryman offers a wider selection of benefits to residents, and that as a stock, Ryman is better. I've even heard Norah Barlow describe SUM to a room of potential investors as "Ryman Jr".

I agree that there is no reason to suspect why in a property slump that Summerset values would decrease at a worse rate than Ryman. Summerset's villages may be smaller but they are still desirable places for people to live, and the demographic tailwinds will work in their favour too.

FYI - I sold my SUM because I found a better investment opportunity on the NZX and needed cash to invest in it. I also felt SUM was the most fully valued in my portfolio, and because RYM is my biggest holding, I was happy to just hold the one company.

Brilliant post Sparky
In charlie munger parlance: "I have nothing to add"
Regards,
Sauce

[Sauce]

Don't tell Sauce but I own shares in both.


I will block my eyes Percy..

[Sauce]

Having read over my post, I do have one qualifier to add to point 1 which is that when I say mostly built at once, I specifically mean the "big building and gardens" which houses the cafe, clinics, open areas, recreational spaces and large amounts of apartment units.

As the village fills up over a year or two, they then will have other stages to add, but the point I am trying to make is that the village experience starts from day one for a resident, whereas at other non Ryman villages like the Summerset Falls village they get their unit, but essentially live in a terraced home gated community without common areas like a bowls court, cafe, medical facilities, dementia levels etc. Ryman has the scale to build the fixed cost part of the village from the get go, then add the variable cost elements like extra residential units as needed.

I agree. It's the scale advantage (which manifests in many areas like the ones you have outlined and more) combined with the REAL 'full continuum of care,' that is the key to RYM's moat.

Shifting the mix towards care beds at a scale that is highly profitable, when other villages are not, in advance of the flood of over 85's is a very important strategic move also.

SUM will have some issues as their villages mature as some residents will not be able to get the care they need and may need to move - as you have pointed out - this is my understanding from my research also.

Care beds are a loss leader for SUM but not for RYM, and SUM make a big deal about their 'full continuum of care' but its not as 'full' as they imply.

Regards,

Sauce

[mamos]

What about the relative quality of their sites?

[Hoop]

currently 215 up 11 +5.4%.... ...back into the blue sky (no resistance area):D

[ratkin]

What about the relative quality of their sites?

Wel, Summerset have just won the australasian award for the best retirement home provider , for the third consecutive year. They must be doing something right

“Ann Richards said Summerset stood out because of its unwavering commitment to being a totally customer centric company.
"Summerset has assembled the best all round management team in Australasia. It is unique in that it has managed to combine balance sheet drive and maintain 'customer centric' policies

[percy]

Hell, she's taken off. Bugger I sold out the other week, as I said, I found my next opportunity. Anyway, good health and cheers to those who are holding.

In your own good time you may wish to share wish us your "next opportunity".?

[NZSilver]

Nice little increase over the last few days, glad I bought in. Seems the market has liked the last 2 announcements.

[artemis]

Added to the NZX50 from 24 December.

Plus CEO Norah Barlow is a finalist in the Herald's Business Leader of the Year. All good ...

[gonzo56]

Does anyone have any indication of when SUM will start paying dividends?

I see they already have a DRP. ( http://www.findata.co.nz/Markets/NZX/64939/Summerset_Dividend_Reinvestment_Plan.htm )

[percy]

I seem to remember either hearing or reading it would be at the end of this year.

[gonzo56]

I seem to remember either hearing or reading it would be at the end of this year.

Cheers Percy. You always reply to my posts when no-one else does :t_up: Thank you.

[artemis]

http://www.nbr.co.nz/article/summerset-annual-sales-climb-33-beating-ipo-forecast-wb-134413

[gonzo56]

A nice sounding update for the market, though it barely moved the needle on the shareprice - only up 1 cent to $2.27, with intraday trading up to $2.35 at one point.

I think investors should wait and see the earnings, which I anticipate being good news as well.

The earnings will have to be good; the p/e ratio is an inflated 112!

[ENP]

Interesting fact.

When Ryman had a market cap of roughly $485 million in 2005 (what Summerset is now) it was making about 24 miilion in profit. Summerset makes 6 million. Rymans return on equity was around 12.5% while Summerset is 1.8%

[gonzo56]

It could be a swift tumble if things turn sour/people lose hope in SUM.

[MPC]

Report at the end of the month will be interesting. It has creeped up a bit the last few days and a little more interest and volume being shown. P/E ratio is crazy but this should lower as the earnings rise. This is definitely one to watch and is one of my picks for the year. Hopefully a dividend announcement will attract more investors as well.

[Vaygor1]

Interesting fact.

When Ryman had a market cap of roughly $485 million in 2005 (what Summerset is now) it was making about 24 miilion in profit. Summerset makes 6 million. Rymans return on equity was around 12.5% while Summerset is 1.8%

Without delving into any analysis, this suggests that either RYM's market cap was too low at the time it was $485M, or SUM's market cap is too high now, or a bit of both.

RYM market cap at $485M equates to $0.97 per share. This was the price around March 2006.

Same market cap with a 4 times difference in profits and 6 times difference in Return on Equity between the two.... I don't think changes in market sentiment over the last 6 years would have caused a difference this big. Your view Hoop?

[KJ]

Interesting fact.

When Ryman had a market cap of roughly $485 million in 2005 (what Summerset is now) it was making about 24 miilion in profit. Summerset makes 6 million. Rymans return on equity was around 12.5% while Summerset is 1.8%

Perhaps SUM's profit to be announced this month will be close to $20m?

[JayRiggs]

I think SUM has become very overpriced.
I haven't looked at anything in detail, but going by their forecast 2012 full year profit of $9.7 million (from moosie_900's post) and 214,819,360 shares on issue, that would come to 4.5c earnings per share.
And at today's closing price of $2.46, that's a PE ratio of 54.67!

Total guess here, I think at current prices, it's taking into account what SUM would be earning in 2 years time?
I was accumulating up to $2 and stopped after that, would dearly love to buy more.
I hope when SUM do report, the market will be disappointed and it'll go down to $2 so I can buy more!

[croesus]

I agree Jay.... NZ stocks like SUM, PPL .. etc.. are over hyped.. too many mums and dads.. have jumped in, perpetuating the capital gain..

coz deposit rates are low and boring, investing in finance companys is akin to buying aticket for a Jet star flight... not cool... the SUMS and PPLs investors will eventually ( those buying at current prices ) get whacked...

the real money will be made , eventually in the likes of WID, CRP, BLT, etc

[KJ]

Highly unlikely my friend (taken from the HLFYR report):



The retirement village developer and operator's net profit before tax for


half year 2012 was $3.7 million, up $4.7million on the first half 2011.






Underlying profit of $6.9 million for the half year 2012 was up 133% on the


same period in 2011. Its IPO forecast for full year 2012 is $9.7 million.



Pure speculation with a market cap like that, just like most stocks at the moment. I don't doubt it is a strong company though and that it deserves the price, I just think RYM is underpriced if SUM is so strong.

So if the HY was $6.9m do you not think that $15 to $20m is possible for the FY? Overpriced?-probably but the same could be said for many NZ stocks at present my friend.

[percy]

First of all my sympathy to Kathleen Corbett's family.
Very difficult when an old person has been in hospital.Hospital does not want them staying taking up a bed.So family needs to find somewhere for the person to be cared for.Summerset failed to take care in this case.This is likely to be a "growth area" for rest homes,so as hospitals do not become clogged up. As the person has been in hospital,and is still unwell,rest homes are going to have to offer a "hospital" type service.
I trust Summerset,Ryman and Metlife can, and will lead the way in provding this "hospital" type service.

[karen1]

Not defending SUM, but I did a bit of searching, and came up with the following interesting links regarding retirement villages, some of which are historic:

http://www.nzherald.co.nz/retirement-villages/news/article.cfm?c_id=306&objectid=10735966 refers to the Eldernet group

http://www.consumer.org.nz/reports/rest-homes/list-of-homes-investigated

http://www.consumer.org.nz/content/uploads/File/pdf/Rest%20homes%20(Part%201).pdf this article mentions two, one RYM, one SUM, and is a worthwhile read

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10660260 refers to Norfolk Court in Dargaville, Eldernet group

So SUM is in the news right now, but undoubtedly there will be other similar media items, which might refer to any one of a number of villages, as time moves on. Theft by staff is another issue which has drawn media attention in the last year, and if I remember correctly one of the villages involved was RYM, another SUM. No retirement village is going to be perfect, 100% of the time, as much due to the nature of the clients they deal with, quality of staff, as anything else .

[percy]

[So SUM is in the news right now, but undoubtedly there will be other similar media items, which might refer to any one of a number of villages, as time moves on. Theft by staff is another issue which has drawn media attention in the last year, and if I remember correctly one of the villages involved was RYM, another SUM. No retirement village is going to be perfect, 100% of the time, as much due to the nature of the clients they deal with, quality of staff, as anything else .[/QUOTE]

Thanks Karen1,all very true.We must also remember our hospitals fail to offer proper care at times.
Unfortunately we are human ,make mistakes,and can do better.
That understood ,the likes of SUM,RYM,and MET have a record good care.

[karen1]

Hi Percy, you're quite right, hospitals often fail, public and private. I wont start on the "medical misadventure" side of things! Suffice to say, often, to err is human..

What I do know is, one of the hardest choices in life is where to put your ageing parent/s, or yourself. Vigilance, 24/7, is a prerequisite for care of the aged, from all concerned - family, staff, etc.

I overlook a rest home, with sevenl units in my immediate view. These units house independent, mainly sole occupants. The staff are reasonably vigiliant, but sadly in many cases the families are not. At least 5 occupiers only get visits at Christmas and presumably birthdays, judging by the sudden surge in visitors. The rest of the year must seem very long. Too often families are quick to point the blame when something goes wrong, but perhaps if they took more interest themselves they might in fact prevent a wrong occurring, although that appears not to be the case which started this latest discussion.

[karen1]

That Consumer article is excellent. Poor of Ryman to have their newest village with an incident like that.
Yes - there was also an incident with Ryman last year involving a staff member stealing jewellery, who was caught and prosecuted.

Thanks Sparky, I appreciate your comment to my post - I have followed you since you joined, and enjoy your posts.

Not necessarily poor of RYM to have an incident of theft in a new village, stealing from clients happens too often in rest homes, and not only by staff.

For anyone with parents in a retirement village/home: I recent foiled a burglary attempt next door (post 141), whereby a woman who used the grounds as a shortcut got chatting with a resident some months ago, and apparently he gave her some money (he's a bit gullible). The day I saw a problem the woman had returned with a friend, and I looked out in time to see the two of them going inside the unit and rang the home. The staff acted very quickly, and the two females were caught and sorted out by the Police. This sort of thing must happen in retirement villages, but it would often be under anyone's radar, except perhaps if family visited regularly and a conversation rung alarm bells.

As per post #141, VIGILANCE has to be number one. Having cared for an elderly family member and seen and dealt with some terrible events, I can speak from experience.

[Jim]

Tell me about it. Dementia is a truly awful disease. My father (still alive at 70) has been through a number of mild-moderate strokes and those invisible TIAs. He has moderate dementia, and while his memory is ok, his judgment and ability to be rational is sorely affected. He is now in a Metlife village, where his care is excellent the nurses ensure he is properly medicated, meaning his health has at least been stable for the last two years.

Thanks for your kind words as well! I enjoy being a part of the Sharetrader community, we learn a lot from each other.

SUM GONE GANGBUSTER again pushing to new territory I wonder what is the next stopper.

[MPC]

Add still it continues. Must be looking at good results at the end of the month.

[CJ]

Looks like a minor setback. If the company is to be believed, this shouldn't affect forecasts for growth. A good buying opportunity when the SP settles after this long run from the company.But obviously pushes some of that growth out.

Would be interesting to know why they turned it down given Hobsonville is an area zoned for expansion (not sure where teh exact site is). Is it just a small rejig or a complete rethink.

[gv1]

Maybe if it was abrothel.. then ACC would have allowed it. useless pen pushes.

[JayRiggs]

The share price could possibly be staying up due to anticipation of a good full year result on Monday. I'm looking forward to it!

[Silverlight]

Can't see why it wouldn't be good. Someone picked up shares at a 4% discount today on that deal, lucky.

Wait for the post result announcement by Quadrant, that they are selling down their stake from 53% to 19.99% or zero.

That deal will likely got through 10%+ below last price.

[ratkin]

Looks like nothing but good news in that result

[percy]

Looks like nothing but good news in that result

A very good result,and a nice dividend.
Dividend payable 20th March.record date 8th March.

[Jim]

Wait for the post result announcement by Quadrant, that they are selling down their stake from 53% to 19.99% or zero.

That deal will likely got through 10%+ below last price.

Quadrant indeed reduced their holding. More on the pipeline ??

[tosspot]

ive got a good feeling about these shares, I reckon they will be up over the $3 within the next 2 months

[gv1]

What are similar asx co's? I mean age care providers.

[tosspot]

their recent results and the current trend with the sp. It hasnt been down since the ipo, it seems the only way this ones going is up. I suppose its just a hunch but a confident one.

[CJ]

their recent results and the current trend with the sp. It hasnt been down since the ipo, it seems the only way this ones going is up. I suppose its just a hunch but a confident one.Well as long as you are confident.

SUM is up quite a bit over the past 6m/1y when compared to RYM and MET. What is stopping it from stagnating while the other catchup. They all have the same tailwind behind them but with differing skills of management.

My question is why have you chosen SUM over RYM or MET. If it is just a hunch, what does you gut same on Red vs Black?

[tosspot]

well Ive only recently started in the share game so I mainly buy of trends and all 3 have been on my watchlist for a while and MET and RYM seem to be very stagnant at the moment. SUM just seems like a steady and reliable stock thats only going up and was somewhat reinforced after there results.

[tosspot]

thats good to know. how do we buy some or do you mean buy on market and price will drop similar to sky tvs a week or so ago.

[janner]

Tosspot, you would need to contact your broker and ask them for some. Essentially an off-market transfer, known as a "placement".

S"%t.. STC.... Funds are limited and you throw this into the pot !!..

[karen1]

I'm reliably informed Quadrant are exiting their SUM holding in the next couple of days, and will be offering a placement to the brokers/market, at roughly a 6-7% discount to market price.

Anyone else hear anything? Could be a good opportunity to buy in at around $2.40-$2.45.

Hi Sparky, last I knew was this, on 6 March: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10869436 and in light of that topped up the other day, not expecting to get in much cheaper. Have got a note in with a broker though, just in case.

[janner]

Hi Sparky, last I knew was this, on 6 March: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10869436 and in light of that topped up the other day, not expecting to get in much cheaper. Have got a note in with a broker though, just in case.

Thanks for the info karen1.. You really know how to make my day.. :-))

Take up MRP !!.. Or concentrate on the shares that are being overlooked ( to put it one way ) whilst all the hype is going on..

As I mentioned to STC.. Funds are not bottomless.. If one is happy with ones holdings at present..

Divie time.. So a few sheckles are coming available.. Plus discretionary spending ..

So much to think about !!.. So little time .. :-))

[bohemian]

By reliably informed, you mean what. I have been waiting for the opportunity to climb into SUM.

[RRR]

Any idea who is going to be underwriting it?

[bohemian]

Ill bet Craigs is one.

[janner]

Ill bet Craigs is one.

Never dealt with them !!.. Never say Never !!..

BUT !!.. Caveat Emptor... They are to smart for their own good in my personal opinion..

[janner]

I'm reliably informed Quadrant are exiting their SUM holding in the next couple of days, and will be offering a placement to the brokers/market, at roughly a 6-7% discount to market price.

Anyone else hear anything? Could be a good opportunity to buy in at around $2.40-$2.45.

It would appear that no one else has heard sparky..

The question has to be . WHY !!..

[winner69]

It would appear that no one else has heard sparky..

The question has to be . WHY !!..

Quadrant shares were in escrow until full year announcment

Then on Mar 6 they indicated to the NZ Herald that they were not about to sell, contary to market speculation

SO what other reason do you need .... sale imminent ..... probably as sparks says

Auadrant not a natural owner of Summerset anyway .... but haven't they done well

[karen1]

By reliably informed I mean three brokers offering me and my wider family members access to SUM shares from Quadrant

MUCH prefer your take on it Sparky! Guess I need to ring that broker tomorrow then. Wish I had known the above before I topped up!

[karen1]

Thanks for the info karen1.. You really know how to make my day.. :-))

Take up MRP !!.. Or concentrate on the shares that are being overlooked ( to put it one way ) whilst all the hype is going on..

As I mentioned to STC.. Funds are not bottomless.. If one is happy with ones holdings at present..

Divie time.. So a few sheckles are coming available.. Plus discretionary spending ..

So much to think about !!.. So little time .. :-))

Sorry Janner, didn't mean to burst your bubble! Article sounded pretty firm on Quandrant staying at this stage, and as I hadn't heard from the broker I assumed it (sell down) wasn't going to happen. Great if it does though.

[janner]

The brokers will be working the phones hard tomorrow morning I'd say!

What would a broker know about hard work ???

[CJ]

Hi Sparky, last I knew was this, on 6 March: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10869436 and in light of that topped up the other day, not expecting to get in much cheaper. Have got a note in with a broker though, just in case.Not that I really care (not a holder, especially not one who has bought in since the 6th), but have they breached any rules for misleading the market (does that only apply to the listed company, not its shareholders). I don't think it could be classed as manipulation and not quite a pump and dump.

That was a vey clear statement so I think it would be extremely unlikely they changed their mind in the last 10 days.

[percy]

My broker tells me that it is not the full sell down expected - Quandrant having decided to hang on to a significant portion to potentially sell later - guess we will get the details tomorrow.

At the float they sold at $1.40.
$2.40 plus they will find better.
Suppose they will hang on to some to sell at $3.40 in a year's time? !!

[winner69]

That's the way it is these days where being sneaky and telling half truths is usual acceptable behaviour

If sparks is correct and quadrant sell down this week they knew a few weeks ago .....but denied it ....or as sparks said were flexible

That's the way the world is ...saying no is a yes as I said in earlier post ...the biggest signal they were selling Karen

Haven't old fashioned values and standards dropped

Prob one reason why snoopy doesn't bother go to c-Suite to find out about a company .....those people are usually pretty sneaky as well

[winner69]

good post spearks ..... must have enjoyed your sultana bran and yoghurt for breakfast to be so insightful at this time of the morning

Interesting points .... lets blame the Herald reporter for being lazy and not looking Chris in the eye (but hard to do over the phone) and asking the hard question ..... easy reporter

I must have come across you in the Koru lounge at times sparks ..... maybe not as we probably going in different directions ..... but talking to C-Suite guys is always interesting ... as long as you understand what you hear is the the optimistics view.

Also agree one can learn heaps just from understanding how thinsg work ... even if not invested .... lke my morbid fascination of NPX over the years has taught me heaps more more about resins and other stuff than I already knew .... and that like percy says too many vice presidentos not always an effective structure ha ha

You mention the late 80's .... like now they got their commuppance even thoguh some did not change .... but on one hand 'standards and values' are important in life when it comes to the business world and investing they do a large degree go out the window (money does that eh) ..... so one needs to live with that .... and play the game and follow the sentiment to a large degree

in 10-15 years our conversation might be completely different

[macduffy]

I've taken a few. Now hold a full hand of RYM, MET and SUM, just wish it was more of RYM and less of the others. Must work on that!

:cool:

[CJ]

Quadrant have just as much right as anyone to obscure their business strategy. They aren't a listed entity, they are an investor in listed entities. There is a difference. If they had announced a sale before it was ready, then they would have depressed the price, and you would have been here railing against the thoughtlessness and stupidity of the big bad private equity company hurting the interests of smaller investors. Yes they have the right to do what they want.

But do they have the right to inform the market one thing, and do another? Normally, a fund would have the "we do not comment on speculation" approach so to make a statement, and "change" their mind within 10 days seems a bit insincere. If the stock had shot up after the announcement (say 10 or 20%), would you view be different (as it is, it performed just a bit better than the NZX50 and as usual, you would have done better putting you money into RYM).

Note: I am not personally annoyed at their actions. However, it is this sort of action that makes small investors not trust the sharemarket and invest in housing instead.

[tosspot]

I just called my broker (asb sec) and they didnt know anything about the sale. she put me on old for 10 minutes then I had to go but this notice pretty says everythings already sold at the discount so looks like I missed out.

[Balance]

Tell me about it. Gifts like Ngai Tahu selling RYM down at $3.15 were in retrospect reasons to liquidate every stock in the bottom half performance of your portfolio and going hard in RYM.

That's the beauty of the market. Differing views on future macro as well as micro prospects.

When Ngai Tahu sold down, they probably thought the property market had peaked. Did not count on the market continuing to chug along.

[winner69]

Note: I am not personally annoyed at their actions. However, it is this sort of action that makes small investors not trust the sharemarket and invest in housing instead.

CJ - thats what i trying to say earlier .... standards and values mean nothing these days when money is involved .... esp when it comes to the greedy money men (sorry financial professionals) ... they think it smart to be clever like this

But mate - you need to live it ... at least until they get all their comuppance and the market starts to scorn such behaviour ..... maybe 5-10 years

But Chris saying what he did was the clear signal that they were going to sell down ... you need to read between the lines

[CJ]

But Chris saying what he did was the clear signal that they were going to sell down ... you need to read between the lines"There has been a lot of speculation in the market - as markets are wont to do - but we have no plans to divest at this stage," I call BULLSH!T. Reading "between the lines" this was a bare faced lie and mislead the market. FMA should at least give them a public telling off even though if it went to court, they probably haven't breached any rules and would get through out quickly. Scare the sht out of them by threatening discovery of all their internal correspondence on SUM. As I said, this flagrant disregard is what causes lack of trust in the markets.

I will move on. As I said, I am not invested (monetarily or personally) in this stock.

[Hoop]

I cried out, "Wolf!" Why didn't you come?" An old man tried to comfort the boy as they walked back to the village.
"We'll help you look for the lost sheep in the morning," he said, putting his arm around the youth, "Nobody believes a liar...even when he is telling the truth!"
The Boy Who Cried Wolf..Aesop fables...

My chart below shows SUM in a glorious long term uptrend punctuated by pauses for a "breather"...These pauses are healthy as it stops the share from suffering exhaustion which would result in a sharper sell off/price fall.
The TA indicators I use are biased towards money flow which shows up when sellers/buyers are active (distribution/accumulation)....however for SUM these default indicators may not be ideal as they seem to be crying wolf every time SUM takes a breather.

So..Here we are again..
TA indicator sell signals went of a few months showing divergence ...do we ignore them again??

I think so.. and wait for chart breaks to confirm if it is another cry wolf or not...the breaking of the trend line is not so important but if there is a support break at 2.48 as well then followed by the EMA50 break there would be technical damage occurring and exiting the share should be considered unless you are a long -term holder in which case your eyes would be on the EMA200 line

Disc: Hold SUM

http://i458.photobucket.com/albums/qq306/Hoop_1/SUM15032013.png

[CJ]

Forsyth Barr have an allocation. Have made my request, will see what I get.....

If Summerset was worth $2.58 on Friday, and there has been no change in its business model or earnings, no dilution of shares, then it should be worth $2.58 again in no time at all.Have they given you a price or is it a book build. The last few have mentioned the price (and discount) upfront.

Given the success of recent placements, are they trying to minimise the discount?

[Anonymous]

$2.42 - which appears to be a 6.5% discount to the Friday price, as I had heard over the weekend.

I was going to ask this earlier and this may be a stupid question, and given that First NZ have offered at $2.42 also then perhaps have answered my own question, but do all brokers participating in a placement have to offer at the same price or can each broker try and 'place' it for as higher price as they think they can achieve?

I guess they would lose a fair bit of goodwill offering at a higher price than their peers...

[Joshuatree]

Not in my experience. Craigs offered a placement to me for less then an other broker recently, cant recall which share atm..

[Anonymous]

Thanks Sparky, that makes sense. I guess then Joshuatree that Craigs were underwriting that placement you got cheaper than others?

[forest]

What do posters value SUM at. I personally can not see a value anywere close to $2.40.
Remember they only grow fast because of resent new equity.(Anybody should be able to grow with new funds). Not sure if they keep this up on their own steam.
I am interested in some opinions on value.

Cheers Forest

[forest]

Sparky,I would have thought that 30% is unlikely for 5 years without extra funds. I have SUM at a PE of around 36 at current price. It wouldnt surprise me if SUM SP will come back to $2.07.
What I also notice is that this placement is carried out just before the yearly accounts are publised, maybe they are not as flattering as people expect.
We will find out in the next few weeks.

[macduffy]

They would lose enormous goodwill. If I paid $2.42 at Forbarr and First NZ could give it to me for $2.40, then I'd rather deal with Forbar.

I'd say UBS, who underwrote the sale, gets 1.5-2.5% in profit. Retail brokers get 1-2%. If Forsyth Barr get $100m allocated, then they click over an easy $1m-$2m for a weekend's work. So UBS would probably have underwritten at $2.32-$2.35 or so.

That's pretty much it, I reckon.

The shares are being "placed" at $2.42 and "trading" is currently halted. Not absolutely sure of this but I would think that participating brokers are obliged to place shares at the placement price. Of course, if they take them firm themselves and on-sell at another price once the trading halt is over, that would be a different matter?

[tosspot]

did anyone manage to get any through asb securties, im pissed I called them in the morning and they didnt know what I was talking about. they put me on hold for to long. called again later and they said we can give shares at a discount you need to buy whats on the market and by the looks of it trading is currently halted didnt know what they were talking about. then called again and the 3rd person said you needed an invite to get in on the $2.42 shares

[tosspot]

Tosspot, this is what happens when you use discount brokerage. If you don't value a broker's services, then you surely can't expect them to value your business when the opportunities come knocking.
No I dont think its got anything to do with that. I was very polite wasnt rude at all. no one new what I was talking about though. it was just the call centre people learning what was going on as I spoke.

[RRR]

They are just clerical/office staff and know nothing about the sharemarket. I had similar experience during Sky TV placement and called them first thing in the morning. The bloke I spoke to said that newscorp are selling on market! Luckily for me my wife has an account with Craigs and bought her some.

[tosspot]

so how do you go about getting the someone who can do something. storm there front office

[RRR]

so how do you go about getting the someone who can do something. storm there front office

Change to a full service broker! Market in a correction mode (here is hoping) and you might get it cheaper, be very patient:cool:

[tosspot]

Well that's kind of the point.

I can pick up the phone and talk directly to my authorised financial advisor, not a call centre jockey. They specialise in this sort of thing. Whereas a call centre jockey wouldn't have a clue. They are tasked with identifying why your clicking on a buy order isn't working on the website, or why your funds haven't transferred across accounts. They don't get any briefings, understand the companies listed or anything like that.

Being polite doesn't even enter into it.

If you want to get access to placements or interesting IPOs in volume, then you need to have a relationship with someone you can pick up the phone with and tell them you want XYZ amount of shares. And they will try to get it for you.

The price for this, plus the research and services you get from a quality broker, is reflected in the fees they charge, which naturally is higher than Direct or ASB Online.

If you dont mind me asking who do you use and do you pay for direct contact with a specialised broker or are there good brokers out there that the contact number goes straight to a broker not a call centre

[Hoop]

Summerset Group Holdings Limited advises that the strike price for the



dividend reinvestment plan (DRP) operating in respect to the dividend payable


on 20 March 2013 has been set at $2.5963 per share.






Ouch!!!

[RRR]

Brokers must be loving it after a long time! Now, they are in demand. Back to good old days of irrational exuberance! Not in a bubble territory yet but I am just a retail investor with a small pocket!

[tosspot]

So now that the placement is completed and the halt concluded (SP opened at 248), any thoughts as to how low this might go? What was the discount on Sky TV and how close to that (or over) did the SP go? ATM went a bit below it's placement price over time right?
I ask because I have a small bid in at 245 - but looking for advice based on experience as to what the SP might go to?
Cheers.
I think its only going back up from here. Everyones trying to swop in on a quick profit. Buy side looks very supported below 2.50

[JayRiggs]

The SkyTV placement was at 4.80.
When the trading halt was lifted, it did go as low as 4.85 on market, then up from there.
After the TradeMe placement last yr, I think it traded slightly below the placement price before moving on up.

I think we'd be lucky to get SUM @ 2.42 or under on market.

[Hoop]

NO technical damage..2.48 support held See my chart post #213 (http://www.sharetrader.co.nz/showthread.php?5009-Summerset-Group-IPO/page15)...so view this price drop as an opportunistic entry level... put my money where my mouth is...accumulated some more this morning

[winner69]

Yup me too. Started my holding in SUM today. Had to pay a bit more than the 2.45 bid I had in early today but happy with my entry price none the less.

well done turmeric .... many will say you won't regret your decision .... whats afew cents in a few years time when you have doubled your money

[Bjauck]

Back when Summerset was listed, my broker said that it would be an unspectacular "plodder" and was not cheap! My first ever equity investment was a subscription in the Infratil float despite a warning from my then broker, who said it would be a "boring" utility play. So, from experience, I should have known to ignore the broker advice against "plodders" and bought a Summerset holding earlier..... but I took a small plunge today! The insider buyer alert was the clincher for me.

[percy]

Back when Summerset was listed, my broker said that it would be an unspectacular "plodder" and was not cheap! My first ever equity investment was a subscription in the Infratil float despite a warning from my then broker, who said it would be a "boring" utility play. So, from experience, I should have known to ignore the broker advice against "plodders" and bought a Summerset holding earlier..... but I took a small plunge today! The insider buyer alert was the clincher for me.

Some of us are very lucky having an excellent broker.
I must admit posters on sharetrader have made me much more alert to what is going on.
sparky is a breath of fresh air,hoop keeps us "on the trend line"and many like mcduffy,winner69,lizard and balance keep us honest.

[Jim]

Don't change your stocks - change your broker. Boring is best for most investors.

I attended the usual Shareholders Association meeting organized last year. The guest speakers were Ms Norah Barlow and Mr Julian from Summerset Group. After the meeting I was very impressed and I bought a parcel at $1.65 on 29-5-2012. Very impressive performance. Shareholders Association meeting often give good information on companies going forward.

[Blendy]

I really must go to the Auckland meetings. Oops.

[winner69]

Sparky is trying to tell you contact Forbar and tell them you want to a REAL customer and take advantage of their services ....at a cost of course

Others include FCNZ .... Craig's etc

[CJ]

Thanks for the suggestions. Do broking houses ever sell their research to non-clinents? Depending on price it would be good to be able to buy research on a specific company.Never used but have seen this in my travels: http://www.reuters.com/finance/stocks/analystResearch?symbol=FBU.NZ

[Joshuatree]

Tha best place may be under our noses ; asking your share trader community.We prob cover all the Brokers/Advisors etc.

[CJ]

Firms discourage the sharing of their reports by automatically stamping your name on it so you can't distribute it widely without it coming back to haunt you.


Tha best place may be under our noses ; asking your share trader community.We prob cover all the Brokers/Advisors etc.Adhoc summaries are ok but being provided the full document is frowned upon.

[Joshuatree]

pmpmpmpmpm

[CJ]

pmpmpmpmpmShhhhh. But on a adhoc, not wholesale basis surely.

[Hoop]

A successful replacement of shares is nearly completed...see depth

Much better than the STU and ATM replacements which overhung those stocks for weeks....It seems investors were much more keener to snap up SUM than those others.

http://i458.photobucket.com/albums/qq306/Hoop_1/sumdepth20032013.png

[Bjauck]

Going back to this converstion, what is the usual process for getting hold of brokering house's research on individual companies? I just use DB at this stage but it would be really good to have access to a range of independent research reports on companies I am interested in. Cheers.

Unfortunately my current broker only seems to analyze a limited number of companies. However, I find for a good summary on companies that the ft.com site is very good. It provides links to buy in depth reports from itself IC, reuters and other sources. For example on SUM:NZC see http://markets.ft.com/research/Markets/Tearsheets/Forecasts?s=SUM:NZC

[Joshuatree]

Unfortunately my current broker only seems to analyze a limited number of companies. However, I find for a good summary on companies that the ft.com site is very good. It provides links to buy in depth reports from itself IC, reuters and other sources. For example on SUM:NZC see http://markets.ft.com/research/Markets/Tearsheets/Forecasts?s=SUM:NZC

Bjauck That is a really useful website, really appreciate your sharing with our share trader community; kudos to you, J T

[macduffy]

Yes, many thanks, BJ!

Works for ASX companies too - suffix :ASX - unsurprisingly, although I first tried AUS, AUT, based on the NZC example!

[percy]

Yes I too find it a great site.Have it on my favourites.So thanks Bjauck.

[CJ]

Intersting (although maybe not suprising) that as RYM heads north due to broker revaluation that SUM does so as well (both up 3%). Is this the norm or just a conincedence today?Depends - investors must be seeing it as an industry re-rating rather than specific to RYM. MET up 1%, SUM up 1.5% and RYM up 3% as I write this (20m delayed - cant be bothered logging in).

[Blendy]

Thank you for that handy research!

I also especially like that you have a team of intelligence units reporting to you ;)

[Blendy]

it's excellent - and I am most appreciative that people on this forum are happy to share their research with others!

[Toasty]

After much agonising a new SUM shareholder is born. RYM a bit pricey for my liking. MET didn't really spin my wheels but SUM was the right mix of price point and potential. Thanks to all on here for the wealth of infomation and analysis.

[Banksie]

I'd also like to add my thanks for the information shared on this thread. New to this forum and new to investing I decided the only way to learn to swim...was to get wet:)...and my first purchase was SUM.

[stones]

I'd also like to add my thanks for the information shared on this thread. New to this forum and new to investing I decided the only way to learn to swim...was to get wet:)...and my first purchase was SUM.

Banksie you are not on your own. I have drowned many times but I am NOT SORRYwith MY SUM so far.

[MPC]

I agree with the positive sentiments expressed here and bought in on fundamentals at $2.36 not too long ago.
Hoping that we get continued stream of good news and I expect to have a good dividend income stream from this stock in the years to come. At the moment I am happy for them to build their base business and have it all aligning for the future.
I rate SUM a stronger buy than RYM and believe they will outperform this year and then.....
Great long term hold.

Regards,
MPC

[Huskeez]

New 52 week high! Clap clap clap

[Toasty]

Just something I was wondering about, and to quantify, I have done no research. All these retirement village operators have been building units through the years of the leaky building fiasco. Has there ever been any indications of possible issues at any of the villages? They look like fairly traditional builds but it was just a random thought. Apologies if this has previously been addressed or is inappropriate.

[tosspot]

Yea i just bought in at 2.74. I sold out at 2.59 just before the run this last week for ryman. realised this has higher returns so back to this. silly me should of just stayed. living up to my username

[Toasty]

In at $2.66 a few days ago. Already up to $2.80 today. I must admit that being part of the sharetader community has lifted my strike rate.

[tosspot]

lol, not really matey, we're all onto a winner here, short and long term holders. Mooses follow clowns you know...

UPDATE: Radar lock, incoming Bulls! ;)

yip sure does look like its on the fast track to $3

[Snow Leopard]

Reading through the recent posts here it seems to me that Summerset has become:

the NEW SHARETRADER SPECULATIVE SHARE :scared:.

Best wishes
Paper Tiger

Disc: Own Some SUM

Disc: please do not be offended by this post unless you really want to be.

[troyvdh]

All I can say is ...thank goodness that folk on this site have never never ever been found to have been found "ramping"...a particular share.

Now if we could discuss CEN.......

[Huskeez]

Troyvdh, you surely aren't suggesting people would go out and buy shares because they read some comment on the internet from someone writing under a pseudonym?Jonathan Lebed haha he had multiple

[Banksie]

Is this better than expected? Seems to me like they are down 1 unit on 2012 and less than the 95 sparky suggested. The new unit sales are well up though.

FY13 SALES OF OCCUPATION RIGHTS





1Q13
Actual



New sales

64



Resales

25



Total

89





FY12 SALES OF OCCUPATION RIGHTS





1Q12
Actual

2Q12
Actual

3Q12
Actual

4Q12
Actual

FY12
Actual



New sales

38

45

41

43

167



Resales

52

36

45

31

164



Total

90

81

86

74

331

[Banksie]

What we don't know is the revenue associated with sales - are they getting a bigger price that they were a year ago - the answer is likely yes, given we know new construction margins are increasing and the overall rise in the property market.

Also depends where these units were sold. The increase in Auckland property prices (10.4%) is much greater than those in Dunedin (3.7%) http://www.qv.co.nz/onlinereports/propertyvaluemap.htm.

Disclaimer: I am not feeling any less positive about this company, just trying to understand how to analyse the announcement by playing devils advocate.

[Snow Leopard]

Best not to get to hung up on an individual quarters figures, look for the underlying trends.

Remember that the sale of a new unit is a lot better for the operational cash flow than a resale.

As long as the number of new units sold keeps going up then things are OK.

Best Wishes
Paper Tiger

[Snow Leopard]

So as the Summerset sets at $2.84 it is just 2 millidollars below my current present value calculation for the same.

See markets are sometimes right :).

I have a value of $3.27 for a years time and a quick look at ft.com (http://markets.ft.com/research/Markets/Tearsheets/Forecasts?s=SUM:NZC) reveals that brokers consensus varies from $2.60 to $3.8.

Best Wishes
Paper Tiger

[Snow Leopard]

My intrinsic value is $3.23, which is based on slightly conservative multipliers used with known 2012 EPS in my spreadsheet modelling. If I have more normal multipliers, it comes up to $3.54.

Based on the coming years estimate for EPS (taken from the ForBarr research which is 8.8cps) I get intrinsic value of $4.00, or $4.39 on normal multipliers.

So uptrend has some serious life left in it then. :t_up:

Best Wishes
Paper Tiger

[Snow Leopard]

More "That's going straight to the pool room".

bw
PT

[Vaygor1]

Always have a backup

More "That's going straight to the pool room".

bw
PT

Plan Z backup.... Jousting sticks.

Btw. Does MRP remind anyone of mankind's ability to generate electricity?

[percy]

What, not again????

Sorry team;we find ourselves "well positioned." lol

[JayRiggs]

Yay we made it to $3! Doing a little dance.

[Zaphod]

I became a holder in this puppy just before the recent rise, so that was a nice start! I note there hasn't been very much discussion on the DRP, however would anyone care to air their thoughts?

[kizame]

https://www.nzx.com/companies/SUM/announcements/234266

Not sure what needs to be discussed about it.

What was on your mind Zaphod?

Well only that it is deep in the money,by about 41c,which is pretty rich as normally only about 2% or so isn't it?

[kizame]

Well only that it is deep in the money,by about 41c,which is pretty rich as normally only about 2% or so isn't it?
Ahhh Forget that last post,the heavy rain came swamping in my ears,went ex divi 6 march and ex brains 20th march ha.

[Beagle]

On board with this company recently. They have some good locations in the North Island and are a good complement to a holding in Ryman in my opinion. Let the growth continue:t_up:

[Zaphod]

https://www.nzx.com/companies/SUM/announcements/234266

Not sure what needs to be discussed about it.

What was on your mind Zaphod?

The strike price certainly wasn't overly generous IMO, but if we're expecting good capital gains then certainly worthwhile. Just interested in hearing from those who have decided against joining the DRP.....

[Huskeez]

Wow what a dry up

[Dej]

Wow what a dry up

:ohmy: your right, only $100k worth of shares for sale currently!

Liking the look of this one ;)

[Goldstein]

Wow what a dry up

Yep - I wonder if there was some sell off over the last few days in anticipation of an interest rate rise by the RB. Now the sellers vanished like an old oak table.

[Huskeez]

Yep shortland streets my fave too :-)

[Dej]

Well that was short lived :t_down:

[Huskeez]

Haha firing blanks! Shaken out a few more sellers though

[stones]

Yep sure is a keeper for me

[Huskeez]

Nice we PR , sorry cant put link up but check it out holders :-D

[percy]

Very positive speach.Positive outlook.

[Toasty]

And the market likes it too as we wander up to $3.09.

[Huskeez]

Sum responds to Rym ! Boom

[Beagle]

Very positive speach.Positive outlook.

Sure is mate. What a great pair to own, this and Ryman.

I'm really liking the size of these guys land bank in the Auckland area.:)

[NZSilver]

"With New Zealand's older population set to double over the next twenty years, the market for retirement and aged care facilities is likely to expand substantially. In our view, Summerset is well positioned to participate in this growth."

Pretty simple really!

[Toasty]

New high for SUM. $3.14...I mean $3.15. I am a little suspicious of all the wins I am having recently. Partly its because I am doing more research and I am certainly enjoying the Sharetrader community, but I get jittery at all the good sharemarket news lately. Feels a bit euphoric. Maybe I am just on the right threads?

[Banksie]

$3.20 - there must have been quite an impressive spread of light refreshments at the AGM yesterday to stimulate this price action. Did anyone attend?

[Banksie]

I spiked the punch. Those now banned synthetic cannabinoids sure came in handy ;)

lol - how 'high' will this share get?

[JayRiggs]

Has anyone been buying recently? I thought about buying some at $3 a few days ago... but $3.23 now, this is ridiculous!
Along with the AGM, I think the share price is responding to the recent RYM surge. One goes up, the other one follows.

[NZSilver]

Has anyone been buying recently? I thought about buying some at $3 a few days ago... but $3.23 now, this is ridiculous!
Along with the AGM, I think the share price is responding to the recent RYM surge. One goes up, the other one follows.

Dont forget MET (I dont hold) but its getting some traction!

[Toasty]

There certainly seems to be a focus on this industry in the media at the moment, along with all the hype about our aging population and pension concerns. Add that to the commentary about the next decade being the golden age for these companies. Seems like a good recipe for the SP to grow on...

[Heffner]

Agreed, to a certain extent IMO they all (RYM SUM & MET) seem to track each other quite closely, which makes sense seeing as they are all in the same business. However, since I entred into this sector (only 4 months ago) I have been quite suprised at how closely they track each other, especially in the short term based on various updates; Broker re-ratings being the big one recently (3 seperate occasions now in the last couple of months).

I guess this is all reflective of the demographic trends these companies benifit from and as per recent discussions on the RYM thread, probably reflective of gains oin the housing sector too.

Note MET is actually the biggest recent gainer up about 12.5% in the last week or so.


There was also some positive news that came through via the GOVT that they will be setting aside more money in the upcoming budget for aged and dementia care.

[Heffner]

I hadn't caught up with that, have you got any links to more detailed info on that? Cheers.

http://www.stuff.co.nz/national/politics/8614082/Aged-care-funding-to-increase

There you are good sir.

[Goldstein]

I doubled my SUM holding at $2.97 as I got sick of looking for an entry point to RYM.

I suspect with RYM at $6 I would be looking at shifting some of my holding to SUM or MET, but don't take that as advice as I'm notoriously bad at putting 'stop-profits' in place.

[Beagle]

I added to my position in this stock yesterday at $3.07 after reading the very positive comments made by the Exec's at the AGM. In my view its almost certain the stock price will double in my initial time horizon of five years, probably quite a bit earlier than that.

[Goldstein]

Somebody has put in a sell order at $200. Are one of you guys taking the piss?

[Banksie]

"American scientists have homed in on the part of the brain that controls ageing, managing to keep mice alive and active for up to 100 days past their normal lifespan."


http://www.stuff.co.nz/science/8623375/Scientists-find-lifespan-control

Good news for this sector.

Capital outlay on properties for aging mice will be pretty minimal as well ;).

[Huskeez]

I had a dream we hit $3.50 by next week.... but I also dreamt I was going out with Kim Kardashian .... I dont know what this means im so confused I can feel my legs...

[BIRMANBOY]

Good for the punters ..bad for the sector. Move em in slow...carry them out quickly is the fundamental premise of retirement investments. PS no seniors were harmed in the writing of this post. I'm one myself...damn it.
"American scientists have homed in on the part of the brain that controls ageing, managing to keep mice alive and active for up to 100 days past their normal lifespan."


http://www.stuff.co.nz/science/8623375/Scientists-find-lifespan-control

Good news for this sector.

Capital outlay on properties for aging mice will be pretty minimal as well ;).

[Snow Leopard]

...Where do you guys see full value?

$2.835.

Is that 30% per annum you are predicting there?

Best Wishes
Paper Tiger