MET - Metlifecare - one for the fundies?

[winner69]

Chris Lee today’s Taking Stock did a bit on the retirement sector.

Seems to sum MET up quite well.

Extract-

Share prices have dropped, on average by about 30 per cent, from their pre-Covid highs, almost a standard fall, implying all listed retirement villages are the same.

They are not.

Ryman is mature, still developing here but particularly in Australia, though developments have stalled.

Summerset wants to grow in Australia, and is spread across the country.

Oceania is largely Auckland-centric, and is in the midst of developing its existing sites.

Arvida is in many low-growth rural towns, and has more of a focus on care than real estate.

And Metlifecare is in a world of its own, forlornly battling to enforce a marriage agreement that was signed pre-Covid and would only proceed if the now unwilling groom is walked up the aisle accompanied by a shotgun.

Of these operators Metlife faces the most difficult future, a perpetual victim of an ugly childhood, its listing as hairy as could be, and later left with various guardians including a stint with the unloveable Todd Group, which had a controlling interest for some years.

Very few people who get invited to the Todd table leave with a doggy bag of goodies. Most slink off, if not emaciated, certainly fed on stale bread and stock.

https://www.chrislee.co.nz/taking-stock

[JohnnyTheHorse]

Those big crossings at the stubborn 4.25 resistance were enough to get me back in on this one. Following the momentum...

[bull....]

yes i better disclose i brought at 4.25 today for a trade

[winner69]

Those big crossings at the stubborn 4.25 resistance were enough to get me back in on this one. Following the momentum...

On its way to 5 bucks ...pretty quickly I hope.

[King1212]

Can not believe bull in onboard.....are u stirring the wheel bull or u want my janitor position?....lol

[bull....]

serious back on for a trade , lets get ramping folks ... wheres beagle and balance the biggest cheerleaders before lol

[Joshuatree]

Ill raise you.$25 a pair of false teeth, and meat and three veggies.

[King1212]

That is Abit harsh JT...how is your BBOZ....hope u got it upside down...lol

[Joshuatree]

Its Friday king all in good humour. I see you are cross promoting again, youve bought up BBOZ again:confused: , please go to the appropriate thread and im happy to discuss if you are remotely serious..

[King1212]

Nah....make a good profit out of it ...the world is happy now....waiting for bull n u to stir market again...lol

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12291970

A bit about Stephen Hunter their new (hopefully top gun), QC in there.

[Balance]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12291970

A bit about Stephen Hunter their new (hopefully top gun), QC in there.

These days, barristers and solicitors will normally get a QC opinion on an uncertain outcome when considering litigation.

The opinion does not come cheap - anywhere from $10,000 to $25,000 for an opinion.

[crighton100]

I read this bit from Chris lee on here,what a load of bollocks.We were owned by the ross group biggest villians in NZ,before we were bought out by MET [the place was going to the dogs under their ownership]Thankfully I can tell you this place is now up to scratch & they keep the place in a modern condition,they have spent millions on the place,which is why the shares are underpriced,I still think $7 is a reasonable price.I can tell you we came in 11 years ago & looked at sum & boy was we dissappointed with them [shoddy workmanship in the units,hopefully they have improved since then].Good to see my PPH still going strong.

[King1212]

Happy for you crighton....I did well with PPH..sold a bit early but no regrets...got my profit. Always a believer of PPH...just don't have the stomach to ride through.

[winner69]

I read this bit from Chris lee on here,what a load of bollocks.We were owned by the ross group biggest villians in NZ,before we were bought out by MET [the place was going to the dogs under their ownership]Thankfully I can tell you this place is now up to scratch & they keep the place in a modern condition,they have spent millions on the place,which is why the shares are underpriced,I still think $7 is a reasonable price.I can tell you we came in 11 years ago & looked at sum & boy was we dissappointed with them [shoddy workmanship in the units,hopefully they have improved since then].Good to see my PPH still going strong.

crighton - when Lee said .... Metlife faces the most difficult future, a perpetual victim of an ugly childhood, its listing as hairy as could be, and later left with various guardians including a stint with the unloveable Todd Group, which had a controlling interest for some years. I think he is referring to the stock MET rather than the villages themselves

Many have wondered why MET the stock is always 'cheap' and 'undervalued' - what Lee says hits the nail on the head. Once tagged the way MET has been its very hard to change market perception - once a market pariah always a market pariah some market commentators say.

PS - Todds did own a fair chunk of Todd around the turn of century and had 35% when they sold out in 2005.

[macduffy]

PS - Todds did own a fair chunk of Todd around the turn of century and had 35% when they sold out in 2005.

Should that read "a fair chunk of MET", winner? From memory, a division of AMP held the rest.

[winner69]

Should that read "a fair chunk of MET", winner? From memory, a division of AMP held the rest.

My memory is that when Todd’s held 35% Cliff Cook still held about 25% and they both got about in about 2005.

[King1212]

https://www.newshub.co.nz/home/money/2020/05/coronavirus-expat-kiwis-rush-to-buy-houses-back-home-but-few-on-offer.html

That is the reason why...NZ property will hold up plus low interest n LVR

[Longhaul]

More reading for you all, this time from Simpson Grierson:

https://www.simpsongrierson.com/articles/2020/covid-19-legal-faq-contractual-issues

"Pandemic as a triggering event: Even if you have a MAC provision, and it looks like it might allow you to terminate your contract, you should talk to your lawyer to check whether it gives you the termination right in the circumstances. MAC clauses are notoriously difficult to uphold, they must be specifically drafted and the clause must clearly apply in the specific circumstance. Further, as a matter of general contract law, if there is any ambiguity or uncertainty in a provision like this, it will be interpreted in favour of the non-cancelling party. We are not aware of any examples of MAC provisions being successfully invoked (in NZ, the UK or the US), as a result of epidemic or pandemic events (such as the 2003 SARS epidemic, the 2009 swine flu pandemic or various outbreaks of MERS starting in 2012).

Global economic conditions as a triggering event: It is unlikely also that a (perhaps inevitable) global economic slow-down will trigger a MAC clause. Frequently such events are expressly excluded from the list of triggering events. So, once again, you will need to check carefully what the MAC clause says."

Updated with another from Harvard: https://corpgov.law.harvard.edu/2020/04/04/covid-19-as-a-material-adverse-effect-mac-under-ma-and-financing-agreements/

I'm starting to get a feeling that MET has the upper hand and it's more likely than not that they will settle before it gets to court. The relative success of New Zealand's containment of the virus to date might also be a positive for MET.

Of course these are just my two cents from reading the articles I've posted. Be interested to hear others' points of view.

[bottomfeeder]

Met and its shareholders can only benefit from court action, subject to unforseen judgement by the court. That is I can't see any downside. Either damages as well as specific performance, or damages and renegotiation of terms (only small movement I would imagine perhaps tops at 10%), rather than damages and repudiation of the agreement. Full repudiation without damages is not a possibility. SP onward and upward.
Thanks Longhaul, will put my buy order in for Monday.

[Balance]

I'm starting to get a feeling that MET has the upper hand and it's more likely than not that they will settle before it gets to court. The relative success of New Zealand's containment of the virus to date might also be a positive for MET.

Of course these are just my two cents from reading the articles I've posted. Be interested to hear others' points of view.

Thanks, Longhaul - very useful reaffirmation. 👍

[bull....]

very good info longhaul

We are not aware of any examples of MAC provisions being successfully invoked (in NZ, the UK or the US), as a result of epidemic or pandemic events (such as the 2003 SARS epidemic, the 2009 swine flu pandemic or various outbreaks of MERS starting in 2012).

[winner69]

Hope MET get something substantial out of this for shareholders

Only way the share price will get over 5 bucks, let alone 6 bucks

[Bjauck]

More reading for you all, this time from Simpson Grierson:

https://www.simpsongrierson.com/articles/2020/covid-19-legal-faq-contractual-issues

"Pandemic as a triggering event: Even if you have a MAC provision, and it looks like it might allow you to terminate your contract, you should talk to your lawyer to check whether it gives you the termination right in the circumstances. MAC clauses are notoriously difficult to uphold, they must be specifically drafted and the clause must clearly apply in the specific circumstance. Further, as a matter of general contract law, if there is any ambiguity or uncertainty in a provision like this, it will be interpreted in favour of the non-cancelling party. We are not aware of any examples of MAC provisions being successfully invoked (in NZ, the UK or the US), as a result of epidemic or pandemic events (such as the 2003 SARS epidemic, the 2009 swine flu pandemic or various outbreaks of MERS starting in 2012).

Global economic conditions as a triggering event: It is unlikely also that a (perhaps inevitable) global economic slow-down will trigger a MAC clause. Frequently such events are expressly excluded from the list of triggering events. So, once again, you will need to check carefully what the MAC clause says."

Updated with another from Harvard: https://corpgov.law.harvard.edu/2020/04/04/covid-19-as-a-material-adverse-effect-mac-under-ma-and-financing-agreements/

I'm starting to get a feeling that MET has the upper hand and it's more likely than not that they will settle before it gets to court. The relative success of New Zealand's containment of the virus to date might also be a positive for MET.

Of course these are just my two cents from reading the articles I've posted. Be interested to hear others' points of view.

I am on the fence at the moment.
Several issues that could be in favour of successful application of the MAC:

1. It was an epidemic that was the cause and not ¥general economic conditions” of the affect on MET (and The epidemic affected senior citizens disproportionately)
2. It was the implementation of existing emergency and epidemic provisions - and not new laws - that affected MET.
3. MET applied for relief from the government which involves future repayment, apparently without required consultation with APVG.

[Balance]

I am on the fence at the moment.
Several issues that could be in favour of successful application of the MAC:

1. It was an epidemic that was the cause and not ¥general economic conditions” of the affect on MET (and The epidemic affected senior citizens disproportionately)
2. It was the implementation of existing emergency and epidemic provisions - and not new laws - that affected MET.
3. MET applied for relief from the government which involves future repayment, apparently without required consultation with APVG.

This is a major deal so any breach by MetLife will have to be very material for a judge to set aside the contract.

[kiwico]

"Pandemic as a triggering event: Even if you have a MAC provision, and it looks like it might allow you to terminate your contract, you should talk to your lawyer to check whether it gives you the termination right in the circumstances.

I saw it more as a marketing spiel rather than sound advice because we know how much these poor lawyers are suffering during the shutdown....:)

[Longhaul]

I am on the fence at the moment..

I think it's fair to say the whole market is still on the fence, otherwise the price would be north of where it is.

Friday's price increase on good volume is a positive sign but still leaves us none the wiser.

[Beagle]

More reading for you all, this time from Simpson Grierson:

https://www.simpsongrierson.com/articles/2020/covid-19-legal-faq-contractual-issues

"Pandemic as a triggering event: Even if you have a MAC provision, and it looks like it might allow you to terminate your contract, you should talk to your lawyer to check whether it gives you the termination right in the circumstances. MAC clauses are notoriously difficult to uphold, they must be specifically drafted and the clause must clearly apply in the specific circumstance. Further, as a matter of general contract law, if there is any ambiguity or uncertainty in a provision like this, it will be interpreted in favour of the non-cancelling party. We are not aware of any examples of MAC provisions being successfully invoked (in NZ, the UK or the US), as a result of epidemic or pandemic events (such as the 2003 SARS epidemic, the 2009 swine flu pandemic or various outbreaks of MERS starting in 2012).

Global economic conditions as a triggering event: It is unlikely also that a (perhaps inevitable) global economic slow-down will trigger a MAC clause. Frequently such events are expressly excluded from the list of triggering events. So, once again, you will need to check carefully what the MAC clause says."

Updated with another from Harvard: https://corpgov.law.harvard.edu/2020/04/04/covid-19-as-a-material-adverse-effect-mac-under-ma-and-financing-agreements/

I'm starting to get a feeling that MET has the upper hand and it's more likely than not that they will settle before it gets to court. The relative success of New Zealand's containment of the virus to date might also be a positive for MET.

Of course these are just my two cents from reading the articles I've posted. Be interested to hear others' points of view.

A BIG thank you for finding that very interesting information on MAC clauses. I am inclined to agree with you that there is a genuine chance of a negotiated settlement.
The share price doesn't seem to be factoring in any chance of this or MET forcing the takeover at $7 which I find very interesting.

[Balance]

A BIG thank you for finding that very interesting information on MAC clauses. I am inclined to agree with you that there is a genuine chance of a negotiated settlement.
The share price doesn't seem to be factoring in any chance of this or MET forcing the takeover at $7 which I find very interesting.

Share price still under pressure from arbitrage funds selling out imo.

What did Warren Buffett said about buying more when things are on sale or special?

[Beagle]

Share price still under pressure from arbitrage funds selling out imo.

What did Warren Buffett said about buying more when things are on sale or special?

Be greedy when others are fearful. I especially like this extract from the Harvard article Longhaul kindly provided

We note that very few MAC disputes have been litigated to judgment; and that strong cases for asserting a MAC usually have resulted in a renegotiation of terms or settlement.

$6 ?

[peat]

those previous outbreaks were nothing compared to this so imo their relevance is minimal


also from memory the MAC clause said about affecting MET disproportionately , not old people , its common knowledge that old people are disproportionately affected by every cough cold or sore hole. My Mum (thinking about her yesterday...) used to say 'growing old is not for the faint hearted'

I still fail to see why 'justice' - whatever it is in this case - cannot be meted out more efficiently. This case should be able to be held next week, and judgement the week after. Why TF not!? Are there not some judges looking for a bit of overtime

[JohnnyTheHorse]

Quite a good summary here. Although he only focuses on MAC, whereas I believe it is the other causes that have the higher likelihood of killing the deal.

https://rapercapital.com/2020/05/06/metlifecare-heads-i-win-big-tails-i-dont-lose-or-better/

[King1212]

Sorry Peat....what is TF?

[peat]

Sorry Peat....what is TF?
da fuk ? instead of what da fuk I'm sayin why da fuuk not?

[Cyclical]

Sorry Peat....what is TF?

Usually preceded by a W..

[King1212]

Ah.... thanks...I will put it on my Te reo dictionary....

[dobby41]

We note that very few MAC disputes have been litigated to judgment; and that strong cases for asserting a MAC usually have resulted in a renegotiation of terms or settlement.

VERY FEW doesn't mean none.
This one could become one of the 'very few'.
Or maybe it won't.

[Leftfield]

Quite a good summary here. Although he only focuses on MAC, whereas I believe it is the other causes that have the higher likelihood of killing the deal.

https://rapercapital.com/2020/05/06/metlifecare-heads-i-win-big-tails-i-dont-lose-or-better/

Excellent article. A very helpful summary of the various scenarios facing MET. Thanks for posting.

[Beagle]

Share price still under pressure from arbitrage funds selling out imo.

What did Warren Buffett said about buying more when things are on sale or special?

That's my read on it too and the only way to explain the pricing which appears to confer a free hit on the possibility of a favourable outcome.


Quite a good summary here. Although he only focuses on MAC, whereas I believe it is the other causes that have the higher likelihood of killing the deal.

https://rapercapital.com/2020/05/06/metlifecare-heads-i-win-big-tails-i-dont-lose-or-better/

Thank you, much appreciated. As the article states the next cheapest stock in the sector is trading at 0.75 times book value. I think that reinforces my point made above.

[peat]

Ah.... thanks...I will put it on my Te reo dictionary....

you sure its not already there bro?

yeh some great links posted thanks guys, and all agreeing the risk is upside. looks like some big players (for NZ) might have a nibble based on those articles even if one commented it was only for medium sized funds

game on, I might pick up some more, maybe even more than I am comfortable with LT, opportunities seem a bit thin - although I will never 'do a Couta' - lol I love that phrase and he'll be lovin HLG back in the 4's.

[Beagle]

VERY FEW doesn't mean none.
This one could become one of the 'very few'.
Or maybe it won't.

The point is very few means that it is considerably more likely than not that this will settle.

[King1212]

Can not find it Peat...lol

Double down yesterday....felt good!

[bull....]

the arbs are buying again , rinse and repeat $7 here we come. waiting for ubs to show up again

[traineeinvestor]

I still fail to see why 'justice' - whatever it is in this case - cannot be meted out more efficiently. This case should be able to be held next week, and judgement the week after. Why TF not!? Are there not some judges looking for a bit of overtime

Unfortunately there is an encyclopaedia full of rules designed to ensure that all parties to litigation get a fair hearing and minimise the risk of a miscarriage of justice. Those same rules provide parties with the ability to drag out proceedings for a very long time. And even after a judgement is obtained, there are rights of appeal.

[Balance]

Unfortunately there is an encyclopaedia full of rules designed to ensure that all parties to litigation get a fair hearing and minimise the risk of a miscarriage of justice. Those same rules provide parties with the ability to drag out proceedings for a very long time. And even after a judgement is obtained, there are rights of appeal.

Hence why a lot of litigations end up in a negotiated settlements - something that judges encourage.

Go to watch the lawyers who will of course urge continuous litigation - how else do they generate fees?

[winner69]

Just a passing thought

It seems that Infratil are pretty good at timing the exit of their investments ...and when they’ve departed the company seems to become a dog even though the new investors get excited as about the future prospects of their new baby

Metlifecare and now Z energy

[winner69]

..............

[Balance]

Just a passing thought

It seems that Infratil are pretty good at timing the exit of their investments ...and when they’ve departed the company seems to become a dog even though the new investors get excited as about the future prospects of their new baby

Metlifecare and now Z energy

Really?

They sold out of Z Energy at $6.00 and a year later, the sp was $8.65 - left some serious money on the table, I think!

[peat]

..............

is that post where you likened IFT to Macquarie?

[bull....]

the arb funds will like the 50k at 4.40

[Balance]

Looking at the buying interest today, matter of time when the 53,000 odd shares at $4.40 (8 sellers so definitely not arbitrage sellers) get taken out.

[King1212]

Just finished reading the article...thanks Johnnythehorse. I have to read it couple times...since English is my second language.

Well...head win..tail also win...very secure n safe investment here...

[klid]

head win..tail also win

I like those odds. Looks attractive.

[JohnnyTheHorse]

Looking at the buying interest today, matter of time when the 53,000 odd shares at $4.40 (8 sellers so definitely not arbitrage sellers) get taken out.

The crossings are happening at higher and higher prices... 425, 429, 435, 439... Someone wants stock and they are willing to pay up for it.

[Balance]

https://www.rnz.co.nz/news/business/416389/more-interest-in-housing-market-from-younger-potential-buyers

House prices are going to fall but not going to collapse.

And in 2 years’ time (maybe earlier), the tsunami of printed money (& record low interest rates) will lead to hyper inflation again in property prices.

[Snoopy]

Sauce suggested that MET often trades significantly below NTA/Book Value because their returns on capital are so low they do not return any real economic profit.

So here’s my table showing returns in the players in the sector



METSUMRYMOCA


(June 2019)(December 2019)(March 2019)(May 2019)


PWC assessed WACC8.9%8.8%9.9%8.6%


ROE2.6%15.5%15%7.4%


ROIC2.7%10.8%10.0%4.0%


ROA1.1%5.2%4.9%3.2%


Operating Cashflow/Invested Cashflow6.8%13.8%11.5%10.1%


Current Price/Book Ratio0.61.22.70.7



Seems to be a relationship between both ROE and ROIC with Price/Book ratios

Lots of advice, so be nice :-)

As a non-holder, I can't help but think that Winner's table is the most important information to be presented on this thread this month. Far from being a heads I win tails I win bet, this chart is telling me that MET is virtually certain to destroy investors capital. There is no getting away from the fact that both ROE and ROIC are way below the cost of capital of this company. So bad does this table look in comparative terms, I have to ask if that June 2019 result is really representative for MET? It looks to me that investing in MET will put your capital at serious risk, with the only hope in the medium term being a takeover.

Below is what Beagle said on the investment potential of MET on 13th January on the OCA thread.


You cannot find a harder one to understand than OCA, that much is absolutely cast iron guaranteed, Snoopy. Start with SUM, considerably easier to understand and quite possibly a more profitable exercise for you. The barking was pretty intense on SUM mid year at ~ $5.50 and later in 2019 with MET at ~ $4.50. You don't always have to be the lead Beagle on the hunt mate :)

From mid year 2019 the price sunk below $4.50 until mid October. It got bid up with the outlook for property in Auckland improving and again with the takeover offer. With immediate property gains and the takeover offer ostensibly off the table the share last traded at $4.38. Despite the 'grey tsunami' of demand it does appear that other operators in this sector do it better. The only incentive I can see for investment here is the discount to NTA, a discount that seems fully deserved by the poor return on assets and equity. Before I would in invest in this, I would want some solid answers as to how ROE and ROIC can be improved. IMV MET represents an unattractive investment proposition today.

SNOOPY

[winner69]

Lots of advice, so be nice

Yep, I got lots and was nice.

[Balance]

Lots of advice, so be nice :-)

As a non-holder, I can't help but think that Winner's table is the most important information to be presented on this thread this month. Far from being a heads I win tails I win bet, this chart is telling me that MET is virtually certain to destroy investors capital. There is no getting away from the fact that both ROE and ROIC are way below the cost of capital of this company. So bad does this table look in comparative terms, I have to ask if that June 2019 result is really representative for MET? It looks to me that investing in MET will put your capital at serious risk, with the only hope in the medium term being a takeover.

Below is what Beagle said on the investment potential of MET on 13th January on the OCA thread.

You miss the key word - leverage.

Great on the way up, nasty on the way down.

Get ready for the capital raising a by RYM & SUM.

Guaranteed.

[bull....]

really is a bull and bear camps on this thread

the ramps

beagle
balance

the down ramps

winner
snoopy

lol who will win

[Cyclical]

You miss the key word - leverage.

Great on the way up, nasty on the way down.

I was going to say the same thing. In that respect, MET should be a comparative safe haven at this point in time...much less potential downside if property prices do retract. And this relative lack of leverage is probably why it's an attractive take over proposition...ripe for kick up the butt.

[Arbroath]

You miss the key word - leverage.

Great on the way up, nasty on the way down.

Get ready for the capital raising a by RYM & SUM.

Guaranteed.

Not saying you'll be wrong but Ryman is famous for having listed in 1999 raising $50m and not having to raise a cent since despite growing into a $6b+ company....big call to say a cap raise for them is guaranteed

[Balance]

Not saying you'll be wrong but Ryman is famous for having listed in 1999 raising $50m and not having to raise a cent since despite growing into a $6b+ company....big call to say a cap raise for them is guaranteed

Agree absolutely about the famous bit - which is why Ryman is considered to be the industry standard and market favorite.

Its leverage however is the highest and it has a a very high capex program ahead.

How strong are the banks' appetite for funding developments going forward?

[winner69]

Lots of advice, so be nice :-)

As a non-holder, I can't help but think that Winner's table is the most important information to be presented on this thread this month. Far from being a heads I win tails I win bet, this chart is telling me that MET is virtually certain to destroy investors capital. There is no getting away from the fact that both ROE and ROIC are way below the cost of capital of this company. So bad does this table look in comparative terms, I have to ask if that June 2019 result is really representative for MET? It looks to me that investing in MET will put your capital at serious risk, with the only hope in the medium term being a takeover.

Below is what Beagle said on the investment potential of MET on 13th January on the OCA thread.



From mid year 2019 the price sunk below $4.50 until mid October. It got bid up with the outlook for property in Auckland improving and again with the takeover offer. With immediate property gains and the takeover offer ostensibly off the table the share last traded at $4.38. Despite the 'grey tsunami' of demand it does appear that other operators in this sector do it better. The only incentive I can see for investment here is the discount to NTA, a discount that seems fully deserved by the poor return on assets and equity. Before I would in invest in this, I would want some solid answers as to how ROE and ROIC can be improved. IMV MET represents an unattractive investment proposition today.

SNOOPY

Thanks Snoopy

Seems you and me are the only ones who think like real investment managers.

Brokers (and most fund managers) generally do things the cheats way to work out where to put others money ...and then follow sentiment and the squiggly line on the chart

[Beagle]

Agree absolutely about the famous bit - which is why Ryman is considered to be the industry standard and market favorite.

Its leverage however is the highest and it has a a very high capex program ahead.

How strong are the banks' appetite for funding developments going forward?

Hello Mr Banker, I am a director from RYMAN and we'd like to extend our credit facilities by $500m. Oh good morning Sir, It is such an honour to meet you and thank you so much for the business. A simple handshake will do. :)

I do really like the fact that MET has the very lowest gearing in this sector.

[Snoopy]

Just finished reading a recently issued report by one of the major broking houses in Australasia on NZ's Retirement Village sector.

A few key points to note from the report (report goes to their institutional & international client base so bound to have some influence) :

1. Demographics trend continue to provide strong tailwind for long term performance of the sector, population of 75+ to double over next 10 years (250,000 more), and

2. Short term headwinds of increased costs and lower unit resales to adversely impact on profits in 2020/21.

Sensitivities:

1. Increased costs in order of biggest impact - OCA, ARV, RYM, SUM & MET

2. Devaluation of asset values when gearing hits 50% (trigger point for debt concerns) - RYM (14%), SUM (15%), OCA (25%), ARV (26%) & MET (38%).

3. Most highly geared so likely to require capital raising - RYM (40%), SUM (33%), OCA (31%), ARV (27%) & MET (16%).



MET has the lowest level of gearing so it is logical that during the last decade of unprecedented property price rises & gains, MET would have not have done as well as its peers which are more highly geared (& hence, leveraged).

The question now is - which company is going to do the best in the property economic setting going forward?

Personally, I prefer a more conservatively geared entity like MET.

To each their own!



You miss the key word - leverage.

Great on the way up, nasty on the way down.

Get ready for the capital raising a by RYM & SUM.

Guaranteed.


Ok the argument for MET is that it is preferable to hold to the others because the lack of gearing means that when property goes down, MET will be impacted the least. I get it. Yet if a principal reason for putting money in the retirement sector is to leverage the property market, wouldn't the best strategy be to sell everything in this sector, MET included?

As to the other points you raise on your first quoted post. You are saying that MET will have the least expected blow out in costs, why? Because it has a lower proportion of care beds needing highly trained staff? Or it has the smallest development pipeline, relative to its size going forwards?

Also I don't understand your point regarding "Devaluation of asset values when gearing hits 50% (trigger point for debt concerns)" Why are you saying that MET assets will depreciate by 38% (so much more than the others). Albeit with MET having the lowest gearing in the sector, I presume this potential catastrophic asset depreciation is unlikely to occur?

SNOOPY

[winner69]

Hello Mr Banker, I am a director from RYMAN and we'd like to extend our credit facilities by $500m. Oh good morning Sir, It is such an honour to meet you and thank you so much for the business. A simple handshake will do. :)

I do really like the fact that MET has the very lowest gearing in this sector.

Currently MET can't even use the debt they have to increase ROE (their peers do) - cardinal sin in financial management

MET and SUM have about the same invested capital (interesting bearing debt and equity) but SUM generates heaps more cash and profit than MET

Hope a settlement comes soon and we get $6 plus - only way for a decent return from punting on MET

[Balance]

Currently MET can't even use the debt they have to increase ROE (their peers do) - cardinal sin in financial management

MET and SUM have about the same invested capital (interesting bearing debt and equity) but SUM generates heaps more cash and profit than MET

Hope a settlement comes soon and we get $6 plus - only way for a decent return from punting on MET

Wrong reason to invest in MET, W69 - imo. Meant sincerely.

[peat]

all views appreciated

[Balance]

Ok the argument for MET is that it is preferable to hold to the others because the lack of gearing means that when property goes down, MET will be impacted the least. I get it. Yet if a principal reason for putting money in the retirement sector is to leverage the property market, wouldn't the best strategy be to sell everything in this sector, MET included?

As to the other points you raise on your first quoted post. You are saying that MET will have the least expected blow out in costs, why? Because it has a lower proportion of care beds needing highly trained staff? Or it has the smallest development pipeline, relative to its size going forwards?

Also I don't understand your point regarding "Devaluation of asset values when gearing hits 50% (trigger point for debt concerns)" Why are you saying that MET assets will depreciate by 38% (so much more than the others). Albeit with MET having the lowest gearing in the sector, I presume this potential catastrophic asset depreciation is unlikely to occur?

SNOOPY

1. We all invest for upside potential & income - but with downside protection in mind too. Investing in MET at a deeper discount to NTA vs the other players provides the downside protection.

2. From the Report : "As an illustration of leverage to employee costs, we highlight the ratio of employee costs to reported underlying profit for the last few periods for the sector. We note that employee costs
include head office and other support staff, while for operators with higher care shares it will be the majority of labour costs.The lowest exposure has been MET, with employee costs being around 60% relative to underlying profit, while this was around 74% during 1H20 given lower profitability. SUM is also relatively low at ~65-70% relative to underlying profit, while RYM was around 94% during FY19."

3. Means if property values for MET drops by 38%, gearing will hit 50%. In contrast, RYM's gearing will hit 50% if its property values drop by 14%.

[Beagle]

Snoopy. Would you buy a house that's been independently valued at $700,000 on 31 December 2019 for $435,000 now, knowing that there was a pretty good chance you could flick it for $600,000 to $650,000 in a few months time or if you get lucky maybe even $700,000 ?

What about, (if you didn't manage to flick it), if the former owner of the house was probably also going to buy it back off you a little bit further down the track for $500,000 + under a buy-back scheme ? Would that then interest you ?

What about if all that failed and you rented it out long term and the tenant gave you an interest free loan for most of the cost and then gave you a 30% kicker on the value every 9 years or so and you could then resell every 9 years and keep all the capital gain profit tax free ? Would you be interested then ?

What about instead of you having to chase rent, organize maintenance and all the others usual drama's with running a rental property this was all fully managed for you and you didn't have to lift a finger ?

These are the realities for investors in MET shares. Why on earth would you own property any other way...think about it.

[bull....]

Housing shortage could be soon be over: BNZ


The BNZ has sounded alarm for the residential construction industry, saying house prices are likely to fall 12 per cent.

https://www.stuff.co.nz/business/121483080/housing-shortage-could-be-soon-be-over-bnz

[Balance]

all views appreciated

But of course, peat!

W69 and I get on very well - relax. I am making the point that I would not punt on MET simply for the takeover offer.

[limmy]

Snoopy. Would you buy a house that's been independently valued at $700,000 on 31 December 2019 for $435,000 now, knowing that there was a pretty good chance you could flick it for $600,000 to $650,000 in a few months time or if you get lucky maybe even $700,000 ?

What about, (if you didn't manage to flick it), if the former owner of the house was probably also going to buy it back off you a little bit further down the track for $500,000 + under a buy-back scheme ? Would that then interest you ?

What about if all that failed and you rented it out long term and the tenant gave you an interest free loan for most of the cost and then gave you a 30% kicker on the value every 9 years or so and you could then resell every 9 years and keep all the capital gain profit tax free ? Would you be interested then ?

What about instead of you having to chase rent, organize maintenance and all the others usual drama's with running a rental property this was all fully managed for you and you didn't have to lift a finger ?

These are the realities for investors in MET shares. Why on earth would you own property any other way...think about it.Excellent analogy Mr. Beagle. Thanks for posting this, for the relief of all existing shareholders.

[winner69]

Does ‘independently valued’ mean market price?

Bit of a worry when the ‘valuers’ take guesses about future property prices etc and then throw a discount rate into their desktop model to come up with a number ....oops I forgot about the Monte Carlo simulation to ‘assess’ how long residents might stay (alive)

Sounds like a DCF (which some on here say are rubbish) with a bit of casino activity thrown in.

Hint: I sort of answered the opening question a few days ago but no response so apparently nobody on here knows whether these ‘valuations’ (biggest chunk of NTA) are actually market related.

[Snoopy]

Snoopy. Would you buy a house that's been independently valued at $700,000 on 31 December 2019 for $435,000 now, knowing that there was a pretty good chance you could flick it for $600,000 to $650,000 in a few months time or if you get lucky maybe even $700,000 ?


This sounds like wishful thinking on the property market, which may or may not come true. But let's take the analogy further. What if you had three people looking at the house. But only one of those put in a $700,000 offer? Then that buyer changed their mind and decided they didn't want to offer $700,000 and pulled out of the deal. The other two potential buyers found this out, but didn't put in a counter offer. Was the house really ever worth $700,000?



What about, (if you didn't manage to flick it), if the former owner of the house was probably also going to buy it back off you a little bit further down the track for $500,000 + under a buy-back scheme ? Would that then interest you ?


Possibly. But what if the $500,000 offer wasn't for the whole house? What say the buyer offered $50,000 to buy just the stand alone garage alone (assuming the whole property was worth $500,000), but wanted to leave you with the rest of the house which would be worth $450,000 if that same buyer had bought the whole property off you (which they didn't do)?



What about if all that failed and you rented it out long term and the tenant gave you an interest free loan for most of the cost and then gave you a 30% kicker on the value every 9 years or so and you could then resell every 9 years and keep all the capital gain profit tax free ? Would you be interested then ?


Yes but you have to consider how much rent your tenant has agreed to pay. In the MET house with an asset value of:

$420,000/0.6= $700,000 and rent was being charged at 1.1% on the asset value of the house, then the rent you would received per year would be:

$700,000 x 0.011 = $7,700

However, because you can buy the MET house for less than asset value, your real yield would be better than this.

1.1% x (700/420) = 1.8%

Now down the road is the SUM house. They are getting a lot more rent for the same sized house. But because of SUM's greed as landlords, third party co-shareholders are lining up to pay

1.2 x $700,000 = $840,000

for a share in what is an equivalent house. How much annual rent does SUM get for their house?

$700,000 x 0.052 = $36,400

However, because of the premium that third party shareholders are prepared to pay, the market yield is reduced to.

0.052 x (700/840) = 4.3%

Now something should be very obvious to our potential rental house buyer here. Despite paying a premium for the SUM house, and despite adjusting the yield on the MET house to reflect the fact you are buying at a discount, the market yield on the SUM house is more than double the market yield on the MET house.

From a yield perspective, you are better off paying twice the price for ostensibly the same asset and buying the SUM house, because it will yield you double the income on your asset. And that leads to the question: Was the MET house ever worth even $420,000, let alone $700,000!



What about instead of you having to chase rent, organize maintenance and all the others usual drama's with running a rental property this was all fully managed for you and you didn't have to lift a finger ?

These are the realities for investors in MET shares. Why on earth would you own property any other way...think about it.


Yes, but then I could also buy the SUM house or the RYM house or the OCA house and receive the same benefits. The MET house doesn't stand out in this regard.

SNOOPY

[winner69]

But of course, peat!

W69 and I get on very well - relax. I am making the point that I would not punt on MET simply for the takeover offer.

But beagles good analogy is a good description of punting. ..

.like Would you buy a house that's been independently valued at $700,000 on 31 December 2019 for $435,000 now, knowing that there was a pretty good chance you could flick it for $600,000 to $650,000 in a few months time or if you get lucky maybe even $700,000 is just punting

Maybe it is more respectable than punting ...maybe it’s speculating

[Cyclical]

Snoopy. Would you buy a house that's been independently valued at $700,000 on 31 December 2019 for $435,000 now, knowing that there was a pretty good chance you could flick it for $600,000 to $650,000 in a few months time or if you get lucky maybe even $700,000 ?

What about, (if you didn't manage to flick it), if the former owner of the house was probably also going to buy it back off you a little bit further down the track for $500,000 + under a buy-back scheme ? Would that then interest you ?

What about if all that failed and you rented it out long term and the tenant gave you an interest free loan for most of the cost and then gave you a 30% kicker on the value every 9 years or so and you could then resell every 9 years and keep all the capital gain profit tax free ? Would you be interested then ?

What about instead of you having to chase rent, organize maintenance and all the others usual drama's with running a rental property this was all fully managed for you and you didn't have to lift a finger ?

These are the realities for investors in MET shares. Why on earth would you own property any other way...think about it.

Yeah, that all works for me. We can nitpick over the details, but at the end of the day there isn't a hell of a lot of downside (short of C19 running riot in a village or 3 down the track), particularly when compared to the rest of the market IMO.

Disc. Happy holder.

[Beagle]

Does it really matter if it not quite worth $700,000 if you're only paying $435,000 ? You're not understanding the company buy-back either. If not this company in this sector which one ? Where else is better value on the NZX ?
Beagle's are such a good breed for smelling a pending feed....sometimes I wonder if you need to go to puppy school. https://www.tvnz.co.nz/shows/dog-squad-puppy-school

[winner69]

Does it really matter if it not quite worth $700,000 if you're only paying $435,000 ? You're not understanding the company buy-back either. If not this company in this sector which one ? Where else is better value on the NZX ?
Beagle's are such a good breed for smelling a pending feed....sometimes I wonder if you need to go to puppy school. https://www.tvnz.co.nz/shows/dog-squad-puppy-school

Market saying MET going to continue to destroy economic value (it’s low ROIC) in the future (difference between equity and market capitalisation is the present value of future returns in excess (or below) cost of capital).

Back to that house that’s valued at around $700,000 now .....it’s getting older and not being kept up to scratch or something like that or not keeping up with Jones and as such slowly losing value.

[bull....]

im sold now , nice quick trade on this dog

[Beagle]

Market saying MET going to continue to destroy economic value (it’s low ROIC) in the future (difference between equity and market capitalisation is the present value of future returns in excess (or below) cost of capital).

Back to that house that’s valued at around $700,000 now .....it’s getting older and not being kept up to scratch or something like that or not keeping up with Jones and as such slowly losing value.

Just as well the house gets fully refurbished every 9 years at the tenants expense :) All of the retirement village operators have had serious water ingress issues...the vast majority don't talk about them, they just get on with their remedial works on the quiet.


im sold now , nice quick trade on this dog I am not surprised. Please spare investors you're endless verbal bashing this time about what a poor company this is now that you've sold.

[bull....]

Just as well the house gets fully refurbished every 9 years at the tenants expense :) All of the retirement village operators have had serious water ingress issues...the vast majority don't talk about them, they just get on with their remedial works on the quiet.

I am not surprised. Please spare investors you're endless verbal bashing this time about what a poor company this is now that you've sold.

it is important to let people know when things are a dog , just like i did when you were peddling z energy as the greatest investment under the sun , i was saying it was sh...t. some people might have been happy to hear that

[Beagle]

it is important to let people know when things are a dog , just like i did when you were peddling z energy as the greatest investment under the sun , i was saying it was sh...t. some people might have been happy to hear that

I got out of ZEL ages ago at over $6 and said why at the time. The company was cheap and on a much better footing in late 2018.
I have posted numerous times that their business model has deteriorated since then. My record speaks for itself, so does yours.

[King1212]

Yup..that why Beagle got a title from me....Master...

Made a lot of money follow his tail ... thanks ..master Beagle

[bull....]

the company apvg was set up in late last year for the takeover , so more than likely has no assets to be pursued in the courts

[Raz]

the company apvg was set up in late last year for the takeover , so more than likely has no assets to be pursued in the courts

Personally I did wonder about this, that's exactly what I would do, standard commercial practice.

[winner69]

Is the OIO still working diligently on the application

Assuming it hasn’t been granted yet


The way they behave might not pass the ‘good character’ test

[psychic]

Does ‘independently valued’ mean market price?

Bit of a worry when the ‘valuers’ take guesses about future property prices etc and then throw a discount rate into their desktop model to come up with a number ....oops I forgot about the Monte Carlo simulation to ‘assess’ how long residents might stay (alive)

Sounds like a DCF (which some on here say are rubbish) with a bit of casino activity thrown in.

Hint: I sort of answered the opening question a few days ago but no response so apparently nobody on here knows whether these ‘valuations’ (biggest chunk of NTA) are actually market related.

If the market has been paying more than valuation shouldn't that give us some confidence?

Taken from the 1/2 year release (my bold)

“We settled 7% more occupation right agreements and, despite subdued local market conditions for most
of the period in review, our average settlement prices were 3% higher - again outperforming both the
market and the prices assumed in the CBRE valuation.”
Company revenues and cash flows were strong, with receipts from the sale of new and existing units up
10% and care revenue continuing to climb. Statutory operating cash flows increased 42% to $67.1 million
while underlying operating cash flows rose 34% to $26.8 million.
Metlifecare’s total assets at balance date were $3.6 billion, 6% higher than a year ago and net assets per
share were $7.00, slightly ahead of last year.

[Poet]

the company apvg was set up in late last year for the takeover , so more than likely has no assets to be pursued in the courts


Personally I did wonder about this, that's exactly what I would do, standard commercial practice.

Of course that would be standard practice, as would the target company ensuring that there was enforceable substance behind the bid.
There exists an "Equity commitment Letter" that has been delivered to MET as per this clause in the Scheme of arrangement

Equity Commitment Letters means the binding equity commitment letters provided in favour of Bidder in connection with the funding of Bidder’s obligations in respect of the Transaction, copies of which were provided to Target at least 24 hours prior to the date of this Agreement;

[winner69]

the company apvg was set up in late last year for the takeover , so more than likely has no assets to be pursued in the courts


If the market has been paying more than valuation shouldn't that give us some confidence?

Taken from the 1/2 year release (my bold)

“We settled 7% more occupation right agreements and, despite subdued local market conditions for most
of the period in review, our average settlement prices were 3% higher - again outperforming both the
market and the prices assumed in the CBRE valuation.”
Company revenues and cash flows were strong, with receipts from the sale of new and existing units up
10% and care revenue continuing to climb. Statutory operating cash flows increased 42% to $67.1 million
while underlying operating cash flows rose 34% to $26.8 million.
Metlifecare’s total assets at balance date were $3.6 billion, 6% higher than a year ago and net assets per
share were $7.00, slightly ahead of last year.

Thanks psychic

That’s what that graph I posted a few days ago was intended to show but not that clearly ...and I wondered why they ‘indexed’ it back to June 15 valuations.

I’ll suss it one day.

[Cyclical]

Peeps, just doing some quick sums. Please correct me if I've got the complete wrong end of the stick.

So my understanding is the EQT held the best part of 20% of MET already, right? And they sold this towards the end of the April at what must have been in the low $4 range.

Now if they are compelled to go through with the original contract and stump up the full $7/share, that little stunt to sell their holding has basically cost them about $125m. If on the other hand they manage to renegotiate a lower price, well again the April dump means they would be no better off if they negotiate a new price = or >$6.40.

If they renegotiate down to $6, they save give or take $100m. This is before considering legal fees, damage to reputation and the fact that many shareholders wouldn't be happy with that an offer of 6 bucks. So why would you bother? It suggests to me that they never had any intention of just renegotiating lower, they just want out, at all costs.

[Poet]

Peeps, just doing some quick sums. Please correct me if I've got the complete wrong end of the stick.

So my understanding is the EQT held the best part of 20% of MET already, right? And they sold this towards the end of the April at what must have been in the low $4 range.

Now if they are compelled to go through with the original contract and stump up the full $7/share, that little stunt to sell their holding has basically cost them about $125m. If on the other hand they manage to renegotiate a lower price, well again the April dump means they would be no better off if they negotiate a new price = or >$6.40.

If they renegotiate down to $6, they save give or take $100m. This is before considering legal fees, damage to reputation and the fact that many shareholders wouldn't be happy with that an offer of 6 bucks. So why would you bother? It suggests to me that they never had any intention of just renegotiating lower, they just want out, at all costs.

I don't think they ever held 20%. They had an undertaking from (ACC? NZSuper?) that those entities would support the scheme of arrangement and sell into it, so effectively they had commitments from 20% of shareholders of the 75% they needed to approve the scheme.

[winner69]

the company apvg was set up in late last year for the takeover , so more than likely has no assets to be pursued in the courts


I don't think they ever held 20%. They had an undertaking from (ACC? NZSuper?) that those entities would support the scheme of arrangement and sell into it, so effectively they had commitments from 20% of shareholders of the 75% they needed to approve the scheme.

Correct

And NZ Super no longer committed

[macduffy]

the company apvg was set up in late last year for the takeover , so more than likely has no assets to be pursued in the courts

So, it's just the parent's good reputation that is at stake?

[Cyclical]

I don't think they ever held 20%. They had an undertaking from (ACC? NZSuper?) that those entities would support the scheme of arrangement and sell into it, so effectively they had commitments from 20% of shareholders of the 75% they needed to approve the scheme.

Oh, ok, this one:

On 27 April 2020 Bidco delivered notice to NZSF and Guardians that the Voting Deed was terminated in accordance with clause 5.2 of the Voting Deed.

Making sense now, cheers.

[Beagle]

https://rapercapital.com/2020/05/06/metlifecare-heads-i-win-big-tails-i-dont-lose-or-better/ Corporate veil of a no asset subsidiary. Anyone worried about that should read the comments section below this article.

Really, if people can't see the risk reward situation after reading that article, they should move on and look for better opportunities somewhere else and I wish you all the best with finding them.

EQT assert that MET's assets have fallen by circa $200m in their notice of cancellation some time back. That's less than $1 share so a negotiated settlement just over $6 a share is quite possible. Since EQT issued their notice of cancellation, as a country we have navigated the Covid 19 crisis extremely well. I think this augers well for the future.

[crighton100]

sorry guys but I sold out of MET today at $2.40 [nice profit thank you].My worry is that all the residents in our village are going bananas,most of them breaking all the rules & next week they are going to let the kids in.I think the chances of a virus outbreak are now too high [& that would not do much for the share price].Hope all you guys with balls of steel do OK.I will not be back,good luck!!

[bull....]

the company apvg was set up in late last year for the takeover , so more than likely has no assets to be pursued in the courts



Of course that would be standard practice, as would the target company ensuring that there was enforceable substance behind the bid.
There exists an "Equity commitment Letter" that has been delivered to MET as per this clause in the Scheme of arrangement

Equity Commitment Letters means the binding equity commitment letters provided in favour of Bidder in connection with the funding of Bidder’s obligations in respect of the Transaction, copies of which were provided to Target at least 24 hours prior to the date of this Agreement;

meaning the parent will loan avpg the money to buy metlifecare , but still apvg has no assets just a shell company.

heres a kicker , the shorters came in after avpg was set up

[Bjauck]

sorry guys but I sold out of MET today at $2.40 [nice profit thank you].My worry is that all the residents in our village are going bananas,most of them breaking all the rules & next week they are going to let the kids in.I think the chances of a virus outbreak are now too high [& that would not do much for the share price].Hope all you guys with balls of steel do OK.I will not be back,good luck!! I presume the sp was a typo? Thanks again for your updates. It is disappointing to read of your village rules in relation to level 2. I have suggested to the older members of my family to remain in isolation until we have had at least two weeks clear of new cases infected on NZ soil. A one size fits all approach to precautions I think is inappropriate.

[King1212]

Hahha.....fxxking classic this forum. Everyone just ramping up n ramping down to thier own benefits.

No virus in the community....being tested many weeks ...

Only virus from porn website....lol

PS: all newbies....be careful out here...trust no one...only follow the facts n fundamentals!

[Beagle]

sorry guys but I sold out of MET today at $2.40 [nice profit thank you].My worry is that all the residents in our village are going bananas,most of them breaking all the rules & next week they are going to let the kids in.I think the chances of a virus outbreak are now too high [& that would not do much for the share price].Hope all you guys with balls of steel do OK.I will not be back,good luck!!

Meow. I would have paid you $2.50 a share :p

[bull....]

Hahha.....fxxking classic this forum. Everyone just ramping up n ramping down to thier own benefits.

No virus in the community....being tested many weeks ...

Only virus from porn website....lol

PS: all newbies....be careful out here...trust no one...only follow the facts n fundamentals!

think you should be asking those big hedge funds about this , all over the register up and down playing it like a fiddle

[King1212]

Crighton....I saw the shares that u sold...200 shares at @$2.40....is that u?

[nztx]

Crighton....I saw the shares that u sold...200 shares at @$2.40....is that u?

Where you see that King1212 .. ? sure you weren't looking at ABA instead ?

NZX today - Low for day $4.35 High for day $4.40

https://www.nzx.com/instruments/MET

I must be looking in wrong place ;)

Remember folks - we can't have MET looking too cheap if & while there is prospect of the Swedish outfit or someone else coming back for another look in ..

[Balance]

sorry guys but I sold out of MET today at $2.40 [nice profit thank you].My worry is that all the residents in our village are going bananas,most of them breaking all the rules & next week they are going to let the kids in.I think the chances of a virus outbreak are now too high [& that would not do much for the share price].Hope all you guys with balls of steel do OK.I will not be back,good luck!!

Good on the oldies - in their shoes, I would do the same. Why should the youngsters be the only one to be rule-breakers?

As Malcolm Forbes wrote years ago : “Don’t slow down as you get older. Go faster - you have less time to enjoy!”

[Poet]

meaning the parent will loan avpg the money to buy metlifecare , but still apvg has no assets just a shell company.

heres a kicker , the shorters came in after avpg was set up

The letter of Equity commitment would have contained a non revocable undertaking to finance the deal and its contingent obligations. MET and its lawyers wouldn't be trying to enforce the takeover on a company that could simply avoid its obligations by declaring itself insolvent and walking away.

[Balance]

The letter of Equity commitment would have contained a non revocable undertaking to finance the deal and its contingent obligations. MET and its lawyers wouldn't be trying to enforce the takeover on a company that could simply avoid its obligations by declaring itself insolvent and walking away.

I wouldn’t bother to reply to the clown. He is a self-acknowledged ramper. Anyone who takes his postings seriously is a fool imo.

[Beagle]

I wouldn’t bother to reply to the clown. He is a self-acknowledged ramper. Anyone who takes his postings seriously is a fool imo.

Bingo !!!!!

[Raz]

I wouldn’t bother to reply to the clown. He is a self-acknowledged ramper. Anyone who takes his postings seriously is a fool imo.

Actually it not always that clear with LOEs either and a few with knowledge here i'm sure are well aware of that. The most silly part of this comment is if there any underlying motive rather than a honest view it would be far from ramping...

[Baa_Baa]

You know, from an ignorant onlooker, which in current company of the most esteemed amongst us I feel I am, the compelling feeling I get is that MET is a binary decision. For an investor it is the worst performing company in the sector and likely to remain so for some time. For the trader, opportunist or punter, it presents a near term opportunity notwithstanding inherent risks.

When the most informed and astute amongst us cannot arrive at a common landing point, the ignorant should step aside. For my own purposes I think there are better places to focus my attention, but not because I am certain they are better investments, Moreso that I am less unsure of a binary outcome than what appears to be unfolding for MET.

[Snow Leopard]

I wouldn’t bother to reply to the clown. He is a self-acknowledged ramper. Anyone who takes his postings seriously is a fool imo.


Bingo !!!!!

Here we go again:

"First remove the plank from your own eye".

[fish]

The letter of Equity commitment would have contained a non revocable undertaking to finance the deal and its contingent obligations. MET and its lawyers wouldn't be trying to enforce the takeover on a company that could simply avoid its obligations by declaring itself insolvent and walking away.

Thanks so much Poet-a clear ,concise and factual reply.

[bull....]

The letter of Equity commitment would have contained a non revocable undertaking to finance the deal and its contingent obligations. MET and its lawyers wouldn't be trying to enforce the takeover on a company that could simply avoid its obligations by declaring itself insolvent and walking away.

i agree its just to with the funding being met.
most private equity firms will not allow a guarantee or any other obligation in a deal that leads to the main vehicle eg EQT in a scheme but they may have a clause that allows for limited damages from the parent. If EQT had provided these guarantees then metlife would just take EQT to court and not the shell.

[winner69]

Snoopy me old mate - further to our discussion re real economic returns in this sector these are interesting numbers. Both for 12 months to December so same period.

One player has capital employed of $1.8 billion from which it generated $50m EBIT and $140m operating cash flow. It’s return on capital about 3% much less than its cost of capital of about 9%.

Another player has capital employed of $1.7 billion and generates EBIT of $187m and operating cash of $240m. Its return on capital is about 11% v cost of capital of about 9%

Which one would you have?



One trades slightly above Book Value while the other significantly below Book Value ...not hard to see why

[Balance]

Which one would you have?



One trades slightly above Book Value while the other significantly below Book Value ...not hard to see why

The one which is conservatively geared and can put on at least 33% in next 12 months.

[Cyclical]

Snoopy me old mate - further to our discussion re real economic returns in this sector these are interesting numbers. Both for 12 months to December so same period.

One player has capital employed of $1.8 billion from which it generated $50m EBIT and $140m operating cash flow. It’s return on capital about 3% much less than its cost of capital of about 9%.

Another player has capital employed of $1.7 billion and generates EBIT of $187m and operating cash of $240m. Its return on capital is about 11% v cost of capital of about 9%

Which one would you have?



One trades slightly above Book Value while the other significantly below Book Value ...not hard to see why

Righto, so let's assume nothing comes of this takeover, what would it take to turn MET around and start generating returns on capital more in line with said other player? I've heard Beagle make reference to inept management in the past. Is this one of the reasons MET is an attractive takeover proposition...the unlocked potential?

[klid]

For an investor it is the worst performing company in the sector and likely to remain so for some time.

Why are/were three? parties interested in it?

https://www.nzx.com/announcements/346335

"Metlifecare also recently received unsolicited expressions of interest from two other parties, although these are not as developed as the revised NBIO."

[Snoopy]

If the market has been paying more than valuation shouldn't that give us some confidence?

Taken from the 1/2 year release (my bold)

“We settled 7% more occupation right agreements and, despite subdued local market conditions for most of the period in review, our average settlement prices were 3% higher - again outperforming both the market and the prices assumed in the CBRE valuation.”


This seems to be proof, albeit historical, that MET is able to sell units at above book valuation. If NTA of the company is $7, that is equivalent to selling shares at $7 x 1.03 = $7.21. That's good, albeit with that 'historical perspective' covenant. But if the average rollover time of occupation is nine years, that capital realisation will take nine years to realise for new contracts (Except if a takeover goes ahead at a price of $7.21: in that case the presumed realisation of NTA would occur much more quickly) . Of course not all occupations would be expected to have nine years to run right now. Let's say the average occupation duration might be 4.5 years as of right now.

The PWC WACC is estimated at 8.9%. So we need to discount the projected realised asset value by that discount factor over 4.5 years to get a present day valuation. Translated into a maths problem, those words look like this:

PV x (1+0.089)^4.5 = $7.21

Solving for the present value I get PV = $4.91

Of course those sales in HY2020 were pre-covid so I would expect a discount factor to reflect that. Probably 10% is reasonable. So that would reduce the fair value of MET to:

0.9 x $4.91 = $4.42

The market closed at $4.37 yesterday, very close to my $4.42 'fair value'. There is no bargain to be had here. Mr Market has got his sums right with this one IMO.

SNOOPY

[winner69]

the company apvg was set up in late last year for the takeover , so more than likely has no assets to be pursued in the courts


The one which is conservatively geared and can put on at least 33% in next 12 months.

The 33% if acquired ...yes?

Won’t be a result of financial performance

We can all hope ...but as you keep telling me hope not a strategy

[Cyclical]

UBS and Credit Suisse continue to sell down. Credit Suisse ceases to have a substantial holding. UBS still over 10%.

[Balance]

UBS and Credit Suisse continue to sell down. Credit Suisse ceases to have a substantial holding. UBS still over 10%.

Good.

From weak hands to stronger hands.

[Cyclical]

The one which is conservatively geared and can put on at least 33% in next 12 months.


The 33% if acquired ...yes?

Won’t be a result of financial performance

We can all hope ...but as you keep telling me hope not a strategy

Yeah, takeover not withstanding, I think I'm more inclined to back OCA to go up 33% in the next 12 months (to a buck), but even then that's me being very optimistic with the recession that lies ahead.

[Balance]

The 33% if acquired ...yes?

Won’t be a result of financial performance

We can all hope ...but as you keep telling me hope not a strategy

We shall see - MET is in a superior position to pay a dividend in an environment where depositors are going to be scrambling for yield by year’s end.

Meanwhile, bull ... ‘s ramping to suit his position is getting tedious and I am surprised you are happy to be a party by reposting his discredited postings to said effect.

[winner69]

the company apvg was set up in late last year for the takeover , so more than likely has no assets to be pursued in the courts


This seems to be proof, albeit historical, that MET is able to sell units at above book valuation. If NTA of the company is $7, that is equivalent to selling shares at $7 x 1.03 = $7.21. That's good, albeit with that 'historical perspective' covenant. But if the average rollover time of occupation is nine years, that capital realisation will take nine years to realise for new contracts (Except if a takeover goes ahead at a price of $7.21: in that case the presumed realisation of NTA would occur much more quickly) . Of course not all occupations would be expected to have nine years to run right now. Let's say the average occupation duration might be 4.5 years as of right now.

Snoops - You into Sky City and casinos eh

Assumed occupancy rates are obtained from Monte Carlo simulations.

[winner69]

the company apvg was set up in late last year for the takeover , so more than likely has no assets to be pursued in the courts


We shall see - MET is in a superior position to pay a dividend in an environment where depositors are going to be scrambling for yield by year’s end.

Meanwhile, bull ... ‘s downramping is getting tedious and I am surprised you are party to his activity.

Just trying to show why MET trades well below NTA .....and hoping like hell that we get our $6 plus sooner than later

Looking forward to the independent report out soon

[Balance]

Just trying to show why MET trades well below NTA .....and hoping like hell that we get our $6 plus sooner than later

Looking forward to the independent report out soon

His post has already been discredited.

Oh well, be that as it may. 🤷🏻

[bull....]

We shall see - MET is in a superior position to pay a dividend in an environment where depositors are going to be scrambling for yield by year’s end.

Meanwhile, bull ... ‘s ramping to suit his position is getting tedious and I am surprised you are happy to be a party to his postings to said effect.

I think you lost the plot , winner analysis is good

[Snoopy]

Snoops - You into Sky City and casinos eh

Assumed occupancy rates are obtained from Monte Carlo simulations.


I am sure you are right Winner. If I was an executive at MET and calculated the present value of the shares assuming a 4.5 year average occupation time for licences to occupy, then I would probably be sacked for gross oversimplification and incompetence. However, since:

1/ I am not an exec at MET , AND
2/ I don't have details on the various expected licence to occupy expiry dates, AND
3/ I don't have the expertise to predict where the property market will go over the next 4.5 years (I am assuming flat pre-Covid pricing)

THEN I think my PV estimate of $4.42 is the best I can do, and is probably still 'ballpark'.

SNOOPY

[King1212]

Yeah...we all know Snoopy valuation is excellent.....look at HGH....lol

[Balance]

We shall see - MET is in a superior position to pay a dividend in an environment where depositors are going to be scrambling for yield by year’s end.

Meanwhile, bull ... ‘s ramping to suit his position is getting tedious and I am surprised you are happy to be a party by reposting his discredited postings to said effect.

Nice to see MET moving above $4.40.

11c DPS = 2.5% yield sure beats the hell out of bank deposits which could be in negative territory by year's end.

[winner69]

the company apvg was set up in late last year for the takeover , so more than likely has no assets to be pursued in the courts


Righto, so let's assume nothing comes of this takeover, what would it take to turn MET around and start generating returns on capital more in line with said other player? I've heard Beagle make reference to inept management in the past. Is this one of the reasons MET is an attractive takeover proposition...the unlocked potential?

Trouble is ‘unlocked potential’ generally doesn’t get unlocked from a company that finds it in this position

Often decades of ineptitude is so ingrained in the corporate culture it’s impossible to change....MET seems to be a good example.

Mr Lee summed it up
Of these operators Metlife faces the most difficult future, a perpetual victim of an ugly childhood, its listing as hairy as could be, and later left with various guardians including a stint with the unloveable Todd Group, which had a controlling interest for some years.

MET ...hoping for that 6 bucks plus settlement soon

[Cyclical]

UBS and Credit Suisse continue to sell down. Credit Suisse ceases to have a substantial holding. UBS still over 10%.


Good.

From weak hands to stronger hands.

Only ~32 million to go, from those two :ohmy:

[Beagle]

Mr Lee, and others have their own theories. They can keep their WACC and ROIC models and I will stick with underlying earnings.

Say what you like about MET the facts are that they have grown underlying earnings at an average rate of 15% per annum for the last 5 years and if all else fails, (multiple potential bidders) then they are on an underlying PE of just over 10 based on FY19 numbers. Those numbers do it for me and I am sure plenty of people have their theories of how they can improve returns which is why multiple parties were and perhaps still are interested in taking them over.

One has to wonder if RYM as the market leader is so good why their underlying growth rate in earnings has only averaged 14% per annum for the last 5 years ? How does anyone explain that ?
If other companies are so good in this sector like SUM and ARV and are such a better long term earnings proposition why aren't those parties interested in MET trying to take them over instead ?

[winner69]

Hey Balance - you going to Leo’s party?

[King1212]

Who is Leo .. Master winner...how come I am not invited?

[winner69]

Maybe underlying earnings CAGR is 15% pa over the last five years but the rot has set in last few years

Not 15% pa last few year is it ...and F20 going to be below F17 ...ouch

[bottomfeeder]

Yield, dividends, don't matter at this stage of this precarious economic cycle. Just need somewhere safe to park some money. Somewhere that shows a potential dividend, gain in value, meeting the effects that inflation will most certainly take hold when the smoke clears.

[winner69]

Who is Leo .. Master winner...how come I am not invited?

HQ

Movers and shakers only ...or Dr Leo’s friends

Royalty not included King ...unless your name is Andrew

[King1212]

Aw yeah... too much!!! I guess ...I am not old enough ehh...

[bull....]

here is your likely outcome.

from a asx terminated scheme just today released that a negotiated settlement because the takeover target decided it would cost to much to pursue in court and was unlikely to prove easy to say the mac was not activated


https://www.asx.com.au/asxpdf/20200513/pdf/44hsgqq341h8ss.pdf

[Beagle]

Maybe underlying earnings CAGR is 15% pa over the last five years but the rot has set in last few years

Not 15% pa last few year is it ...and F20 going to be below F17 ...ouch

Mid point of MET's underlying earnings forecast for FY20 is $86.5m and it is the only company in this sector brave enough to have guidance....but you know that already.
I also know already that you don't think they are going to make that forecast because you've said it so many times I have lost count.

[bull....]

as mentioned metlife will most probably just settle because avpg is a shell and eqt gave no guarantees as private equity do in these arrangements.

by the way ubs and credit suisse are not just selling they are buying and selling using stock borrowing arrangements

[Beagle]

as mentioned metlife will most probably just settle because avpg is a shell and eqt gave no guarantees as private equity do in these arrangements

Congrats, you just made my ignore list. I simply cannot stand to read your bull any longer.

[traineeinvestor]

here is your likely outcome.

from a asx terminated scheme just today released that a negotiated settlement because the takeover target decided it would cost to much to pursue in court and was unlikely to prove easy to say the mac was not activated


https://www.asx.com.au/asxpdf/20200513/pdf/44hsgqq341h8ss.pdf

I'd be very disappointed if a (likely) partial contribution to MET's costs was the end result.

That said, IMHO the investment case stacks up regardless of whether MET gets taken out or not.

[winner69]

Congrats, you just made my ignore list. I simply cannot stand to read your bull **** any longer.

You might have missed this then baegle

https://www.asx.com.au/asxpdf/20200513/pdf/44hsgqq341h8ss.pdf

Jeez CML Board a pack of wimps

[bull....]

I'd be very disappointed if a (likely) partial contribution to MET's costs was the end result.

That said, IMHO the investment case stacks up regardless of whether MET gets taken out or not.

thats everyones decision to make themselves , i just highlighting that betting on a takeover is not good investment decision making in this case in my opinion and people who peddal it as most likely to happen are really ill informed and misleading

[bull....]

Congrats, you just made my ignore list. I simply cannot stand to read your bull any longer.

are we meant to cry now lol

[Beagle]

You might have missed this then baegle

https://www.asx.com.au/asxpdf/20200513/pdf/44hsgqq341h8ss.pdf

Jeez CML Board a pack of wimps

Come on mate...you don't seriously think that is even vaguely relevant to MET given they have already committed to legal proceedings ?

[traineeinvestor]

... just highlighting that betting on a takeover is not good investment decision making ...

No argument from me. I've been around long enough to know that the universe of listed companies which are rumoured to be potential takeover targets is significantly larger than the solar system of companies that are actually taken over and would not buy a company on speculation that an offer will be forthcoming.

[Balance]

Congrats, you just made my ignore list. I simply cannot stand to read your bull any longer.

Put bull... in my Ignore list a couple of weeks ago when it became very clear that he is but a ramper with no value to add in making investment decisions.

Hope others take note of that fact if they continue to read his garbage.

[Joshuatree]

thats everyones decision to make themselves , i just highlighting that betting on a takeover is not good investment decision making in this case in my opinion and people who peddal it as most likely to happen are really ill informed and misleading

Appreciate your contrarian views Bull, keep it up ,it gives some real balance on here. Also appreciate your transparency re your trading.Not aware of anyone else on here with that honesty. so when reading posts they can have very different meanings and agendas, so big grain of salt necessary here on Sharetrader

[bottomfeeder]

Maybe betting on a takeover is generally not an investment decision, except when the takeover offer was $7 and the SP is just over $4.00. I would say that was a good investment decision.

[Bjauck]

thats everyones decision to make themselves , i just highlighting that betting on a takeover is not good investment decision making in this case in my opinion and people who peddal it as most likely to happen are really ill informed and misleading I think there has been some good discussion from all sides on the merits of MET, with or without the take-over scheme implementation and on the merits of the MET directors' case. I guess you need to judge the poster's reliability on their history and any cross-references in the post.

As to whether a post is misleading, I think all posts come with the caveat that you should do your own research. This is an open discussion forum without a membership fee after all.

I guess betting on a takeover, where there have been no previous approaches is more of a gamble. However there has been an offer and there have been three interested parties in MET. Why did MET interest them?

I have asked myself what impact on MET, since those parties were interested, has actually eventuated since the epidemic. What is the impact on residential property? What is the forecast? Has the epidemic actually made living in a retirement village more appealing? What is the impact on residential care? Has there been material change yet? Is there a forecast to be a material change? Everybody is limited by the availability of reliable information.

[klid]

Also of note is that they were commencing a $30m share buyback before all of this because they thought they were undervalued.

[dubya]

Also of note is that they were commencing a $30m share buyback before all of this because they thought they were undervalued.

Yes. And they also didn't pay the interim dividend in March because of the takeover (about 3.5c?). Hopefully that's to come, maybe that'll be added to the final dividend which is normally about 7 cents.

[winner69]

Quite a good summary here. Although he only focuses on MAC, whereas I believe it is the other causes that have the higher likelihood of killing the deal.

https://rapercapital.com/2020/05/06/metlifecare-heads-i-win-big-tails-i-dont-lose-or-better/

I see Jeremy going to charge $1,500 a year for his genius

[peat]

I see Jeremy going to charge $1,500 a year for his genius

its a but off topic but you of all people should not have a problem with that - I had a look at one of his previous recommendations to short something called Nio Inc, and while I agree with him and it totally has traced out a bearish harmonic pattern , it hasn't fallen yet. So he'll still be sweating that one out... but the funny thing was my platform said 'no shorting allowed for that stock'. Which is weird have only struck that recently with AIR. So anyway , idle chat.... he does allege a very good record all documented apparently. I wont buy his services at this point and probably never, but I do pay for some stuff so its always a possibility I guess.


Thanks for everyones diverse views. I tend to think directors have a good chance of succeeding esp dare I say it in a NZ court. Those articles did strengthen the view that the courts err on the side of the party seeking the contract (scheme) to continue as planned, unless the case for setting it aside is clear and unambiguous, which it really isn't. So, directors, feather the lawyers nest a bit and get us our $7.


Another reason for me is that I really want to be able to say I three-wayed Metlife.

Long and strong

[King1212]

Thanks Peat for your in-depth.

If MET goes through n won....you will soon get a title of Master from me....

[Beagle]

https://rapercapital.com/2020/05/06/metlifecare-heads-i-win-big-tails-i-dont-lose-or-better/
Such a good article that outlines the range of potential outcomes very clearly.

The question I would like to pose and answer is given these now well known range of potential outcomes is there any premium built into the current share price for the possibility of a "quick $2" or thereabouts profit ?

Firstly I'd like to examine that based on discount to asset backing
Clearly MET still trades at a deep discount of $4.35 / $7.00 = 62% = 38% discount to last reported asset backing. All other sector participants trade at a premium to NTA (notwithstanding the fact that they will all have been impacted by Covid 19 in a very similar manner) apart from OCA.
Based on a recently shared institutional report on here, its apparent that from a cost perspective OCA will be most affected by extra costs. They currently trade on 75 / 101 = 74% = 26% discount to NTA. Conclusion :- There is no way you could make the case based on asset backing that MET's closing share price today in any way whatsoever is pricing in a premium based on asset backing for "being in play"

Earnings - Impossible to do a comparative forecast review within this sector because every other sector participant has withdrawn guidance apart from MET. MET's own guidance for FY20 at mid point is $86.5m underlying down just on 5% from FY19. This gives underlying eps of 40.55 cps and at 44.35 puts them on a forward PE of just 10.7 and those earnings have clearly been impacted by Covid 19 to some extent. This is right towards the bottom end of the PE this stock has been trading on in recent years so again, objectively one would be really struggling to make any case that the current price is pumped up for being in play based on earnings.

Finally lets have a look at the percentage bounce-back from the lowest trading point for shares in this sector in recent months to determine if this has bounced back more than others ?
MET 435 / 316 = 38% bounce-back
ARV 132 / 88 = 50%
OCA 75 / 38 = 97%
SUM 591 / 336 = 76%
RYM 1220 / 661 = 85%

No way you would reasonably conclude that MET has bounced back of its low point stronger than the others because of it being in play, in fact the difference compared to the rest of the sector suggests quite the opposite. (Arbitrage funds selling down to reduce their exposure)

As a long term investment I have previously calculated that MET will make circa $120m gross per annum in underlying profit from the natural cycle of recurring earnings just from recycling existing earnings based on the level of embedded value per unit and the average tenure of 9.1 years. MET have the lowest gearing in the sector and are the least reliant on ongoing development of new units to generate returns.

I don't think anything is currently priced into the shares for a potential positive outcome and effectively the arbitrage funds with their selldown are giving other investors a completely free option on an early more positive outcome.

Then there's the pending company stock buy-back and finally is it so bad to hold a stock on a PE of 10.7 that's enjoyed a 5 year average compound growth rate in earnings of 15% per annum ?

I don't see the downside. I see plenty of potential upside either in the short term or long run. Heads you win, tails you win.
Disc - Significant position in MET, moderate position in OCA.

[Snoopy]

Snoopy me old mate - further to our discussion re real economic returns in this sector these are interesting numbers. Both for 12 months to December so same period.

One player has capital employed of $1.8 billion from which it generated $50m EBIT and $140m operating cash flow. It’s return on capital about 3% much less than its cost of capital of about 9%.


Sounds like a case of investment expectations not being MET? Although in this instance, cross referencing my own quote below, it might just be MET!



You have to consider how much rent your tenant has agreed to pay. In the MET house with an asset value of:

$420,000/0.6= $700,000 and rent was being charged at 1.1% on the asset value of the house, then the rent you would received per year would be:

$700,000 x 0.011 = $7,700

However, because you can buy the MET house for less than asset value, your real yield would be better than this.

1.1% x (700/420) = 1.8%


Now bring in the alternative purchase option.



Another player has capital employed of $1.7 billion and generates EBIT of $187m and operating cash of $240m. Its return on capital is about 11% v cost of capital of about 9%


SUMthing definitely afoot in your example? Very similar to my point of SUM house down the road giving a much better income return?



Now down the road is the SUM house. They are getting a lot more rent for the same sized house. But because of SUM's greed as landlords, third party co-shareholders are lining up to pay

1.2 x $700,000 = $840,000

for a share in what is an equivalent house. How much annual rent does SUM get for their house?

$700,000 x 0.052 = $36,400

However, because of the premium that third party shareholders are prepared to pay, the market yield is reduced to.

0.052 x (700/840) = 4.3%




Which one would you have?


Can't see any reason to change my conclusion below.



Now something should be very obvious to our potential rental house buyer here. Despite paying a premium for the SUM house, and despite adjusting the yield on the MET house to reflect the fact you are buying at a discount, the market yield on the SUM house is more than double the market yield on the MET house.

From a yield perspective, you are better off paying twice the price for ostensibly the same asset and buying the SUM house, because it will yield you double the income on your asset. And that leads to the question: Was the MET house ever worth even $420,000, let alone $700,000!




One trades slightly above Book Value while the other significantly below Book Value ...not hard to see why


Here I have to disagree with you Winner. It is hard to see why MET management is so inMETp. Cyclical below asked the right question (I have put it in bold).


Righto, so let's assume nothing comes of this takeover, what would it take to turn MET around and start generating returns on capital more in line with said other player? I've heard Beagle make reference to inept management in the past. Is this one of the reasons MET is an attractive takeover proposition...the unlocked potential?

Now who on the believer team is prepared to answer it? Because if no-one can, that means MET is worth no more than $4.42.

SNOOPY

[winner69]

Very good analysis Beagle. If you put that sort of stuff out in a regular thesis piece on the web you could charge $1,000 a year for punters to read. :):t_up:

No argument with any of it. But again you fail to address the question of why is it that the market per se has weighed everything up and concluded that on most metrics MET should be priced where it is relative to its peers. Not just a today thing but how it’s been for many years....and likely to remain so.

Totally agree with you with this bit ‘...I don’t think anything is currently priced into the shares for a potential positive outcome and effectively the arbitrage funds with their selldown are giving other investors a completely free option on an early more positive outcome.‘ (maybe you’re tip sheet is worth $1,500 pa after all :t_up:)

Yes a free option and we’ll worth a big punt for a big payout - let’s hope it’s in the money sooner than later.

If it’s not in the money and it appears that nobody is interested in taking MET out I’ll wont be hanging around because I think I know why the market ‘weighing machine’ weighs MET as it does. (Maybe my tip sheet is worth $2,000 pa :t_up::t_up::t_up::p)

Yep heads you win big but tails you don’t lose (or if you’re lucky win a little bit)

[winner69]

Hope MET getting all the stuff they need for the Court hearing on the 28th completed and sent off to them.

Wonder how OIO application going?

[bull....]

seems like major shareholder wants to take scheme bidder to court in the cml scheme

CML shareholders not finished with bailed bidder ScotPac


https://www.afr.com/street-talk/cml-shareholders-not-finished-with-bailed-bidder-scotpac-20200513-p54sgn

has a caveat though at bottom of article

In formal takeover bids its hard for bidders to walk away without a breach of condition but that's not the case for scheme of arrangements.

see carlyle group on cnbc this morning being grilled about walking away from shceme due to mac clause said they dont think it hurt there reputation

[sb9]

Hope MET getting all the stuff they need for the Court hearing on the 28th completed and sent off to them.

Wonder how OIO application going?

Could be a spanner in the works??

Government introducing a national interest test for foreign investment, to stop strategically important companies being snapped up by foreign buyers at bargain basement prices

https://www.interest.co.nz/property/105000/government-introducing-national-interest-test-foreign-investment-stop-strategically

[Beagle]

I looked at that yesterday and didn't see any additional hurdle that wasn't already there under the existing approval process for this deal.

[stoploss]

Could be a spanner in the works??

Government introducing a national interest test for foreign investment, to stop strategically important companies being snapped up by foreign buyers at bargain basement prices

https://www.interest.co.nz/property/105000/government-introducing-national-interest-test-foreign-investment-stop-strategically
$ 7.00 isn’t bargain basement , $ 3.40
was ........

[winner69]

Could be a spanner in the works??

Government introducing a national interest test for foreign investment, to stop strategically important companies being snapped up by foreign buyers at bargain basement prices

https://www.interest.co.nz/property/105000/government-introducing-national-interest-test-foreign-investment-stop-strategically

I would hazard a guess existing applications play by the ‘old’ rules

[peat]

Cyclical below asked the right question (I have put it in bold).


Originally Posted by Cyclical https://www.sharetrader.co.nz/images/buttons/viewpost-right.png (https://www.sharetrader.co.nz/showthread.php?p=814791#post814791)
Righto, so let's assume nothing comes of this takeover, what would it take to turn MET around and start generating returns on capital more in line with said other player?


Now who on the believer team is prepared to answer it? Because if no-one can, that means MET is worth no more than $4.42.

SNOOPY

You should be asking the foreign takeover company. :p

They are the ones who have entered in a binding arrangement committing to a price of $7, and are now reneging on that. The law should see to it they pay this.
If a pandemic was to trigger the MAC it should have been explicitly stated.

[Snoopy]

Cyclical wrote:
"Righto, so let's assume nothing comes of this takeover, what would it take to turn MET around and start generating returns on capital more in line with said other player?"

You should be asking the foreign takeover company. :p

They are the ones who have entered in a binding arrangement committing to a price of $7, and are now reneging on that. The law should see to it they pay this.

If a pandemic was to trigger the MAC it should have been explicitly stated.


The three potential takeover suitor companies have answered in 'market speak'. Two have not submitted a bid. The third has pulled their bid at $7. I am not sure if this is for:

1/ MET asset operational reasons (e.g. once leaky building issues are fixed, the building stock will be too expensive to on sell at a profit) , or
2/ Funding reasons (based on the bidders own borrowing capacity).

Either way the bidders say the performance of MET cannot be lifted in the current business environment. However, some here on this forum must have the answer as they are happy to buy MET at $4.40 or thereabouts. Maybe if they shared their 'turnaround secrets', more of we non-holders would 'get it' , buy in , and raise the MET share price?

SNOOPY

[Balance]

The three potential takeover suitor companies have answered in 'market speak'. Two have not submitted a bid. The third has pulled their bid at $7. I am not sure if this is for:

1/ MET asset operational reasons (e.g. once leaky building issues are fixed, the building stock will be too expensive to on sell at a profit) , or
2/ Funding reasons (based on the bidders own borrowing capacity).

Either way the bidders say the performance of MET cannot be lifted in the current business environment. However, some here on this forum must have the answer as they are happy to buy MET at $4.40 or thereabouts. Maybe if they shared their 'turnaround secrets', more of we non-holders would 'get it' , buy in , and raise the MET share price?

SNOOPY

There have been plenty of discussion around that - if you choose not to read or cannot see it, then just stay clear of the stock. It’s that simple!

[Snoopy]

There have been plenty of discussion around that - if you choose not to read or cannot see it, then just stay clear of the stock. It’s that simple!


All the discussion I have read of late is along the lines of:

1/ MET having a lower growth profile and so being rightly priced on a lower earnings multiple.
2/ MET being more exposed to the Auckland market, and so indirectly being more exposed to the vicissitudes of the Auckland property market, which has been soft over the last year.

I get the discount to asset value being in MET's favour. But ultimately assets have to earn a return. And by any measure you choose: ROE, ROA or ROIC, the asset performance of MET is poor. The other way of looking at this is that, with all the takeover attention, MET is the share in the retirement sector that is 'correctly priced' and the others will gradually drift down to valuations that line up with MET.

SNOOPY

P.S. I will try and kick start this discussion:

1/ Since land is really expensive, should MET be looking to operate more serviced blocks of flats rather than stand alone dwellings?
2/ Is the balance of 'occupation rights' units to 'extra care' units right for today's new MET customers? IOW as the average new MET customer today gets older and older, is moving into a retirement unit with little option on site for 'extra care' later still an attractive option?

[winner69]

There have been plenty of discussion around that - if you choose not to read or cannot see it, then just stay clear of the stock. It’s that simple!

To be fair Snoopy asks a good question and there hasn’t been any real answers as to how they can turn around performance and improve returns .....besides screw suppliers to improve development margins ....oops I forgot the leverage bit.

Hope somebody knows the answer and takes them over for $6 plus ....hoping, hoping

Heads you win big time ....tails you don’t lose

[Balance]

All the discussion I have read of late is along the lines of:

1/ MET having a lower growth profile and so being rightly priced on a lower earnings multiple.
2/ MET being more exposed to the Auckland market, and so indirectly being more exposed to the vicissitudes of the Auckland property market, which has been soft over the last year.

I get the discount to asset value being in MET's favour. But ultimately assets have to earn a return. And by any measure you choose: ROE, ROA or ROIC, the asset performance of MET is poor. The other way of looking at this is that, with all the takeover attention, MET is the share in the retirement sector that is 'correctly priced' and the others will gradually drift down to valuations that line up with MET.

SNOOPY

If that’s all you have picked up from all the discussions, and you do not perceive MET as worthy of your investment, I would have thought it’s time to move on to more fruitful pursuits?

I doubt very much you are going to get much more out of all the discussions here.

I have a rather comprehensive report from one of the major stockbroking form on the sector which I have read. I have shared a summary of the report here.

Basically, the sector is going to be a long term winner and each of the sector players here is worthy of investment for the long term. Up to each to decide really.

[winner69]

Hey balance ....as you say ‘the sector is going to be a long term winner and each of the sector players here is worthy of investment for the long term.’

Snoopy probably not at odds with this outlook and his question (and mine) is really asking ‘what does MET have to do to improve financial performance to make it an out performer (rather than a laggard) in the sector?’

That question hasn’t been answered

Still hoping for takeover ...best outcome

[Snoopy]

Just finished reading a recently issued report by one of the major broking houses in Australasia on NZ's Retirement Village sector.

Nothing really new which have not been discussed and debated ad nauseam here in the Meet, Sum & Oca threads.

Nevertheless, a few key points to note from the report (report goes to their institutional & international client base so bound to have some influence) :

1. Demographics trend continue to provide strong tailwind for long term performance of the sector, population of 75+ to double over next 10 years (250,000 more), and

2. Short term headwinds of increased costs and lower unit resales to adversely impact on profits in 2020/21.

Sensitivities:

1. Increased costs in order of biggest impact - OCA, ARV, RYM, SUM & MET

2. Devaluation of asset values when gearing hits 50% (trigger point for debt concerns) - RYM (14%), SUM (15%), OCA (25%), ARV (26%) & MET (38%).

3. Most highly geared so likely to require capital raising - RYM (40%), SUM (33%), OCA (31%), ARV (27%) & MET (16%).



I have a rather comprehensive report from one of the major stockbroking form on the sector which I have read. I have shared a summary of the report here.

Basically, the sector is going to be a long term winner and each of the sector players here is worthy of investment for the long term. Up to each to decide really.


I have re-quoted your summary of the broker report Balance. It is largely a 'rising tide lifts all boats' argument. I don't disagree with that. But a rising tide doesn't stop shoddy boat builders. If I want to invest in a sector I want to invest in something that will be lifted by a rising tide. The question I have is, do MET have the skills to build a decent boat? The past isn't necessarily a guide to the future. But it does currently look like MET own some shoddy boats (as evidenced by poor ROIC returns).

To further comment on your summary. Don't RYM and SUM have their own in house team of builders? This is good when growth is going gangbusters. But in a lower growth environment it could be a handicap. What do you do with your building team when there is little to build? Those in the sector without their own building team might suddenly have an advantage. What does that 'Increased costs in order of biggest impact' comparative cost structure look like if you remove the building teams from SUM and RYM? Wouldn't SUM and RYM look a lot more competitive with MET if you did that?

The gearing argument is a double edged sword. Less gearing is good in a downturn. But the lower ROE that that implies and the lower growth outlook will mean MET has a lower PE multiple going forwards, to go with lower growth expectations.

SNOOPY

[Joshuatree]

Interesting discussion of much the same thing back in 2014. MET has less care beds now though i think?


From the report:



I find this comment interesting:
1. Care beds - my understanding was that these were relatively low margin and therefore a less attractive use of capex. Their financial value seemed to be mainly as a marketing tool in attracting residents who want greater certainty about end of life care. Has this changed? i.e. IF you can fill the retirement units without adding care beds, why wouldn't you avoid financing these?? (MET not actually showing worse occupancy at this point than RYM.)

2. Entry age - I would have thought Younger is not Better! The (financial) perfect ideal would seem to me to be if the residents stayed just long enough to finish paying the amenities fee in full - from memory, about 4 years?

I think they discard Price/Book too easily. We are talking a four-fold difference between MET to RYM and two-fold MET to SUM. That's a big value arbitrage hinging on management quality and decision making. Sure, MET has not exactly performed to date on a relative basis, but with a re-invigorated board and RYM/SUM providing a benchmark, MET management must surely have some easy gains to make in closing the gap?

[winner69]

I have re-quoted your summary of the broker report Balance. It is largely a 'rising tide lifts all boats' argument. I don't disagree with that. But a rising tide doesn't stop shoddy boat builders. If I want to invest in a sector I want to invest in something that will be lifted by a rising tide. The question I have is, do MET have the skills to build a decent boat? The past isn't necessarily a guide to the future. But it does currently look like MET own some shoddy boats.

To further comment on your summary. Don't RYM and SUM have their own in house team of builders? This is good when growth is going gangbusters. But in a lower growth environment it could be a handicap. What do you do with your building team when there is little to build? Those in the sector without their own building team might suddenly have an advantage. What does that 'Increased costs in order of biggest impact' comparative cost structure look like if you remove the building teams from SUM and RYM? Wouldn't SUM and RYM look a lot more competitive with MET if you did that?

SNOOPY

Love that word shoddy ...haven’t heard it used for ages. :)

I fear we both going to get into trouble with the MET believers....so be brave.

Court hearing in 13 days ...hope MET giving the judge what he wants.

[winner69]

Interesting you brought that old post up JT

Liz said In 2014 ‘ MET has not exactly performed to date on a relative basis, but with a re-invigorated board and RYM/SUM providing a benchmark, MET management must surely have some easy gains to make in closing the gap?’

Wow, six years and still saying the same old stuff.

Maybe they need to try another reinvigorated board ....lol

Whatever that Sowry needs to go ...he should have been told you don’t run a retirement village operation like Housing NZ

[Joshuatree]

2014 Wolf with Gaynor now,?Did his apprenticeship here:)

I've recently been looking at the retirement industry, looking into the fundamentals of the companys trying to getting a picture of where various companys are heading.
So far i've just been through the annual reports i can get of the websites. Looking at MET over the last 7 years earnings per share are all over the show as well as dividends. I tried going back further but decided it wasn't work the hassle as the annual reports made it hard to find Net Profit/earnings per share/dps etc and what i did find seemed to correlate with the last seven years.

What is interesting is that Ryman has really nice annual reports that are investor friendly, Summerset pretty good, not as good as rymans, metlifecare horrible. Seem's to be inline with how each company peforms.



MET
2007
2008
2009
2010
2011
2012
2013


EPS
116.3
60.7
120.3
55.1
17
104.1
65.8












DPS
22
19
0
0
0
0
3


RATIO
19%
32%




5%



Their earnings per share/ dps are all over show. Trying to put a value on it is pretty hard. While the retirement market is increasing so you would think MET earnings would increase as well i am not so sure as Summerset and Ryman have better retirement homes and may very well steal their market share and earnings could very well possibly decrease.

Free cash flow may be a more valid method for finding a value for MET?

Does anyone have a valuation on MET and is willing to share how they arrive at it?

[winner69]

Just as well it’s different this time ....the four most costly words in the annals of investing (Templeton)

[Joshuatree]

Im sure liz wont mind me sharing that amongst other things she said about MET a few days ago"trouble is that such low divs in the sector and valuations therefore can go wherever sentiment likes".

[Beagle]

Some people are getting stuck on fundamental misconceptions and can't get past the basics. All the professional analysts use underlying earnings.
Not much difference between the underlying earnings of MET, SUM and RYM. That's why the sharks were circling for a takeover of MET.

[winner69]

Some people are getting stuck on fundamental misconceptions and can't get past the basics. All the professional analysts use underlying earnings.
Not much difference between the underlying earnings of MET, SUM and RYM. That's why the sharks were circling for a takeover of MET.

I have no misconceptions - yes professional analysts use/love underlying earnings (broker analysts that is)

But real investment managers look past underlying earnings and consider things like value creation

[Beagle]

I have no misconceptions - yes professional analysts use/love underlying earnings (broker analysts that is)

But real investment managers look past underlying earnings and consider things like value creation

As you know, the dog has his own way of sniffing for food and will keep doing so because he's very fat so it must be working :)

[winner69]

As you know, the dog has his own way of sniffing for food and will keep doing so because he's very fat so it must be working :)

Not trying to change you ...if it works For you keep at it.

We all have different approaches and we are all right

Read this interesting titbit this morning -

@aswathdamodaran
For the last decade, as growth beat value, passive outpaced active investing, and large caps did better than small caps, we were told to wait for a crisis. I look at how this crisis has played out & conclude that so far, it has been more of the same

[Leftfield]

Read this interesting titbit this morning -

@aswathdamodaran
For the last decade, as growth beat value, passive outpaced active investing, and large caps did better than small caps, we were told to wait for a crisis. I look at how this crisis has played out & conclude that so far, it has been more of the same

Nice quote. Find myself in agreement, although the word 'Passive' is a bit misleading. Takes a lot of courage to buy and hold at times.

[Cyclical]

Nice quote. Find myself in agreement, although the word 'Passive' is a bit misleading. Takes a lot of courage to buy and hold at times.

Maybe by passive, he means index tracking ETF's? Some of those would have done nicely since March 23.

[winner69]

Nice quote. Find myself in agreement, although the word 'Passive' is a bit misleading. Takes a lot of courage to buy and hold at times.

From you posts and what you seem to be invested in I’d class you as an ‘Active’

Yes, active takes courage as well.

[Beagle]

To further comment on your summary. Don't RYM and SUM have their own in house team of builders? This is good when growth is going gangbusters. But in a lower growth environment it could be a handicap. What do you do with your building team when there is little to build? Those in the sector without their own building team might suddenly have an advantage. What does that 'Increased costs in order of biggest impact' comparative cost structure look like if you remove the building teams from SUM and RYM? Wouldn't SUM and RYM look a lot more competitive with MET if you did that?
The gearing argument is a double edged sword. Less gearing is good in a downturn. But the lower ROE that that implies and the lower growth outlook will mean MET has a lower PE multiple going forwards, to go with lower growth expectations.
SNOOPY

Interesting points. My understanding is that MET are undertaking a comprehensive review of their development model and frankly they need too. 13% development margin does not cut it and won't cut it going forward. Very modest cost to them hitting the go slow on developments, (unlike SUM who for example generated circa 60% of their underlying profit last year from development activities).

Oceania also commented that they can slow down development without cost. They project manage all their developments but my understanding is they outsource the actual construction on fixed price contracts. Maverick would know a lot more.

What I find interesting is that all sector participants to a greater or lesser extent have been struggling to sell their newly developed units and have recently been struggling with increased construction costs. This suggests to me that MET who make most of their underlying profit from existing units are in a more resilient position. Their low gearing is also a huge advantage. I think a negotiated settlement in the low-mid $6 range is the most likely outcome.

[winner69]

Interesting points. My understanding is that MET are undertaking a comprehensive review of their development model and frankly they need too. 13% development margin does not cut it and won't cut it going forward. Very modest cost to them hitting the go slow on developments, (unlike SUM who for example generated circa 60% of their underlying profit last year from development activities).

Oceania also commented that they can slow down development without cost. They project manage all their developments but my understanding is they outsource the actual construction on fixed price contracts. Maverick would know a lot more.

What I find interesting is that all sector participants to a greater or lesser extent have been struggling to sell their newly developed units and have recently been struggling with increased construction costs. This suggests to me that MET who make most of their underlying profit from existing units are in a more resilient position. Their low gearing is also a huge advantage. I think a negotiated settlement in the low-mid $6 range is the most likely outcome.

I hope neg settlement happens in low mid $6 range

Great outcome

Heads you win, tail you don’t lose

[Beagle]

I hope neg settlement happens in low mid $6 range

Great outcome

Heads you win, tail you don’t lose

If that happens that will leave OCA as the only sector player on a significant discount to NTA. OCA have a yield at 74 cents of 6.6% and a PE of 9. Cash flow was up nicely by 21% for the half year too. Maybe they get a boost if the MET takeover goes through as people reallocate their portfolio ? Yet if the takeover doesn't happen OCA are still capable of paying 6.6% dividends. Hmmm. Maybe a bob each way isn't silly ?

[winner69]

House prices already falling

The fallout begins.


https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/New_Zealand/2020/May_2020/NZ_Home_Truths_May_2020.pdf

[Beagle]

A 7% fall they are predicting for the rest of 2020 needs to be viewed in the context that house prices increased ~ 5% in the first quarter so by Westpac's own expectations year on year house prices will be down by just 2% by 31 December 2020. Not really an earth shattering decline is it.

[Raz]

A 7% fall they are predicting for the rest of 2020 needs to be viewed in the context that house prices increased ~ 5% in the first quarter so by Westpac's own expectations year on year house prices will be down by just 2% by 31 December 2020. Not really an earth shattering decline is it.

So we count down to their day in court yet hardly any SP movement...when you think your the smartest person in the room you better just double check you are:)

Hope you all get on a road trip this weekend:)

[Snoopy]

I'm sure Liz wont mind me sharing that amongst other things she said about MET a few days ago"trouble is that such low divs in the sector and valuations therefore can go wherever sentiment likes".


Liz has always had a sharp mind and I think she has summed up MET very well in a sentence. It is really just a play on the sentiment of the Auckland property market and how things look to pan out over the ensuing two years. But I guess with interest rates headed even lower, even a 2.5% gross yield has to be taken seriously as a significant 'dividend payer'.

SNOOPY

[BlackPeter]

House prices already falling

The fallout begins.


https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/New_Zealand/2020/May_2020/NZ_Home_Truths_May_2020.pdf

Mmh ... so stock prices fell in less than one month by more than 30%, while house prices dropped in this for house prices worst month in human history by only 1.8% (actually with seasonal adjustment they dropped just 1.1%) at quite low volumes.

Amazing what some people whinge about.

[winner69]

Hope we get some news next week

Want that 6 bucks plus.

[winner69]

Surely APVG will have to come to party now

Go for the whole 7 bucks I say

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MET/353227/322679.pdf

[dobby41]

House prices already falling

The fallout begins.


https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/New_Zealand/2020/May_2020/NZ_Home_Truths_May_2020.pdf

I'm not sure I'd take prices during a lockdown as indicative.
So they predict 7% down, much better than the 20% or so others have predicted. But that's predictions for you.

[Bjauck]

I'm not sure I'd take prices during a lockdown as indicative.
So they predict 7% down, much better than the 20% or so others have predicted. But that's predictions for you.

Quite a stunningly good medium term forecast for residential housing from Westpac. A 7% drop followed by an 11% recovery. By the looks of their chart, by 2024 they are only expecting house prices to be lower by approximately 2% from their forecast without Covid-19. This takes into account the expected low interest rates and absence of LVR restrictions.

[bull....]

metlifecare lost for sure after reading that announcement , so many area's where avpg can argue. so they spend millions on court costs and the best they can hope for i reckon is a negiotaed break fee. it drag on for years

[jonu]

Apologies if this has already been covered...but is it known who the Investors are in the Equity Commitment Letter? Could those "Investors" be playing the market in the meantime?

[Beagle]

Surely APVG will have to come to party now

Go for the whole 7 bucks I say

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MET/353227/322679.pdf

As much as I am tempted to read the whole thing and play at being a Judge, I know my limitations. Couple of things I did note.....there are probably heaps more gems for anyone prepared to read the whole document.
1. The final draft of the independent appraisal report in May 2020 showed a value range of $6.50 - $7.65
2. APVG withdrew their OIO application on 3/5/20.

Who knows how this will pan out but I remain cautiously hopeful of a negotiated settlement.

[peat]

The matter is expected to initially be heard in the High Court on 28 May 2020, at which time Metlifecare will make a request for an expedited court timetable.

[King1212]

The market doest not think the court case is going to end well...??

[Ace]

The market doest not think the court case is going to end well...??

How many times has the market been “wrong”, there’s a reason we make or lose money here! That being said - we are also part of the “market” and the SP reflects us and our thoughts as a collective. What were the statistics about the majority, the market and trading again?

[fish]

The matter is expected to initially be heard in the High Court on 28 May 2020, at which time Metlifecare will make a request for an expedited court timetable.

The statement of claim by MET by looks very strong and has raised my optimism for a quick settlement.
Opening SP this morning reflects a strong case to enforce the agreement.
My feeling today is that a negotiated settlement closer to $7 than $6 would be in the best interests of both parties and I guess this might have to happen sooner than we think(before the Scheme of arrangement is put to shareholders)

[jonu]

Apologies if this has already been covered...but is it known who the Investors are in the Equity Commitment Letter? Could those "Investors" be playing the market in the meantime?

Was this question too stupid? Is the answer widely known?

[bull....]

this is just one point in apvg termination


Metlifecare has breached the interim period restrictions by deferring development, remediation, maintenance, and refurbishment projects outside of the parameters of the SIA without APVG’s consent. APVG is also concerned that Metlifecare has, without approval and in breach of the SIA, applied for and taken a wage subsidy in respect of entities that are not reasonably likely to be entitled to the wage subsidy, which is a material arrangement that creates reputational and repayment risks for Metlifecare. Those unauthorised actions are material to Metlifecare and entitle APVG to terminate the SIA.”


this is interesting and of course wouldnt metlife have to prove the lockdown was legal and prevented it from carrying out these things.

Was the Government's Covid-19 lockdown illegal? Expert explains
https://www.tvnz.co.nz/one-news/new-zealand/governments-covid-19-lockdown-illegal-expert-explains

claiming the wage subsidy ruined reputation

"In an environment where the community as a whole has taken the 'we're in this together' view, have tried to act responsibly, and have tried to act in ways which look after one another, businesses which stand out as being selfish, as trying to take advantage of these schemes - not passing money on to people who require it, applying for money inappropriately - I think will suffer serious reputational damage."

https://www.rnz.co.nz/national/programmes/checkpoint/audio/2018745412/law-firms-repay-millions-of-dollars-in-unneeded-wage-subsidies

just pointing out why it will drag on and on in my opinion in a court room so open to argument

[Ace]

this is just one point in apvg termination


Metlifecare has breached the interim period restrictions by deferring development, remediation, maintenance, and refurbishment projects outside of the parameters of the SIA without APVG’s consent. APVG is also concerned that Metlifecare has, without approval and in breach of the SIA, applied for and taken a wage subsidy in respect of entities that are not reasonably likely to be entitled to the wage subsidy, which is a material arrangement that creates reputational and repayment risks for Metlifecare. Those unauthorised actions are material to Metlifecare and entitle APVG to terminate the SIA.”


this is interesting and of course wouldnt metlife have to prove the lockdown was legal and prevented it from carrying out these things.

Was the Government's Covid-19 lockdown illegal? Expert explains


https://www.tvnz.co.nz/one-news/new-zealand/governments-covid-19-lockdown-illegal-expert-explains

claiming the wage subsidy ruined reputation

"In an environment where the community as a whole has taken the 'we're in this together' view, have tried to act responsibly, and have tried to act in ways which look after one another, businesses which stand out as being selfish, as trying to take advantage of these schemes - not passing money on to people who require it, applying for money inappropriately - I think will suffer serious reputational damage."

https://www.rnz.co.nz/national/programmes/checkpoint/audio/2018745412/law-firms-repay-millions-of-dollars-in-unneeded-wage-subsidies

just pointing out why it will drag on and on in my opinion in a court room so open to argument

Or you could just read past the statement of facts and into Metlifecares defence to already see their defence against such clauses and claims listed there in detail and with references to relevant laws and clauses.

Here I’ll paste the relevant info here.


66 APVG had no reasonable basis to conclude that a Prescribed Occurrence had occurred, and none had in fact occurred. In particular, no breach of clauses 9.2 and 9.3 of the SIA occurred:

Particulars – Capex adjustments
66.1 Metlifecare gave APVG reasonable access to information about, kept APVG reasonably informed of, and consulted with APVG in relation to the steps Metlifecare took in response to the Level 4 lockdown restrictions as set out in Appendix Two;
66.2 Metlifecare’s responses to the Level 4 lockdown restrictions did not result in a significant change to the nature and scale of its business, and did not involve any business or undertaking in which Metlifecare was not previously engaged;
66.3 deferrals in construction, remediation and refurbishment & maintenance capital expenditure projects were necessary in response to the Level 4 lockdown restrictions and Metlifecare planned for remobilisation of the planned capital expenditure spending to occur as quickly as practicable once the Level 4 lockdown restrictions were lifted;
66.4 deferrals in construction, remediation and refurbishment & maintenance capital expenditure projects that were not in response to the Level 4 lockdown restrictions were consented to by APVG, as set out in Appendix Two, and to the extent that APVG did not consent to any deferrals then APVG’s consent has been unreasonably withheld in relation to the
works at the following villages:
(a) Pohutakawa Landing;
(b) Gulf Rise;
(c) Palmerston North;
(d) Dannemora Gardens; and
(e) Hibiscus Coast;

Particulars – Wage subsidy
66.5 applying for and receiving wage subsidies from the Government for 25 Metlifecare group of companies:
(a) was lawful, in that the applicant companies were, and remain, eligible to seek and receive the subsidy;
(b) was a reasonable and appropriate step to take in all of the circumstances;
100397445/7769645.5 (tel:100397445/7769645.5)
19
(c) was consistent with EQT Infrastructure IV Fund’s (and APVG’s) advice and recommendation, to consider and manage its liquidity needs;
(d) was not a breach of clause 9.2(c)(ii) of the SIA, as it was not a failure to use all reasonable endeavours to preserve Metlifecare’s relationships with Government Agencies and the other persons referred to in that clause;
(e) was not a breach of clause 9.2(d)(x)(C) of the SIA as it was not the entry into a contract, commitment or arrangement that was of material importance to the business of the Target Group as a whole;
(f) cannot constitute a breach of clause 9.2(d)(xi) of the SIA, as that clause relates to contracts, commitments, arrangements and payments to Related Entities and similar persons; and
66.6 in any event, none of the above matters has an effect which is material to the group taken as a whole, such that they justify termination of the SIA.

[bull....]

Or you could just read past the statement of facts and into Metlifecares defence to already see their defence against such clauses and claims listed there in detail and with references to relevant laws and clauses.

of course , but thats just one side of the argument. apvg will have just as many law case points etc as metlife do.
I see metlife can spend millions in court for $7/share or if they back down can argue over the break fee of 15 million to try and get something

[bottomfeeder]

The issues raised by APVG, are not substantive enough to warrant cancellation.

[bull....]

The issues raised by APVG, are not substantive enough to warrant cancellation.

then why is the price 4.35 and not 6.80 if its so clear cut. anyway im no legal guru but thats my guesses from market experience

[winner69]

I got called up for a jury once - said in a loud voice he's guilty as sin ...and got sent home

He was guilty as sin but at least I didn't have to sit through three days to find out

Should I talk to the judge - APVG guilty as sin

[dobby41]

Seems that the bush lawyers are out in force.

[Beagle]

I got called up for a jury once - said in a loud voice he's guilty as sin ...and got sent home

He was guilty as sin but at least I didn't have to sit through three days to find out

Should I talk to the judge - APVG guilty as sin

I know I spend too much time watching CNBC but...be that as it may the subject of MAC clauses came up a couple of days ago and one expert opined that these have traditionally been clauses to protect against material adverse changes specific to the target company. He went on to suggest that if Zoom were the target company would they be able to cancel any takeover deal on behalf of their shareholders because the value of their shares had gone up due to Covid 19 ? An interesting question and perspective I thought...

Anyway said expert when on that it all depends upon the wording of the agreement. Pretty clear that the agreement was written up such that any change that comes about by a change in general economic conditions is excluded. Covid 19 was the catalyst for the change in economic conditions but as economic conditions changes are excluded and it was clear both parties wrote it up that they should be excluded then prima facie risk appears to lay with the acquirer. Hope the court see it that way...but there appears to be nothing factored into the share price that suggests they might which really sheets me back to the arbitrage boys simply selling down...

Opportunity knocks but as is always the case, not without some risk.

[TFA]

Good post. Let's face it, AVG pulled the plug because the market tanked due to extreme fear because of Covid-19. They've tried to engineer some arguments to support this but they look extremely weak. Even if they were successful in convincing the court that the event has been triggered, they have no evidence to substantiate the assets or income drop so.
The interesting thing is that the market dropped 25% causing them to want to bail, however by 8 April when they officially announced they were pulling out the market had already recouped some ground (still down around 10% from 19 December when they agreed to $7), however the market has continued to recover and is now only off 5% from December 19.
NZ has (touch wood) beaten the virus in 49 days, the old folks haven't been wiped out, the triggers that caused AVG to pull the plug are being minimised by the day. Their chances of winning in court look slim and their alternative position isn't looking so bad now. Highly likely that a deal will proceed imho

A further interesting point is by trying to reneg and withdrawing the foreign investment application could make them complicit in the deal falling over if the OIO deemed them not be of good character

[bottomfeeder]

Seems that the bush lawyers are out in force.

Some bush lawyers are from the bush, others have some experience in these matters. Shouldn't generalise.

[jonu]

Apologies if this has already been covered...but is it known who the Investors are in the Equity Commitment Letter? Could those "Investors" be playing the market in the meantime?

Well the third time I'm asking this question. Either you all are too polite to call me an idiot or nobody knows. A lot of "expert" legal advice in the meantime.

[winner69]

Well the third time I'm asking this question. Either you all are too polite to call me an idiot or nobody knows. A lot of "expert" legal advice in the meantime.

APVG (that newly incorporated company with no assets we talked about) made the offer - EQT Infrastructure Fund IV own the holding company of APVG - that fund has 'investors' who were apparently prepared to pump more cash into the EQT fund to fund the acquisition.

those 'investors' probably unknown but I doubt if they are 'playing' the market

What makes you think they are playing the market

[jonu]

APVG (that newly incorporated company with no assets we talked about) made the offer - EQT Infrastructure Fund IV own the holding company of APVG - that fund has 'investors' who were apparently prepared to pump more cash into the EQT fund to fund the acquisition.

those 'investors' probably unknown but I doubt if they are 'playing' the market

What makes you think they are playing the market

Thanks for the response winner.

I don't "think" they are playing the market, but it seems to me to be possible. Unknown large players who may or may not have knowledge of whether APVG intend to settle out of Court at a lower purchase price or are really determined to walk away all together.

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12332666 Nothing new here, just what the Herald reported.

[Cyclical]

2. APVG withdrew their OIO application on 3/5/20.

That kinda reeks of arrogance doesn't it? Unless the process dictates they have no option but to pull it anyway...ie it can't just go on hold in the interim.

[Beagle]

That kinda reeks of arrogance doesn't it? Unless the process dictates they have no option but to pull it anyway...ie it can't just go on hold in the interim.

Quite possibly an actionable event in its own right in terms of MET seeking damages as APVG knew full well at the time they withdrew their application that MET were legally contesting their right to cancel the agreement. This sort of action would certainly add imputes to MET's claim that APVG have not been acting in good faith.
I think this is a clear sign that this is going to get ugly.

[winner69]

APVG worried they might fail the ‘good character’ test

[Cyclical]

APVG worried they might fail the ‘good character’ test

No doubt they'd be livered.

EQT clearly aren't concerned about their own reputation. I guess they think no one's going to notice the trail of sh1t they leave down in this part of the world...probably a fair assumption.

[tommy_d]

this is what i imagine the court decision will come down to. What are views on MET being down 30% over the three month period and thus eligible for the wage subsidy? my guess, they'll be paying it back...

APVG is also concerned that Metlifecare has, without approval and in breach of the SIA, applied for and taken a wage subsidy in respect of entities that are not reasonably likely to be entitled to the wage subsidy, which is a material arrangement that creates reputational and repayment risks for Metlifecare. Those unauthorised actions are material to Metlifecare and entitle APVG to terminate the SIA.

[Beagle]

They only have to prove income was down 30% for one month to be eligible for the subsidy. Sales of new units and resales of same stopped during lockdown level 4.

[Balance]

They only have to prove income was down 30% for one month to be eligible for the subsidy. Sales of new units and resales of same stopped during lockdown level 4.

As a contact of mine said, claim first - can always repay later if things are ok. Be silly not to claim if you can. It’s a $15 billion giveaway!

[Longhaul]

As a contact of mine said, claim first - can always repay later if things are ok. Be silly not to claim if you can. It’s a $15 billion giveaway!

It was such a stretch to claim that MET's application for the subsidy was a reputational risk. If somehow, miraculously they didn't have a fall in revenue of 30% for the month, then they just pay it back and look like the good guy!

[Beagle]

It was such a stretch to claim that MET's application for the subsidy was a reputational risk. If somehow, miraculously they didn't have a fall in revenue of 30% for the month, then they just pay it back and look like the good guy!

Yes some of the stuff EQT have claimed looks like its just taking a shotgun approach, shooting off both barrels and hoping at least one pellet hits the mark. Not sure their approach will be stand up to scrutiny of N.Z. courts. Time will tell. One thing for sure, its good we appear to be getting on top of this virus in N.Z., I think that helps MET's chances, (there is no "bush" legal basis for my thinking, this is just my gut feel)

[Longhaul]

Yes some of the stuff EQT have claimed looks like its just taking a shotgun approach, shooting off both barrels and hoping at least one pellet hits the mark. Not sure their approach will be stand up to scrutiny of N.Z. courts. Time will tell. One thing for sure, its good we appear to be getting on top of this virus in N.Z., I think that helps MET's chances, (there is no "bush" legal basis for my thinking, this is just my gut feel)

Agree.

Even if MET wins, what is the risk that EQT still manages to wriggle out of their obligation to complete the deal? Even choosing to ignore the court's decision?

I have no idea what the international enforcement of a NZ court order involves.

[Cyclical]

It was such a stretch to claim that MET's application for the subsidy was a reputational risk. If somehow, miraculously they didn't have a fall in revenue of 30% for the month, then they just pay it back and look like the good guy!

Yeah, it's probably damned if you do, damned if you don't. Had MET not claimed it and it latter turned out that they were eligible, would EQT then be moaning that they hadn't taken the handout? More than likely I suspect.

[bottomfeeder]

I don't want the takeover to go ahead. I would much rather get costs and damages. After all what am I going to do with the cash. So much fake money being printed at the moment, that any cash being held is a risk, when hyper inflation and low interest rates take over. I remember the stories of my grandparents telling me how he sold shares before the war in Europe and then when Germany invaded cash was useless and of no value. Mind you shares would probably have been valueless as well. Kiyosaki says keep out of cash, buy Gold Silver and Bitcoin. I would much rather hold onto MET as a hedge against inflation, don't care so much about dividends, I want profit, capital gain and a hedge against inflation. Then when the dust settles in about five years, I wouldn't mind a takeover at $15.

[thedrunkfish]

I don't want the takeover to go ahead. I would much rather get costs and damages. After all what am I going to do with the cash. So much fake money being printed at the moment, that any cash being held is a risk, when hyper inflation and low interest rates take over. I remember the stories of my grandparents telling me how he sold shares before the war in Europe and then when Germany invaded cash was useless and of no value. Mind you shares would probably have been valueless as well. Kiyosaki says keep out of cash, buy Gold Silver and Bitcoin. I would much rather hold onto MET as a hedge against inflation, don't care so much about dividends, I want profit, capital gain and a hedge against inflation. Then when the dust settles in about five years, I wouldn't mind a takeover at $15.

Kiyosaki lol

[traineeinvestor]

Kiyosaki lol

Have to agree with this – there's been enough written about Kiyosaki (both before and after the bankruptcy filing) to full several books with details of the shortcomings in his "advice."

[macduffy]

I want profit, capital gain and a hedge against inflation. Then when the dust settles in about five years, I wouldn't mind a takeover at $15.

Don't we all!

:t_up:

[bottomfeeder]

Kiyosaki lol

Yeah OK, he is a bit of a crook, but is he wrong, all the fake money they are giving out, just waters down the value of the existing money supply. Better off holding assets than cash. Then we have to choose which assets.

[Baa_Baa]

Yeah OK, he is a bit of a crook, but is he wrong, all the fake money they are giving out, just waters down the value of the existing money supply. Better off holding assets than cash. Then we have to choose which assets.

Kyosaki is a tired worn out promoter, he did good with property, made his fortune, his methodology since has been questionable. Gold is as solid an asset as you’ll find anywhere, but as a proportion of a portfolio, not all in.

[peat]

Don't we all!

:t_up:


in about five years, I wouldn't mind a takeover at $15.

Havent done the maths but 7 now would suit me better

having done the maths now that is not too bad

[bottomfeeder]

I wouldn't never advocate gold, silver, or bitcoin. But I would have to agree that Kiyosaki was right about cash. Fake money, monopoly money, is what is going to happen to the money supply. Hyper inflation will mean the only assets worth having will be property, particularly those assets such as retirement villages that have captive demand, regular captive income and a guaranteed future. I don't want the cash, it is too fleeting in value. If this takeover goes ahead, watch other village shares go up as investors will look to place the cash.

[Beagle]

I wouldn't never advocate gold, silver, or bitcoin. But I would have to agree that Kiyosaki was right about cash. Fake money, monopoly money, is what is going to happen to the money supply. Hyper inflation will mean the only assets worth having will be property, particularly those assets such as retirement villages that have captive demand, regular captive income and a guaranteed future. I don't want the cash, it is too fleeting in value. If this takeover goes ahead, watch other village shares go up as investors will look to place the cash.

This is the smart way to play this takeover thing. OCA will be the only retirement company left trading at a sizeable discount to asset backing. OCA are trading on a pre covid 19 historical underlying PE of just 9, (which means you are getting all future growth for all time for nothing) and appear to have a sustainable dividend yield of 6.6% and the vast majority of their income is from Govt funded care. I think OCA will get a significant boost if the MET takeover happens, (or more likely a negotiated settlement) as investors reallocate the proceeds of the takeover back onto the sector. I like both MET and OCA but am more comfortable holding OCA long term with their much higher yield and arguably more resilient business model.

For the life of me I cannot see any logic in holding any of the other retirement companies that are trading at a premium to asset backing. I think Salt are bang on the money with their short on vastly overrated RYM. I also think SUM's profits are very vulnerable to a substantial pullback, (60% of profits came from development last year), such a pullback being driven from increased cost of construction and ongoing inability to sell even the reduced numbers of units they're building.

ARV should do okay but I see much better value in MET and OCA.

[peat]

being short RYM likely means that they can go hard on the long side of the equation as sectoral risk is greatly reduced - something a fund will have to bear in mind

[winner69]

Wow ...big shareholders support MET

Dont we all

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MET/353446/322925.pdf

[bull....]

that make the avpg group take notice lol

[fish]

that make the avpg group take notice lol

They have no choice starting in a weeks time

[Balance]

They have no choice starting in a weeks time

Precisely - and big shareholders coming out to support MET is all about sending a message to go ahead and spend the millions of dollars required to take on AVPG.

Out of court settlement is my guess of how AVPG is currently contemplating.

[dubya]

Precisely - and big shareholders coming out to support MEWT is all about sending a message to go ahead and spend the millions of dollars required to take on AVPG.

Out of court settlement is my guess of how AVPG is currently contemplating.

Sooooo let's assume if there is an out of court settlement...... how much would be acceptable to MET? ........ after legal fees if paid out to shareholders ..... just over 213 million shares on register.

[bull....]

big s/h supporting met means they dont mind if met pays millions in court costs thats all. as was the case with cml in aus big s/h actually took legal action themselves as well as the company and still meant jake at the end of the day.

[Cyclical]

Sooooo let's assume if there is an out of court settlement...... how much would be acceptable to MET? ........ after legal fees if paid out to shareholders ..... just over 213 million shares on register.

$1 per share works for me. Although I guess the taxman takes away a 3rd of it, which isn't so appealing.