MET - Metlifecare - one for the fundies?

[peat]

don't forget how we've been underwhelmed by most directors stock picking abilities.
which is what buying your own shares is.
Maybe the low price (on days other than say March 23rd) is telling the directors that they're not doing a very good job and they should be focussing on that so as to alter the markets perception
I know it sounds all good from the numbers but really I would prefer debt paid off first, some cash in the bank, a steady dividend and then buy your own paper. There is just something that smacks of ponzi with buy backs.

[winner69]

don't forget how we've been underwhelmed by most directors stock picking abilities.
which is what buying your own shares is.
Maybe the low price (on days other than say March 23rd) is telling the directors that they're not doing a very good job and they should be focussing on that so as to alter the markets perception
I know it sounds all good from the numbers but really I would prefer debt paid off first, some cash in the bank, a steady dividend and then buy your own paper. There is just something that smacks of ponzi with buy backs.

You’re right peat

If you haven’t or aren’t likely too prove to the market management is doing a good job (mainly financial performance) the only way they have left to get the share price up is to pump it up with shareholders cash and hope that that ‘strategy’ works.

MET grow their business by building things and looking after people. If it’s a ‘better investment’ to buy their own shares they have failed badly eh.....and admission of failure. Surely all resources need to go into core activities.

Buyback dumb idea.....Ellis needs to get Sowry and his team to pull finger and do better.

Otherwise ‘deep value’ for a long time.

[winner69]

Issue $100m Bonds late September and a few weeks later say they are going to do a buy back of shares ......hmm

[winner69]

MET have a generous management incentive share scheme.

Good it’s based on Total Shareholder Return TSR relative to a peer group

TSR generally is increase in share price + dividends + other returns to shareholders (eg buyback shares)

Share buyback boosts TSR ( both from the cash used and if they are lucky from increased share price)

Cynically an ulterior motive for a share buyback rather than ‘best use of shareholders capital’

[Beagle]

You guys are conveniently ignoring the fact that buy-backs (whether they are out of debt raised at 3% or underlying eps) will be eps accretive and when you can make an instant 71.5% return (700/408) are far more value accretive to shareholders than using their money to build more units generating a 13% development margin that might take a year or more to realise. Buy-backs definitely have their place when shares are trading at a deep discount to their intrinsic value and absolutely are in shareholders best interests.

Its not a ponzi scheme at all peat. NZX limits buy-backs to 5% of issued capital in any one year and the maths on this is very clear as illustrated in the paragraph directly above. Fact is too that debt has never been cheaper so running a company with some debt is also going to give a better return than if its all equity and resident funded.

Think about it. The market is clearly well supplied with units, selling them seems to be an issue for all companies in this sector. Why spend $600,000 per unit building new ones hoping to sell them for $700,000 sometime in the next year (AKA spending the bulk of your funds on new developments) when you can buy shares in your own company and cancel them which is analogous to buying existing units for $408,000 and getting an instant return, (not waiting a year for it) of $700,000.

This is not rocket science, its simple maths. 71.5% straight away is a heck of a lot more value accretive to shareholders than maybe getting 13% in a years time with their money !

[winner69]

You guys are conveniently ignoring the fact that buy-backs (whether they are out of debt raised at 3% or underlying eps) will be eps accretive and when you can make an instant 71.5% return (700/408) are far more value accretive to shareholders than using their money to build more units generating a 13% development margin that might take a year or more to realise. Buy-backs definitely have their place when shares are trading at a deep discount to their intrinsic value and absolutely are in shareholders best interests.

Its not a ponzi scheme at all peat. NZX limits buy-backs to 5% of issued capital in any one year and the maths on this is very clear as illustrated in the paragraph directly above. Fact is too that debt has never been cheaper so running a company with some debt is also going to give a better return than if its all equity and resident funded.

Doubt whether they even thought of it as an ‘investment’ ....main motivation financial engineeringinban attempt to make themselves look better and line their own pockets.


You almost implying business model is broken.

[Beagle]

Their development model is not going especially well and needs a complete overhaul, (which I understand they are working on). Right at the minute the share price is broken and buying back their own shares is FAR more value accretive to shareholders than building yet more supply into an oversupplied market.

Really they need to go back to all their suppliers and contractors and request a 15% price reduction to build better margin's into their development model. Some companies and contractors have been doing extremely well from MET's recent development activities, unfortunately it hasn't been MET. They need to hire a very skilled procurement manager if one of their recently appointed development managers hasn't already got the skills. SUM's margins really took off a few years ago after they found a really good procurement manager.

[winner69]

Their development model is not going especially well and needs a complete overhaul, (which I understand they are working on). Right at the minute the share price is broken and buying back their own shares is FAR more value accretive to shareholders than building yet more supply into an oversupplied market.

Really they need to go back to all their suppliers and contractors and request a 15% price reduction to build better margin's into their development model. Someone is doing extremely well from their recent development activities, unfortunately it hasn't been MET. They need to hire a very skilled procurement manager if one of their recently appointed development managers hasn't already got the skills. SUM's margins really took off a few years ago after they found someone good.

Hope they manage to pump the share price up a decent amount if they do go ahead

Doubt punters will give a stuff whether a buyback adds ‘value’ or not

Sowry needs to go

[winner69]

Buybacks to boost the share price often seems to be a predictor for even more falls in the share price —- Turners, Fletchers etc

Seems Market not fooled by financial engineering and companies touting their share prices should be higher

Many conveniently overlook there’s often a reason for a dismal share price.

[Beagle]

I was impressed with the tone and attitude shown and the way they articulated their position very clearly in the announcement earlier this week. You suggested I could have written it and the fact is I couldn't have written it better. Good to see them showing a fair bit of "fight"

[percy]

Buybacks to boost the share price often seems to be a predictor for even more falls in the share price —- Turners, Fletchers etc

Seems Market not fooled by financial engineering and companies touting their share prices should be higher

Many conveniently overlook there’s often a reason for a dismal share price.

A share buyback occurs when a company purchases some of its shares in the open market and retires these outstanding shares. This can be a great thing for shareholders because after the share buyback, they each will own a bigger portion of the company, and therefore a bigger portion of its cash flow and earnings.
Also stops management wanting to do foolish acquisitions,therefore they concentrate on their own business.
Had Fletchers concentrated on share buy backs in the past, instead of acquisitions, they would have a great business today,instead of losing millions of shareholders funds.

ps.A few months ago I was looking forward to Turners announcing a further share buy back.Corona Virus stopped those sort of thoughts.

[King1212]

Well...TLT will do $250m buy back soon!

[winner69]

Well...TLT will do $250m buy back soon!

At least TLT have a genuine reason for a buy back - they have far too much cash sitting idle.

And every shareholder is going partake on a pro-rata basis

[Beagle]

A share buyback occurs when a company purchases some of its shares in the open market and retires these outstanding shares. This can be a great thing for shareholders because after the share buyback, they each will own a bigger portion of the company, and therefore a bigger portion of its cash flow and earnings.
Also stops management wanting to do foolish acquisitions,therefore they concentrate on their own business.
Had Fletchers concentrated on share buy backs in the past, instead of acquisitions, they would have a great business today,instead of losing millions of shareholders funds.


Well said as some people don't appear to understand and / or appreciate the basics.

[winner69]

I agree MET pretty cheap at the moment and the hope of some takeover keeps me in

But not really that cheap

Underlying profit -

FY17 $82.0m
FY18 $87.3m +6.3%
FY19 $90.5m +3.8%
FY20 $83.0m -8.3% and that’s if they are lucky

Hard to see FY21 being better


Not a good trend there

[traineeinvestor]

A share buyback occurs when a company purchases some of its shares in the open market and retires these outstanding shares. This can be a great thing for shareholders because after the share buyback, they each will own a bigger portion of the company, and therefore a bigger portion of its cash flow and earnings.
Also stops management wanting to do foolish acquisitions,therefore they concentrate on their own business.
Had Fletchers concentrated on share buy backs in the past, instead of acquisitions, they would have a great business today,instead of losing millions of shareholders funds.



I agree with all of this and have a strong preference for investing companies that are more likely to buy back shares than ones that make a habit of raising new capital through dilutive share placings. That said, buybacks may be a signal that the company lacks growth opportunities. I also like to look at where the funds for the buy back are coming from – if the company is racking up high levels of debt to fund the repurchase of its own shares then I start to worry about the board's motives.

As per the last interim accounts, MET has $311 million of interest bearing debt ($100 million in retail bonds with most of the rest in bank facilities) against shareholders funds of $1,493 million. IMHO this is a very comfortable level of gearing (even allowing for obligations to repurchase occupation rights) and I'd be happy to see at least some of their cash flow being used to repurchase shares. In this context, I note that cash outflows for investing exceeded cash inflows from operations in the last half year.

Regardless, I'd rather see a company whose shares are trading at well below NAV using cash for buying back its own shares than paying unimputed dividends which is what MET has been doing historically. With the former shareholders loose part of their dividend proportionate to their marginal tax rate and with the latter, not only is there no tax leakage but the company is effectively buying assets at a discount (in METs case, a substantial discount).

It's a bit old but there's an easy to read summary on buybacks here: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-value-of-share-buybacks

[Beagle]

I agree MET pretty cheap at the moment and the hope of some takeover keeps me in

But not really that cheap

Underlying profit -

FY17 $82.0m
FY18 $87.3m +6.3%
FY19 $90.5m +3.8%
FY20 $83.0m -8.3% and that’s if they are lucky

Hard to see FY21 being better


Not a good trend there

You must like playing Devil's advocate seeing as you hold plenty...okay mate I am seriously bored AND sick and tired of Mrs Beagle's constant grumpiness, so I will play silly beggars with you.

For a start the mid point of their FY20 forecast is $86.5m, (as you well know) which is down just $4m on FY19.
We don't know what extra costs they have incurred because of Covid 19 but we do know from SUM that they reckon it is millions. Lets assume millions means several million seeing as SUM took a wage subsidy of nearly $9m but still has withdrawn guidance.

I'm going to call it as $4m extra costs as a guess. So we're up to an adjusted underlying profit of about the same as FY19 just with the extra specific costs of Covid 19.

Then we consider that they have had to shut down their sales operations for over a month. We know they have embedded value of $1,155m and average resident tenure is 9.1 years.
Each year they make a gross underlying profit of about $1,155m / 9.1 years = $127m. Shut that $127m per annum profit engine down for a month and obviously you lose approx 1/12th of that or about $10.6m.

Let me do the maths for you. $86.5m after $4m extra costs and adjusting for $10.6m forgone gross underlying profit margin = normalised underlying profit of $101.1m.

Take some happy pills mate, it seems you need them and I know Mrs Beagle really does.
https://thebfd.co.nz/2020/03/26/the-bfd-video-coronavirus-quarantine-choice-a-with-your-wife-and-kids-or-b/

[King1212]

Master Beagle...u need to tell Mrs Beagle...it is a wine o'clock....get her to sip couple bottles...ops glasses

[Beagle]

Yeah, I could sure do with a few drinks myself. We are dry as I haven't been able to stomach the long local liquor shop queue's. Facing up to that might be the lesser of two evil's though !!

[percy]

Yeah, I could sure do with a few drinks myself. We are dry as I haven't been able to stomach the long local liquor shop queue's. Facing up to that might be the lesser of two evil's though !!

I don't need any drink.
Lovely home entertainment.
Wife has been on the phone for about and hour and a half, explaining world, and NZ economics, to her friend.
Peace .!..lol.

[Beagle]

Can she ring Mrs Beagle next lol

I have always been happy to follow my own nose for a feed which is seldom wrong. As far as I am concerned MET providing guidance this week of at mid point $86.5m, (considering the circumstances) was a real breath of fresh air when the vast majority of companies on the NZX who have previously issued guidance are so cautious they're withdrawing it completely, (note not revising it, withdrawing it !).

If all the takeover stuff fails there's still the full effect of the companies previously announced share buyback to come.

We're going over $5 one way or the other in due course eh Balance :)

[stoploss]

Yeah, I could sure do with a few drinks myself. We are dry as I haven't been able to stomach the long local liquor shop queue's. Facing up to that might be the lesser of two evil's though !!

Order it online https://www.containerdoor.com/nz/products?category=*ESSENTIAL_ITEMS*

[winner69]

Traineeinvestor, not a good link for the believers to follow

One paragraph says reads ....”Wall Street analyst commented in a recent report, “Share buybacks . . . improve EPS, return on equity, return on capital employed, economic profit, and fundamental intrinsic value.” At first glance, this argument seems to make sense: the same earnings divided by fewer shares results in a higher EPS and so a higher share price. But this belief is wrong”.

[Beagle]

Traineeinvestor, not a good link for the believers to follow

One paragraph says reads ....Wall Street analyst commented in a recent report, “Share buybacks . . . improve EPS, return on equity, return on capital employed, economic profit, and fundamental intrinsic value.” At first glance, this argument seems to make sense: the same earnings divided by fewer shares results in a higher EPS and so a higher share price. But this belief is wrong.

Just because you say so in bold or do you have some evidence to support your theory ?

[winner69]

Just because you say so in bold or do you have some evidence to support your theory ?

That’s an extract from the article ...its McKinsey words

[traineeinvestor]

Traineeinvestor, not a good link for the believers to follow

One paragraph says reads ....”Wall Street analyst commented in a recent report, “Share buybacks . . . improve EPS, return on equity, return on capital employed, economic profit, and fundamental intrinsic value.” At first glance, this argument seems to make sense: the same earnings divided by fewer shares results in a higher EPS and so a higher share price. But this belief is wrong”.

Yep - that's why I posted it – they're not universally loved and, for the reasons mentioned, are not always the best use of company resources. We have to look at each case on it's merits. FWIW, I prefer them to wasting money on risky new ventures or unimputed dividends or hoarding cash for no good reason. I don't like them when they result in the gearing level being jacked up. For MET, I'd support a modest share buyback (but obviously nothing like that's going to happen as long as MET insists the takeover is on).

[Baa_Baa]

Notwithstanding the takeover bid price, why do you think the ‘market’ has priced this company so low for so long compared to other listed retirement companies?

The market comprises big players, very well informed, dwarfing the mums and dads, clearly for a very long time they think this is a dog. Why is that exactly? The answer cannot be that they are stupid. Something is not right and hasn’t been for a long time.

Other than an opportunist play for a potential takeover which may never happen the market is saying and has said for a long time … avoid, there’s better sector exposure elsewhere.

So the question again, why exactly has the cumulative wisdom of the market priced this as a dog for so long? There must be something. Smoke means fire

[Beagle]

That’s an extract from the article ...its McKinsey words

Article contains some broad generalizations and its very old. In MET's case you have a company with 213m shares trading on an underlying PE of 10 (less than a no growth company as no growth with a 10 Govt stock rate of 1% is about 11.5) and you're buying back shares at a very deep discount to asset backing. If profit stays the same, which is likely if they shut down development activities which lets face it haven't been that profitable, and they buy back 10% of their shares in the first year 21m shares at say $4.10, underlying eps will grow at 10% in the first year, 11% in the second year as the 21m shares they buyback the following year is 11% of their reduced number on issue, 12.1% in the third year, 13.3% in the fourth year and so on...i.e. in this worked theoretical example you have a 10% growth rate initially that grows consecutively 10% faster every year. Remember this is a stock on a PE of just 10 but now has an eps growth rate of 10% growing 10% faster every year...you think that might then be worth more than a PE of 10 as eps grows faster and faster and faster ? You can call this the Beagle Buy-Back (BBB) compound growth model if you like :) How to turn a slow growing company into a much faster growing one.

Not only that, but if you extrapolate this out to the 10th year the company will have bought back 210m of its shares (10 years at 21m shares per annum x $4.08), there will be just 3m shares left earning $90m underlying profit each year so annual eps is $30 per share so those remaining 3 million shares would be pretty valuable eh :D

The obvious shortcoming of the above theoretical example is of course with ever increasing eps each year there's no way in the world the share price would stay at $4.08 per share, but therein lies my key point, for as long as this absurd share price situation lasts the buy-back process is tremendously value accretive for remaining shareholders. The longer the situation lasts the more value accretive it becomes.

To address your point Baa Baa - in my view the company was slow to adapt its business model away from mostly independent living and its development model isn't working especially well at present. They have been working on expanding to a more balanced product offer with care services and there's plenty of work to be done with overhauling their development model, no argument with that.

That said the numbers don't lie and notwithstanding the above they have been growing underlying eps on average at 15% per annum for the last 5 years which is faster than RYM at 14% per annum and as there's plenty of room for improvement with their business model and its execution so its quite likely there's plenty of scope to leverage upon their existing growth rate once things are back to normal. In the long run the market is a weighing machine, not a voting machine. MET the dark horse of the field, most likely to outperform the sector in the foreseeable future in my opinion.

[percy]

Change companies for a moment.
Acquisition ,share buyback or return capital to shareholders.
A number of years ago Ebos had too much cash/equity, or whatever you want to call it,but according to the then major shareholder, a lazy balance sheet.He wanted a capital return to shareholders.The then CEO thought they should keep the cash, in case another acquisition came along. Peter Kraus told Mark Waller,"Find a good acquisition that stacks up,and I will find you the capital." So capital was returned.Since that time Ebos have raised capital a number of times for some great acquisitions.[that stacked up].
Therefore acquisitions,share buy backs,and capital returns are all instruments directors can use.
History tells us what directors/companies made the right choices.

[winner69]

Phrase ‘Intrinsic value’ keeps popping up on this thread

One who ranted on ad nauseam about intrinsic value was Ron Brierley ....Brierley’s shareprice does not reflect ‘intrinsic value’ ... heard that so often it gave me the the heebie jeebies....did the same with GPG ...share price doesn’t reflect intrinsic value.

As BaaBaa says once a dog always a dog ...no matter how illogical or irrational it looks.

But as time as past maybe intrinsic Meant something different to Ron than it does to me.

[percy]

Phrase ‘Intrinsic value’ keeps popping up on this thread

One who ranted on ad nauseam about intrinsic value was Ron Brierley ....Brierley’s shareprice does not reflect ‘intrinsic value’ ... heard that so often it gave me the the heebie jeebies....did the same with GPG ...share price doesn’t reflect intrinsic value.

As BaaBaa says once a dog always a dog ...no matter how illogical or irrational it looks.

But as time as past maybe intrinsic Meant something different to Ron than it does to me.

Bit like us all,sometimes he was right,other times he was wrong.
Made big money when he was right,which usually covered the big loses when he was wrong.

[Beagle]

But you said you've got heaps Winner ? If its such a mange, flea and tick infested 3 legged half blind pig dog why do you have heaps ? I know you have a soft spot for looking after dog's of the furry variety that nobody else wants but this could be a much more expensive hobby unless you think you can lure someone in on the greater fool theory but so far you're doing a great job of trying to scare them away :confused:

Me...I just think a truck load of flea powder, a good wash, groom, some decent food and supplements and its show dog material ! Maybe never as good as the perfectly preened afghan hound that is RYM but you're not paying pedigree prices are you !

[Longhaul]

So the question again, why exactly has the cumulative wisdom of the market priced this as a dog for so long? There must be something. Smoke means fire
It is a perplexing question isn't it?

But on the other side, EQT/APVG - with all of their experience and knowledge - were happy to pay $7 per share for this dog. What did they know that the market doesn't? (Were they planning on giving the exec team the boot?)

[Baa_Baa]

It is a perplexing question isn't it?

But on the other side, EQT/APVG - with all of their experience and knowledge - were happy to pay $7 per share for this dog. What did they know that the market doesn't? (Were they planning on giving the exec team the boot?)

I think they're an (under NTA) asset stripper, buy the assets, sell most of them, make a profit, stuff the rest, sell the dregs for a few bucks, feck the shareholders big time. Corporate raider is a term I've heard used before. Like the 80's was.

[Beagle]

I think they're an (under NTA) asset stripper, buy the assets, sell most of them, make a profit, stuff the rest, sell the dregs for a few bucks, feck the shareholders big time. Corporate raider is a term I've heard used before. Like the 80's was.

Doesn't work if they're paying full NTA of $7 so that theory doesn't stand up to scrutiny.

[Raz]

Doesn't work if they're paying full NTA of $7 so that theory doesn't stand up to scrutiny.


Talk about a momentum shift in the thread, shame it lags behind the share price! :)

[winner69]

Real estate guys getting super excited

Country going to be over run with kiwis coming home

Property boom on way

Good for MET ...need all the help they can get

https://www.oneroof.co.nz/news/covid-19-desperate-to-buy-a-house-ex-pats-first-home-buyers-are-lining-up-37849

[Beagle]

Real estate guys getting super excited

Country going to be over run with kiwis coming home

Property boom on way

Good for MET ...need all the help they can get

https://www.oneroof.co.nz/news/covid-19-desperate-to-buy-a-house-ex-pats-first-home-buyers-are-lining-up-37849

I had that ex pat demand picture over a week ago from John Bayley's right hand man but many on here were highly sceptical, (you among them if my memory serves me correctly).

There isn't going to be a big fall in the real estate market overall in my opinion but some area's like Queenstown district properties will definitely struggle.

[Bjauck]

I had that ex pat demand picture over a week ago from John Bayley's right hand man but many on here were highly sceptical, (you among them if my memory serves me correctly).

There isn't going to be a big fall in the real estate market overall in my opinion but some area's like Queenstown district properties will definitely struggle. The emotive tabloid headlined "Desperate to buy a house" One Roof item was reporting what agents were saying. Real Estate agents are saying demand will take off. In my experience, agents have always said that you'll mss out if you do not act now. When agents tell the story, it is sometimes difficult to distinguish what is their puffed up faux demand from real demand.

That is not to say there will be no returning ex-pats. Some may already be cashed up. Some may be cashed up and without any need to find employment before buying a NZ house too. Those with a London property to sell before buying in NZ will not be in such a great position.

No doubt after the lockdown period there will be pent up demand to buy as well as pent up demand to sell houses.

[Beagle]

Tony Alexander has been around for a long time. I think he's on the money with his opinion. If one considers that any decline is probably only temporary the net effect on the DCF valuation of companies in the retirement sector is very small. https://tmmonline.nz/article/976516719/house-price-drops-are-short-lived-alexander?utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Monday+27+A pril+2020

I agree that many agents will tell you whatever is in their own best interests in terms of getting a commission which is why I only listen to the guys at the top that I know and respect and are giving me non vested interest information.

[Balance]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12327722

ASB Bank (one of the biggest home mortgage lenders in Auckland) forecasts 6% fall in house prices.

[winner69]

Tony Alexander has been around for a long time. I think he's on the money with his opinion. If one considers that any decline is probably only temporary the net effect on the DCF valuation of companies in the retirement sector is very small. https://tmmonline.nz/article/976516719/house-price-drops-are-short-lived-alexander?utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Monday+27+A pril+2020

I agree that many agents will tell you whatever is in their own best interests in terms of getting a commission which is why I only listen to the guys at the top that I know and respect and are giving me non vested interest information.

But the venerable Tony says “Previous recessions indicate house prices fall at the same time GDP declines, and start rising again as the economy starts growing,”

But I thought you were predicting a U type recession (rather than a V)

That ‘rising again’ might be a way off?

[Beagle]

But the venerable Tony says “Previous recessions indicate house prices fall at the same time GDP declines, and start rising again as the economy starts growing,”

But I thought you were predicting a U type recession (rather than a V)

That ‘rising again’ might be a way off?

Quantitative easing, interest rates at 100 year lows, LVR restrictions gone, ex pats coming home. We may see a fall of 5-10% in the 12 months ahead in my view. Too hard to predict further out than that but I think Queenstown district could come back a LOT more in the years ahead. Might be a good time to buy a nice lake view holiday home down there but I think one would be wise to give it a good 12-18 months to let the market find a new level before going bargain hunting. Market there might end up looking like Auckland water storage dams, half empty and dropping :eek2:

ARV have a village down there...hmmm

[Balance]

https://www.stuff.co.nz/life-style/homed/121227636/heres-why-house-prices-may-not-fall-as-far-as-you-expect

Many factors at play which will significantly cushion declines in house prices, view of Tony Alexander.

Those factors will not prevent house prices on average from falling over the remainder of this year in the face of heightened job insecurity and income losses for so many business owners.

But they will mitigate declines and set the scene for a 2021 recovery.

[Bjauck]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12327722

ASB Bank (one of the biggest home mortgage lenders in Auckland) forecasts 6% fall in house prices. The government will do its darnedest to limit house price declines.

As for the share market, ex-PM Bill English encapsulated the attitude. They would be upset if share prices do NOT decline by a large percentage. This attitude sums up NZ priorities. The value of NZers investment in NZ listed companies is more-or-less expendable. This is an easy target (if misplaced) for breast-beating over fairness. It is the value invested in residential property that is of national (and electoral) importance and priority.

[Scrunch]

The government will do its darnedest to limit house price declines.

As for the share market, ex-PM Bill English encapsulated the attitude. They would be upset if share prices do NOT decline by a large percentage. This attitude sums up NZ priorities. The value of NZers investment in NZ listed companies is more-or-less expendable. This is an easy target (if misplaced) for breast-beating over fairness. It is the value invested in residential property that is of national (and electoral) importance and priority.

Tend to agree. Before Covid, a fall in house prices would have been appreciated (by government) as it helped resolve a number of issues. After Covid the thing the government needs the most is a restoration of confidence in the economy. If they get that (which probably also gets the current crew relected), a recovery can start. A Key plank towards this future recovery would be stable house prices. Quite frankly I can't see people having a lot of confidence and therefore spending, if house prices are on a downward slide with no indicators of where the bottom is.

The problem is that the government doesn't always get what it wants, but if it does that should help MET.

[Beagle]

ASB expects 6% house price decline followed by a recovery https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12327722.

[traineeinvestor]

The emotive tabloid headlined "Desperate to buy a house" One Roof item was reporting what agents were saying. Real Estate agents are saying demand will take off. In my experience, agents have always said that you'll mss out if you do not act now. When agents tell the story, it is sometimes difficult to distinguish what is their puffed up faux demand from real demand.

That is not to say there will be no returning ex-pats. Some may already be cashed up. Some may be cashed up and without any need to find employment before buying a NZ house too. Those with a London property to sell before buying in NZ will not be in such a great position.

No doubt after the lockdown period there will be pent up demand to buy as well as pent up demand to sell houses.

+1

I'm an expat currently doing lockdown in NZ. Two agents cold called me last week to ask when (not if) I'm coming back here to live and whether I had found a home yet. Apparently they know something I don't. :confused: Both agents also assumed I was only interested in the expensive end of the market which would come as a shock to my creditors.

In addition to the points you mention, there's also the question of career and, for many, a non-Kiwi spouse, children settled in overseas schools and other ties that build up over the years.

I'm sure some will come back, maybe even a few more than normal, but expectations of a deluge of returning Kiwi's "desperate" to buy a house are wishful thinking on the part of the agents. Likewise, the idea of buying a house as a safe haven home for the future fails due to the combined effect of NZ's tax residency rules and the FIE regime.

What we may see is an increase in people looking to migrate to NZ from places like the PRC.

[King1212]

Nah.....we only take people with a lot of bacon in the fridge ....

[traineeinvestor]

Nah.....we only take people with a lot of bacon in the fridge ....

The $10 million needed for Investor Class 1 application may be an awful lot of money to some of us but there there are a lot of people who have that kind of wealth in the PRC.

[Balance]

The $10 million needed for Investor Class 1 application may be an awful lot of money to some of us but there there are a lot of people who have that kind of wealth in the PRC.

I can tell you from my Immigration Consultant contact (ex-MP) that NZ is last on the list for those from PRC with real serious money - their preferences being Canada & Australia, US, UK and NZ a very very very distant last.

[King1212]

Nah...$10 is nothing....bring more....

Our Papatūānuku is worthy...

[traineeinvestor]

I can tell you from my Immigration Consultant contact (ex-MP) that NZ is last on the list for those from PRC with real serious money - their preferences being Canada & Australia, US, UK and NZ a very very very distant last.

That sounds right – it's certainly consistent with all the discussions I have had with people in Hong Kong. Limited career and business opportunities, the FIE tax and education are regularly mentioned as reasons for preferring other destinations.

That said, it's a very big pool of eligible people and NZ's a very small economy – it only takes a tiny fraction of the people looking to exit China to decide to head down our way to make an impact. No idea whether it will happen or not.

[King1212]

We don't need expats with heaps of student loan or debts. Plz don't return....we need only people that have a lot of bacon in the fridge.....

[macduffy]

I can tell you from my Immigration Consultant contact (ex-MP) that NZ is last on the list for those from PRC with real serious money - their preferences being Canada & Australia, US, UK and NZ a very very very distant last.

Yes, but being cynical, if I was an immigration consultant I too would be doing everything I could to talk down the capital input required from my potential clients.

By the way, how did all this discussion get on MET's thread? Oh, house prices!!!

[peat]

https://thebfd.co.nz/2020/03/26/the-bfd-video-coronavirus-quarantine-choice-a-with-your-wife-and-kids-or-b/

LOL
he's quick.

[Beagle]

LOL
he's quick.

Smart man, anything's better than A, LOL

[carrom74]

FWIW- Metlifecare has been number 2 for two consecutive weeks on direct Broking”s Top 10 buys.So,someone is buying and as Balance rightly pointed out, the Arb”s aren’t selling and the volume is pretty low.

[winner69]

THEY MUST CONTINUE WITH THEIR CONTRACTUAL OBLIGATIONS ...and put us out of our misery

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MET/352211/321431.pdf

GO MET ....STICK IT TO THEM

[Raz]

+1

I'm an expat currently doing lockdown in NZ. Two agents cold called me last week to ask when (not if) I'm coming back here to live and whether I had found a home yet. Apparently they know something I don't. :confused: Both agents also assumed I was only interested in the expensive end of the market which would come as a shock to my creditors.

In addition to the points you mention, there's also the question of career and, for many, a non-Kiwi spouse, children settled in overseas schools and other ties that build up over the years.

I'm sure some will come back, maybe even a few more than normal, but expectations of a deluge of returning Kiwi's "desperate" to buy a house are wishful thinking on the part of the agents. Likewise, the idea of buying a house as a safe haven home for the future fails due to the combined effect of NZ's tax residency rules and the FIE regime.

What we may see is an increase in people looking to migrate to NZ from places like the PRC.

Yeah its all talk. I have also had several agents contact me, friend of a friend said I had left LA, they do not know my NZ property interest are in Trusts etc so they are scouting around for business. I know a lot of ex-pats that have come back for the relative safety..for now...an an entirely different issue to settle back here when the big money will always be overseas. Only a very small group are in a independent financial position to do just that.

[Raz]

THEY MUST CONTINUE WITH THEIR CONTRACTUAL OBLIGATIONS ...and put us out of our misery

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MET/352211/321431.pdf

GO MET ....STICK IT TO THEM

Good and very clear notice.

[Gerald]

" Under New Zealand law, an invalid termination is treated as a ‘repudiation’ of the contract enabling the non-defaulting party to elect to either (i) cancel the contract and seek damages or (ii) continue with the contract and require the defaulting partly to perform its obligations. "

Anyone know what 'damages' would look like? Might cover those Chapman fees :cool:

[Balance]

" Under New Zealand law, an invalid termination is treated as a ‘repudiation’ of the contract enabling the non-defaulting party to elect to either (i) cancel the contract and seek damages or (ii) continue with the contract and require the defaulting partly to perform its obligations. "

Anyone know what 'damages' would look like? Might cover those Chapman fees :cool:

Does not look like MET is going for damages - it is going for specific performance, for the $7.00 takeover offer to go ahead.

[allfromacell]

Looks like they'er out completely, clearly they have no intention of going ahead.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MET/352213/321435.pdf

[Balance]

Looks like they'er out completely, clearly they have no intention of going ahead.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MET/352213/321435.pdf

That’s in line with their termination notice. They could hardly do otherwise, could they?

[JohnnyTheHorse]

I encourage everyone to read the termination notice from EQT. My initial thoughts are that irrespective of everything else, the wage subsidy application will hold up in court (allowing legal termination of the contract).

Either EQT or the board are in big trouble! Either way, the lawyers are going to be doing well.

[jonu]

I'm not sure which way this reads for the share price.

On one hand EQT is out and presumably the heavy selling will stop. On the other hand they have fully committed to exit and have taken the risk of hugely increasing their losses if they are to be made to go through with it. There is going to be blood on the floor by the end of it.

[sb9]

I encourage everyone to read the termination notice from EQT. My initial thoughts are that irrespective of everything else, the wage subsidy application will hold up in court (allowing legal termination of the contract).

Either EQT or the board are in big trouble! Either way, the lawyers are going to be doing well.

Unfortunately only winners out of these corporate litigation wars are lawyers....

[traineeinvestor]

Does not look like MET is going for damages - it is going for specific performance, for the $7.00 takeover offer to go ahead.

Which, I assume, means no dividend and no share buyback until this is resolved as per the original terms of offer? But a complex case like this can drag on for years (including appeals).

[King1212]

Well..I see it as positive...all behind us now...MET can concentrate with thier business and NTA $7....even 30% off still $5.60

[Longhaul]

I encourage everyone to read the termination notice from EQT.

Where can we find this? Nevermind, I see it's on NZX.

[winner69]

I encourage everyone to read the termination notice from EQT. My initial thoughts are that irrespective of everything else, the wage subsidy application will hold up in court (allowing legal termination of the contract).

Either EQT or the board are in big trouble! Either way, the lawyers are going to be doing well.

I reckon the EQT letter is much better than MET’s response

Seeing MET haven’t done much about FY21 and FY22 numbers suppose EQT had to resort to the Forsythe Barr -


Forsyth Barr published a research note dated 22 April 2020, which stated among other things: “Our scenario is that new sales and resales are very modest, if not non-existent over the first six months post commencement of the Level 4 lockdown and we have assumed development activity remains stalled over this period as well.” Forsyth Barr has commensurately reduced their forecast for Metlifecare’s normalised profit for FY20 and FY21 by 19.9% and 28.7% respectively.

That’s one heck of drop in profit forecasts

[dabsman]

So can someone explain to me how this all works:

MET go to court and lose - I am happy as I think there is lots more value in MET than $7 in the medium term and am happy to hold long term particulatly after selling at $6.91 and buying back in the $3's.
MET go to Court and win - I am happy as I get $7 which is a 100% profit in circa 1 year lets say

The thing I dont know about is lets say this takes a year. How is it then valued with maybe 3 dividends due (we forgo 1 in the sale), development completion, revaluation, profit apportionment etc etc. If they are forced to buy in a years time do we get say $8 as there is another years profit and dividends etc etc.

This will get really messy. It is sort of like begging an ex to come back after she moved in with someone else - sort of sad and will never end well

[macduffy]

The thing I dont know about is lets say this takes a year. How is it then valued with maybe 3 dividends due (we forgo 1 in the sale), development completion, revaluation, profit apportionment etc etc. If they are forced to buy in a years time do we get say $8 as there is another years profit and dividends etc etc.

That depends on the state of the market in a year's time and who, if anyone, sees MET as an attractive takeover proposition. ie who knows the future?

:mellow:

[Balance]

So can someone explain to me how this all works:

MET go to court and lose - I am happy as I think there is lots more value in MET than $7 in the medium term and am happy to hold long term particulatly after selling at $6.91 and buying back in the $3's.
MET go to Court and win - I am happy as I get $7 which is a 100% profit in circa 1 year lets say

The thing I dont know about is lets say this takes a year. How is it then valued with maybe 3 dividends due (we forgo 1 in the sale), development completion, revaluation, profit apportionment etc etc. If they are forced to buy in a years time do we get say $8 as there is another years profit and dividends etc etc.

This will get really messy. It is sort of like begging an ex to come back after she moved in with someone else - sort of sad and will never end well

Commercial disputes happen all the time - that's what the law and dare I write, lawyers and judges are for.

Let the law takes its course or they can quietly negotiate and settle out of court. Interesting enough, judges usually urge parties to settle out of court if possible.

[Sir Ten]

Proper cluster this one. I bought the arbitrage around $5/share and find myself in no man's land...

The MAC is clearly up for legal debate and interpretation... however the prescribed occurrences argument and poor response to EQT's info requests reflect poorly on MET.

[Beagle]

Commercial disputes happen all the time - that's what the law and dare I write, lawyers and judges are for.

Let the law takes its course or they can quietly negotiate and settle out of court. Interesting enough, judges usually urge parties to settle out of court if possible.

What deposit if any have EQT paid in this process ? MET will have incurred substantial costs already. Are there any funds held in trust or does this just turn into one big legal fight that could go on for years and MET are expending millions in legal fees on top of millions already spend in this process ? Possession is often 9 /10th's of the law and I fear unless there is access to some deposit funds EQT have paid there could be a LOT of money going out the door with a very uncertain outcome.

The only thing absolutely certain here is the lawyers will do extremely well out of this as its FAR from crystal clear.

[allfromacell]

I don't know how much this could cost but say it ended up costing $0.20 per share in legal fees, the potential reward would surely be worth the cost if METs legal advice is solid.

[King1212]

Bring it on..I am ready to pay $2 pershare..that will bring the NTA to $5

[Ecks]

MET pulling funds (~ NZ$1m+) from taxpayers pockets when it's mostly business as usual will not bode well for them. I think this decision by MET triggers the MAC clause.
https://services.workandincome.govt.nz/eps/search



Business Name
Number of employees paid
Total amount paid
Last updated


METLIFECARE LIMITED
139
$962,966.40
22/04/2020


METLIFECARE KAPITI LIMITED
13
$80,066.40
22/04/2020


METLIFECARE POWLEY LIMITED
68
$415,761.60
22/04/2020


METLIFECARE OAKRIDGE LIMITED
5
$32,318.40
22/04/2020


METLIFECARE PINESONG LIMITED
60
$384,991.20
22/04/2020




Others in the retirement industry that have taken the subsidy

SUMMERSET MANAGEMENT GROUP LIMITED
1344
$8,870,544.00
22/04/2020





OCEANIA HEALTHCARE LIMITED
266
$1,768,008.00
22/04/2020




It seems Ryman didn't take the government handout.

Any corporate arbitration never ends well for anyone but the lawyers whom I find encourage conflict (personal experience)

DISC: Holding for long term (mid 3's buyer with more buy orders @ $3.8 and lower)

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12327909

It looks highly adversarial to me. Break fee is $14.91m incl GST which is meant to represent each parties costs in this matter.
My view is it could easily cost them double that again if they try and litigate this so perhaps $45m all up incl GST ($39m ex GST) which is 18.3 cps, (call it 20 cents).

My re-read of the scheme implementation agreement does not give me any comfort that any deposit has been paid.

As I said last week, it is best to only buy the amount of shares at the price you are prepared to pay as a long term investment assuming the takeover doesn't happen.
Updated, assume they burn 20 cents per value in litigation in this failed takeover and real estate falls 7.5%, (average of economists expectations).

This all sheets me back to just on $6.

[Ace]

I agree. Claiming the wage subsidy which required a 30% projected drop in revenue for a period and then claiming revenue is more or less the same within a 10% tolerance doesn’t look good. Granted the 30% drop could be for a month period as far as I’m aware. So which one is it? Every other point I’d say MET seems correct.

[Beagle]

Total wage subsidy claimed across all 26 subsidiary companies was $7.1m

This thing really is a cluster @#%&. Long term they will be fine but what a mess this takeover is.

[see weed]

Just my thoughts. How many 2WW vets in these homes? APVGL (BIDCO) EQT sold there 19% odd holding on ANZAC observed holiday 27/4/20? Property vals. drop? Maybe they were only buying in to close it down and have all that nice prime real estate to develope and sell to private home buyers? Maybe it was a good thing that deal fell through for the sake of the residence? Maybe I am barking up the wrong tree? Who knows?

[sb9]

Total wage subsidy claimed across all 26 subsidiary companies was $7.1m

This thing really is a cluster @#%&. Long term they will be fine but what a mess this takeover is.

If I'm a holder with bit of safety margin, I would get out and watch the drama from sidelines...

[dabsman]

You only need to show revenue drop by 30% in one month. Surely all the deferred sales in April (i.e. contracted but unable to settle) would show a 30% reduction in revenue?

[winner69]

Just my thoughts. How many 2WW vets in these homes? APVGL (BIDCO) EQT sold there 19% odd holding on ANZAC observed holiday 27/4/20? Property vals. drop? Maybe they were only buying in to close it down and have all that nice prime real estate to develope and sell to private home buyers? Maybe it was a good thing that deal fell through for the sake of the residence? Maybe I am barking up the wrong tree? Who knows?

Seeweed ...bidco didn’t have (m)any to sell ...that notice is about the Super Funds shares (pledged to vote yes)

[Beagle]

You only need to show revenue drop by 30% in one month. Surely all the deferred sales in April (i.e. contracted but unable to settle) would show a 30% reduction in revenue?

That's my read on it too. I don't think there's anything illegal about claiming the wage subsidy. Quite probably disingenuous of EQT to claim that there is. I note in the various documents released to the NZX today MET took legal advice on their eligibility.

[Ace]

That's my read on it too. I don't think there's anything illegal about claiming the wage subsidy. Quite probably disingenuous of EQT to claim that there is. I note in the various documents released to the NZX today MET took legal advice on their eligibility.

Yeah I don’t think there’s anything wrong with it either although I think EQT will use that if MET claimed and required the wage subsidy then it implies that their business is materially impacted financially and without the subsidy -7.1m would be enough for the underlying business to trigger MAC, and surely this will have a material impact in the future right? The saving grace is that the impact is due to general economic conditions and law.

EDIT: and as you say they have legal advice from an experienced team so I’m sure it’s all taken care of! Other thing is though, EQT might have the same haha.

[Longhaul]

That's my read on it too. I don't think there's anything illegal about claiming the wage subsidy. Quite probably disingenuous of EQT to claim that there is. I note in the various documents released to the NZX today MET took legal advice on their eligibility.

It would seem impossible that MET didn't suffer a 30% drop in revenue for the month, and that they would have applied for the subsidy without legal advice. This issue is a it of a red herring IMHO.

The key argument that the courts will have to decide is whether COVID-19 is the cause of the MAC.

Flipping a coin might give us the most informed answer at the moment.

[mp52]

Not only revenue down but significant additional operating costs to rest homes bought on by the lockdown including cover/overtime for potentially sick staff, additional gate security, technology purchases to facilitate family contact with residents etc. As these are all measures to provide a high margin of safety for the most at risk group in the pop I can’t see the govt having an issue with the subsidy.

[King1212]

Uh..... people sold...can see all the negatives coming...

Bring in bull....to stir up more. ..we need a boil up!

[Bjauck]

It would seem impossible that MET didn't suffer a 30% drop in revenue for the month, and that they would have applied for the subsidy without legal advice. This issue is a it of a red herring IMHO.

The key argument that the courts will have to decide is whether COVID-19 is the cause of the MAC.

Flipping a coin might give us the most informed answer at the moment. Yes I agree. I think the case may turn on whether the "change in law" can be triggered as a successful "carve out" under the MAC clause. Are the consequences for MET as a result of the epidemic or the "change in law?"

Obviously the change in law was brought about in responding to the epidemic. Also, if there had been no change in law, the result of the epidemic may have brought about even greater adverse consequences for MET. As there would have been material adverse consequences for MET, whether or not there had been changes in law, does that mean that the epidemic was the actual cause of the MAC?

So are the circumstances that brought about the "change in law" legally relevant in enforcing the scheme of arrangement?

[peat]

Also, if there had been no change in law, the result of the epidemic may have brought about even greater adverse consequences for MET. As there would have been material adverse consequences for MET, whether or not there had been changes in law, does that mean that the epidemic was the actual cause of the MAC?



Ya cant argue that line - ifs and maybe's and would haves are irrelevant. No one knows what might happen


Its funny I reckon because anyone drafting a MAC would almost certainly wish and intend to cover an event like this because asset prices in general have dropped - we all know that from our portfolios (except Beagle).
And yet its not at all clear that this event is covered , so the offeror (now withdrawing) did a real poor job of writing the SIA MAC clause. I wonder if its the same legal firm now arguing on their behalf and this of course implies vested interest in their position which means they may not truly believe it but be forced to argue it otherwise it reflects poorly on them. ANyone know if its the same firm?



So are the circumstances that brought about the "change in law" legally relevant in enforcing the scheme of arrangement?




Do we go down the proximate cause root on the legal argument as per standard insurance? . Its usually the closest cause in that case which in my book points to the law change

[Bjauck]

Maybe it is relevant that a “state of national emergency” was declared. Is that actually a “change of law” or actually just working within the existing legal framework to combat the emergency as necessary. The cause of the emergency and/or the previously legally countenanced declaration of emergency powers then being proximate cause?

So the use of the emergency powers would neither be “general economic conditions” nor a change of law, as the ability to use emergency powers had previously been part of the NZ constitutional and legal system. The agreement could then be avoided as neither of these two carve outs from the MAC would apply.

[Longhaul]

I'm sure I'm not alone here, but why does MET persistently trade below NTA by such a wide margin (currently at 59% of NTA)?

I wish I had some insight into the decision making of those who keep the price where it is. It baffles me why anyone would sell, unless they had no other option.

If I was sniffing around as a potential buyer, it would be in my interest to keep the price as low as possible. Does anyone else think this is what's happening here?

[Cyclical]

DISC: Holding for long term (mid 3's buyer with more buy orders @ $3.8 and lower)

Just dropped 2 thirds of my holding to bank the profit while I still have one. Doubtless long term this one has potential, but not sure I've got the patience for a long drawn out, costly and likely ugly legal battle hampering the company's direction when there may well be other bargains coming up, so elected to free up some powder. Like you Ecks, if it gets back to $3.80 or something, I'll probably load up again. As it stands, it still makes up a good chunk of my portfolio.

[Ace]

Maybe it is relevant that a “state of national emergency” was declared. Is that actually a “change of law” or actually just working within the existing legal framework to combat the emergency as necessary. The cause of the emergency and/or the previously legally countenanced declaration of emergency powers then being proximate cause?

So the use of the emergency powers would neither be “general economic conditions” nor a change of law, as the ability to use emergency powers had previously been part of the NZ constitutional and legal system. The agreement could then be avoided as neither of these two carve outs from the MAC would apply.

I think we are reading into it too much. Generally a change in law is secondary to a circumstance anyway. If going by that logic a change in law can always easily be used as a scapegoat to trigger a MAC by looking at what caused the change in law. End of the day regardless of how, the law was changed and I’d think that’s what it comes down to.

As far as I’m aware and to my limited knowledge, the covid laws are new? And even the alert level system and its implications.

[Longhaul]

As far as I’m aware and to my limited knowledge, the covid laws are new? And even the alert level system and its implications.

It looks like it - COVID-19 Response (Urgent Management Measures) Legislation Bill (https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/document/BILL_96378/covid-19-response-urgent-management-measures-legislation)

[macduffy]

I'm sure I'm not alone here, but why does MET persistently trade below NTA by such a wide margin (currently at 59% of NTA)?

I wish I had some insight into the decision making of those who keep the price where it is. It baffles me why anyone would sell, unless they had no other option.

If I was sniffing around as a potential buyer, it would be in my interest to keep the price as low as possible. Does anyone else think this is what's happening here?

That question has intrigued investors for longer than many of us can remember. The usual answer has been the perceived lower quality of some of their buildings, coupled with "leaky building" issues. I doubt that there has been a long term intention to keep the price low.

[Bjauck]

I think we are reading into it too much. Generally a change in law is secondary to a circumstance anyway. If going by that logic a change in law can always easily be used as a scapegoat to trigger a MAC by looking at what caused the change in law. End of the day regardless of how, the law was changed and I’d think that’s what it comes down to.

As far as I’m aware and to my limited knowledge, the covid laws are new? And even the alert level system and its implications.
The change of law would be a carve out and thus neutralise the MAC event. What I am suggesting is that the emergency powers were a part of the NZ legal system and did not need a change of law to enable them. Consequently I am suggesting that the MET directors cannot rely on a change of law to defeat the MAC trigger. The restrictions placed on Metlifecare (and others) are as a result of exisiting law.

The Health Act had already allowed for quarantining and isolation. Amongst others, there was also the Epidemic Preparedness Act 2006 http://legislation.govt.nz/act/public/2006/0085/latest/whole.html#DLM404483

‘The powers under New Zealand's emergency legislation did not require new Bills to be passed. The existence of several statutes that make up the country's legislative framework were already in place, and were simply enacted”
https://www.newshub.co.nz/home/politics/2020/03/government-s-covid-19-emergency-powers-compared-to-1951-waterfront-dispute.html

The MET directors may have a chance relying on the “general economic conditions’ carve out. However on that front I think that they could well be defeated by the fact that emergency provisions of various Acts have been employed by the Government as a result of a health epidemic.

[Joshuatree]

worth going back to the beginning, heres an example questioning the discount way back then and sauces reasoning.

2011


Hi Michael,

I'd be very careful with this one

You have to consider the relative economics. Metlifecare's assets have been creating significant losses for shareholders, therefore the market is discounting them. This is the correct response from the market. The "valuations" mean a whole heap of nothing unless Metlifecare decides to sell their villages, and in that case they would still need someone in the market for an entire village to stump up that amount, or the valuation still means nothing. So basically, the NTA valuation you mention is information that is not as useful as it seems.

If I had a bank account with $1,000,000 cash balance (that could never be withdrawn) that was losing -5% a year, and I told you I had a registered valuation on the bank account identical to its NTA of $1,000,000 but I would kindly sell it to you at a 50% discount (i.e. $500,000). Would you jump at the opportunity? I think you would have to be pretty damn sure that bank account would return to +5% or more in a hell of a hurry before you got interested in buying my bank account at this "discounted" price.

RYMAN on the other hand makes an economic return of about 30% on all the money it retains in the business. That's a formidable return and one that Mr Market will quite rightly pay a premium for. If I told you I had a bank account with $1,000,000 in it returning $300,000 a year compounding annually, what would you pay me for THAT bank account? I suspect you might part with a fair bit more than $1,000,000? Well so would the general market - hence the price offered for RYM shares.

Of course MET might turn its profitability around, in which case the current price might turn out to be a bargain. But there is a very good reason why MET is in the current situation its in. And that's because the business has performed very poorly. The opposite is true of RYM.

I think the time to get excited about a discount to net tangible assets is only when you have an insight into the business and its odds of achieving sound future economics i.e. profits and high, or at least adequate, returns on invested capital.

Cheers

Sauce

[Beagle]

The change of law would be a carve out and thus neutralise the MAC event. What I am suggesting is that the emergency powers were a part of the NZ legal system and did not need a change of law to enable them. Consequently I am suggesting that the MET directors cannot rely on a change of law to defeat the MAC trigger. The restrictions placed on Metlifecare (and others) are as a result of exisiting law.

The Health Act had already allowed for quarantining and isolation. Amongst others, there was also the Epidemic Preparedness Act 2006 http://legislation.govt.nz/act/public/2006/0085/latest/whole.html#DLM404483

‘The powers under New Zealand's emergency legislation did not require new Bills to be passed. The existence of several statutes that make up the country's legislative framework were already in place, and were simply enacted”
https://www.newshub.co.nz/home/politics/2020/03/government-s-covid-19-emergency-powers-compared-to-1951-waterfront-dispute.html



Extract from MET's response "Further, the level 4 lockdown restrictions impacting the operation of our business and most other businesses in New Zealand result from changes in law. These changes have been implemented through a number of new legislative instruments including the section 70(1)(f) Health Act Order made on 3 April 2020 (as amended on 22 April 2020), the section 70(1)(m) Health Act Order made on 25 March 2020, and the COVID-19 Response (Urgent Management Measures) Legislation Act 2020. There is no basis to suggest that these changes in general economic conditions and changes in law"

Amendments to the law are generally considered to be changes per se. (But who really knows how this will turn out and who is right or wrong and earlier today it was suggested a coin toss would give as good as likely an answer as anything else so that's what I did, tossed a $2 coin, heads the Scheme implementation agreement will go ahead and tails it won't...the coin came down tails).

Just as well I only bought enough at a price that I am happy to own long term.

[Longhaul]

worth going back to the beginning, heres an example questioning the discount way back then and sauces reasoning.

2011

Thanks Joshuatree, this Sauce character was a pretty clever condiment by the looks of things. Very helpful, even after 9 years!

[Bjauck]

Extract from MET's response "Further, the level 4 lockdown restrictions impacting the operation of our business and most other businesses in New Zealand result from changes in law. These changes have been implemented through a number of new legislative instruments including the section 70(1)(f) Health Act Order made on 3 April 2020 (as amended on 22 April 2020), the section 70(1)(m) Health Act Order made on 25 March 2020, and the COVID-19 Response (Urgent Management Measures) Legislation Act 2020. There is no basis to suggest that these changes in general economic conditions and changes in law"

Amendments to the law are generally considered to be changes per se. (But who really knows how this will turn out and who is right or wrong and earlier today it was suggested a coin toss would give as good as likely an answer as anything else so that's what I did, tossed a $2 coin, heads the Scheme implementation agreement will go ahead and tails it won't...the coin came down tails).

Just as well I only bought enough at a price that I am happy to own long term.

I bought to be a long term holder as well!

I am sure there is plenty for the lawyers to argue over until the A2 dairy cows come home!

The 2006 Epidemic Preparedness Act had already allowed for the amendment of primary legislation by Executive order in order to manage outbreaks of infectious disease.

The use of existing legislation containing emergency provisions may have been enough to materially impact MET even without any subsequent legislative changes.

Disc: ATM holder!

[percy]

Thanks Joshuatree, this Sauce character was a pretty clever condiment by the looks of things. Very helpful, even after 9 years!

He was brilliant.
Sorely missed.

[King1212]

So long master Beagle still on the ship....I will be onboard..even as a janitor....I like the job title...lol

[Beagle]

Originally Posted by Sauce
Hi Michael,

I'd be very careful with this one

You have to consider the relative economics. Metlifecare's assets have been creating significant losses for shareholders, therefore the market is discounting them. This is the correct response from the market. The "valuations" mean a whole heap of nothing unless Metlifecare decides to sell their villages, and in that case they would still need someone in the market for an entire village to stump up that amount, or the valuation still means nothing. So basically, the NTA valuation you mention is information that is not as useful as it seems.

If I had a bank account with $1,000,000 cash balance (that could never be withdrawn) that was losing -5% a year, and I told you I had a registered valuation on the bank account identical to its NTA of $1,000,000 but I would kindly sell it to you at a 50% discount (i.e. $500,000). Would you jump at the opportunity? I think you would have to be pretty damn sure that bank account would return to +5% or more in a hell of a hurry before you got interested in buying my bank account at this "discounted" price.

RYMAN on the other hand makes an economic return of about 30% on all the money it retains in the business. That's a formidable return and one that Mr Market will quite rightly pay a premium for. If I told you I had a bank account with $1,000,000 in it returning $300,000 a year compounding annually, what would you pay me for THAT bank account? I suspect you might part with a fair bit more than $1,000,000? Well so would the general market - hence the price offered for RYM shares.

Of course MET might turn its profitability around, in which case the current price might turn out to be a bargain. But there is a very good reason why MET is in the current situation its in. And that's because the business has performed very poorly. The opposite is true of RYM.

I think the time to get excited about a discount to net tangible assets is only when you have an insight into the business and its odds of achieving sound future economics i.e. profits and high, or at least adequate, returns on invested capital.


That might have been an astute observation 9 years ago however, the reality today is SUM, RYM and MET all produce underlying eps in the range of 40-50 cps. RYM was going to be just on 50 cents for FY20 but has withdrawn guidance altogether, suggesting it will be considerably less, SUM was going to be about $106m underlying, unchanged in 2020 compared to FY19 which is 46 cps but has also withdrawn guidance altogether suggesting it will also be materially less.

MET the only one of these 3 to have issued fresh FY20 guidance inclusive of the effects of Covid 19 has at its mid-point $86.5m underlying profit = 40.5 cents.
In my opinion its crystal clear all companies in this sector will be materially affected so its likely the underlying eps of these 3 won't be materially dissimilar to each other in FY20, certainly nowhere as materially different to explain the vast gulf in their respective share prices.

Turning to growth, MET has been growing faster than RYM over the last 5 years.
In the long run the market is a weighing machine not a voting machine. You can pay $4.17, $6.23 or $12.70 and you are getting ostensibly the same earnings. RYM achieves this because its business model is superior off $4.50 assets, SUM about $5 and MET about $7 NTA.

At the end of the day when its all said and done, its the eps that counts and if a $4.17 share gets you the same earnings and a better growth rate as a $12.70 share I am going to choose the $4.17 share every single time because quite clearly you can own 3 of them for the same price and still get change and therefore earn three times as much eps. I suppose being a bean counter means to me, what really matters is earnings. Others might invest for other reasons, like brand value or feel good factor because they won some Readers digest award and that's their prerogative and good luck to them.

[Cyclical]

Ok, let's assume for a bit that MET is being candid and their profit guidance is what one would expect and that we may see a 5 to 15% hit to property values over the next 2 years or so before a recovery. When you stump up $1.5b for a company, does the temporary decline in NTA really matter that much? One would assume they weren't planning to be in this game short term? So why do they really want to pull the pin? Is it because they offered too much in the first place (which was perhaps at the top end when times were good)? Do they no longer have the funding available, or has the funding suddenly become a lot harder to get? Did they stuff up and commit to something they now regret for some reason? Have they got other more pressing concerns closer to home? Or are they looking to beat it down a couple a hundred mil rather than wear the loss on the balance sheet? It just seems to be me they are using pretty lame excuses to try back out, hence my questioning the true motive.

[JeremyALD]

To be honest I'd rather MET just sue APVG for damages and continue on with the business. I'm happy to hold for 5 years plus and I'm sure we'll see a good return over that time horizon. I kind of feel sorry for customers and staff if they are left with a company that didn't want them or the business.

[limmy]

To be honest I'd rather MET just sue APVG for damages and continue on with the business. I'm happy to hold for 5 years plus and I'm sure we'll see a good return over that time horizon. I kind of feel sorry for customers and staff if they are left with a company that didn't want them or the business. I'm happy to hold long term also, along with my RYM and SUM.

[Cyclical]

To be honest I'd rather MET just sue APVG for damages and continue on with the business. I'm happy to hold for 5 years plus and I'm sure we'll see a good return over that time horizon. I kind of feel sorry for customers and staff if they are left with a company that didn't want them or the business.

I'm inclined to agree. Try recoup the costs and a bit more and get back to running the business and paying dividends and the share buy back scheme or whatever. Dragging a legal battle out for a long time isn't going to do anyone any favours (apart from the Lawyers). Better to get back on track and start making themselves look attractive for the next taker candidate.

[nztx]

I'm happy to hold long term also, along with my RYM and SUM.

Ditto with MET here too..

[Bjauck]

I'm inclined to agree. Try recoup the costs and a bit more and get back to running the business and paying dividends and the share buy back scheme or whatever. Dragging a legal battle out for a long time isn't going to do anyone any favours (apart from the Lawyers). Better to get back on track and start making themselves look attractive for the next taker candidate. For reasons previously posted they may be on a hiding to nowhere even if they try to just recoup costs. If the buyer is now reluctant, why go to court or try to force through the sale during an epidemic. Would it be in the interests of the residents or the company itself to have a reluctant owner who may try to flip it as quickly as possible?

Perhaps best to draw a line under the affair and concentrate on residents wellbeing and the health of the business?

[winner69]

The guys at NZ Superfund must be gutted their get out jail card is no more. No way will this deal go ahead.

They’re stuck with this dog for longer ...hopefully not forever

Got most of their shares at $3.53 in 2013 (as did Infratil). Infratil sold out for $5.61 in 2017, discount to prevailing share price which was around $6.00.

NZ Super hung in there, no doubt hoping that all the great stuff MET we’re doing would reward them.

Well that $6 is now $4.17 ....can see why they’ll be gutted not getting the $7.00

The NZ Superfund return on their MET investment has been about 2.5% pa plus miserly dividends. MET a real dog and drag on their overall returns.

Probably be lucky to make 2.5% pa over the next few years ....so probably again touting MET around the world in the hope of finding another white knight to end their misery.

[limmy]

What happened to that first buyer, who offered $6.50 ? Will they be likely to come back with another offer, perhaps a bit less than the original $6.50 ? Say $6.00 ?

[Beagle]

What happened to that first buyer, who offered $6.50 ? Will they be likely to come back with another offer, perhaps a bit less than the original $6.50 ? Say $6.00 ?

That was EQT but most people seem to have forgotten the fact that there were two other parties interested.

[moimoi]

That was EQT but most people seem to have forgotten the fact that there were two other parties interested.

Both of whom may well be no longer interested for the same reason that EQT is no longer interested...

[Balance]

That was EQT but most people seem to have forgotten the fact that there were two other parties interested.

You are a man of infinite patience, Beagle - if someone cannot be bothered checking on and following the sequence of events in a takeover, I certainly cannot be bothered replying!


Both of whom may well be no longer interested for the same reason that EQT is no longer interested...

They will be back - it's all about the price.

There's any number of deals which have fallen over as the economic landscape has changed out there and what made sense pre-covid19 does not make sense anymore - eg. Boeing/Embraer $4.2 Billion deal.

Other deals still make sense but buyers are of course going to try and renegotiate the price if they can. In EQT's shoes, I would do exactly the same.

[dubya]

Both of whom may well be no longer interested for the same reason that EQT is no longer interested...
That could very well be the case, but I guess time will tell.
I would like to know who the two other parties were though. Maybe that will be disclosed sometime soonish... ?

Possibly another NZ listed Retirement Village operator could be interested in expanding their operation by buying existing at well below NAV for instant expansion and associated synergies (just like Arvida did last year) versus building new (with the associated risks).
There are just soooo many interesting possibilities. Glad to be along for the ride.
Imo I don't think this is a 'dog' company at all.
Disc: Hold MET, OCA, ARV

[Balance]

That could very well be the case, but I guess time will tell.
I would like to know who the two other parties were though. Maybe that will be disclosed sometime soonish... ?

Possibly another NZ listed Retirement Village operator could be interested in expanding their operation by buying existing at well below NAV for instant expansion and associated synergies (just like Arvida did last year) versus building new (with the associated risks).
There are just soooo many interesting possibilities. Glad to be along for the ride.
Imo I don't think this is a 'dog' company at all.
Disc: Hold MET, OCA, ARV

Nothing stays cheap forever and Metlife's takeover offer of $7.00, after MET spent several months at around $4.20 last year is testimony to that fact.

Summerset was similarly sold down around the same period but interesting enough, EQT chose MET to buy. Guess why?

[JeremyALD]

What happened to that first buyer, who offered $6.50 ? Will they be likely to come back with another offer, perhaps a bit less than the original $6.50 ? Say $6.00 ?

If superannuation fund ect were not happy with $6.50 before, I struggle to see why they accept anything lower than that given New Zealand looks well placed in the Covid crisis.

[King1212]

https://www.odt.co.nz/business/property/dunedin-buyers-lined-waiting-lockdown-lift

Low interest... possible negative interest...will only push our assests higher..higher and higher..

[nztx]

https://www.odt.co.nz/business/property/dunedin-buyers-lined-waiting-lockdown-lift

Low interest... possible negative interest...will only push our assests higher..higher and higher..

Interesting times coming up indeed .. maybe a selective temporary residential property slump in only some areas ?

[winner69]

Those old quotes from Sauce that somebody put up are spot on as to why MET invariably trades below NTA

MET’s returns on equity and or assets is much lower than SUM and RYM

In METs case returns are abysmally low and probably don’t cover their cost of capital.

As Sauce said they are not adding economic value .....and when that happens real economic returns are negative

Real investment managers who do real proper assessments look at businesses this way ...not using fandangled things like underlying earnings ....and that’s possibly one reason why MET trades at less than book value. The difference between the two is what the market thinks how much economic value is going to be destroyed into the future......sauce put it more succinctly

But whatever we hope a greater fool rides into town and puts us out of our misery at $6.50

[Beagle]

You are a man of infinite patience, Beagle - if someone cannot be bothered checking on and following the sequence of events in a takeover, I certainly cannot be bothered replying!



They will be back - it's all about the price.

There's any number of deals which have fallen over as the economic landscape has changed out there and what made sense pre-covid19 does not make sense anymore - eg. Boeing/Embraer $4.2 Billion deal.

Other deals still make sense but buyers are of course going to try and renegotiate the price if they can. In EQT's shoes, I would do exactly the same.

Thanks mate, but certainly not infinite. Its was just a one line response mainly for the purpose of reminding others there were two other interested parties.
Most seem to think those other two have disappeared permanently. I think if EQT don't come back one of them will at some stage.

Interestingly EQT think their asset base might have shrunk by $200m, say $1 a share on 213m shares = $6.

[44wishlists]

Anyone knows if once the law case starts, can other party (or parties) still come up with an offer?

[winner69]

Remember the good ol days when MET had an offer from a ’credible’ party and 2 others were interested and the Board proudly told us that their valuation models even spat out $8 plus

Bozos all of them ...I’d accept $5.50 if anybody was actually keen of acquiring MET ...fleas and all.

[dobby41]

Anyone knows if once the law case starts, can other party (or parties) still come up with an offer?

They can mutually settle out of court at any stage.

[Balance]

Remember the good ol days when MET had an offer from a ’credible’ party and 2 others were interested and the Board proudly told us that their valuation models even spat out $8 plus

Bozos all of them ...I’d accept $5.50 if anybody was actually keen of acquiring MET ...fleas and all.

I don't get your reasoning, W69 - one of those rare times.

You could have sold at $6.90 when the Arb funds were buying with their ears pinned back.

Why didn't you?

[winner69]

I don't get your reasoning, W69 - one of those rare times.

You could have sold at $6.90 when the Arb funds were buying with their ears pinned back.

Why didn't you?

Sorry mate .....did sell out high

In again low for a punt ... infinite patience not my game with MET

Maybe a greater fool will turn up with $6.50 ...hope so, that would be good.

[Balance]

Sorry mate .....did sell out high

In again low for a punt ... infinite patience not my game with MET

Maybe a greater fool will turn up with $6.50 ...hope so, that would be good.

Haha - fair enough.

I can see $5.50 to $6.00 easily, not $6.50.

Was talking to a Sydney based investment banker who worked on a takeover deal* before Covid-19 lockdown and he was suitably cheesed off that the deal was put on hold after spending days and weeks on the deal. Well, he has just been told to go and renegotiate on the price. Let's see what happens.

* I haven't got the foggiest idea which company.

[dibble]

Just as an aside, should MET unexpectedly win a court case, does anyone with better legal nous than I know how that gets enforced with a foreign company, ie could they just walk (swim) away or perhaps plead they no longer have the liquidity etc leaving MET with a moral victory and a legal bill?

[Balance]

Just as an aside, should MET unexpectedly win a court case, does anyone with better legal nous than I know how that gets enforced with a foreign company, ie could they just walk (swim) away or perhaps plead they no longer have the liquidity etc leaving MET with a moral victory and a legal bill?

Possible but EQT is part of multi-billion fund. Usually zero debt in the main holding company.

[winner69]

If anybody interested in EQT here’s the last Annual Report

https://www.eqtgroup.com/globalassets/shareholder-relations/ar-2019/eqt-ab-annual-report-2019.pdf

[winner69]

MET FY20 a bit of a worry

Things apparently were trucking along nicely until C19 so would have expected to have underlying earnings in H220 of about $53m (last year plus a bit)

But that guidance implies that H220 is only to be $43m

Sort of says that C19 (and other factors?) has impacted the last quarter (June) by about $10m ... many adverse factors really hurting the sector as a whole ...ouch

One would think that those impacts will carry over to FY21 which means FY21 could be $25m to $30m lower than FY20.....underlying earnings could fall to around $55m even if things pick up a bit next year.

MET without corporate activity not cheap at the moment ......let us all hope that reason will prevail with EQT or a greater fool rides into town and gives us 6 bucks or more.

[Leftfield]

MET FY20 a bit of a worry.....

MET without corporate activity not cheap at the moment ......let us all hope that reason will prevail with EQT or a greater fool rides into town and gives us 6 bucks or more.

Well said Winner. Many headwinds for MET.

Investing in the hope of a take-over (greater fool) or successful legal action is not a great strategy IMHO.

(Disc - not holding.)

[winner69]

Well said Winner. Many headwinds for MET.

Investing in the hope of a take-over (greater fool) or successful legal action is not a great strategy IMHO.

(Disc - not holding.)


Yep, not always the best strategy but it worked with MET before

But watching the squiggly line on the chart closely and ready to react

[bull....]

always said met was the bounce trade only

[Beagle]

MET FY20 a bit of a worry

Things apparently were trucking along nicely until C19 so would have expected to have underlying earnings in H220 of about $53m (last year plus a bit)

But that guidance implies that H220 is only to be $43m

Sort of says that C19 (and other factors?) has impacted the last quarter (June) by about $10m ... many adverse factors really hurting the sector as a whole ...ouch

One would think that those impacts will carry over to FY21 which means FY21 could be $25m to $30m lower than FY20.....underlying earnings could fall to around $55m even if things pick up a bit next year.

MET without corporate activity not cheap at the moment ......let us all hope that reason will prevail with EQT or a greater fool rides into town and gives us 6 bucks or more.

The whole sector will be affected. Some companies are trading at a deep discount to asset backing which reflects this and others are trading at an unwarranted premium. OCA also coming into contention with yesterday's fall as a value long term growth story.

For someone on the record as saying you have three times the position as last time you danced with this "dog" you're sure doing a good job of bagging it. Something doesn't add up .:confused:

[winner69]

The whole sector will be affected. Some companies are trading at a deep discount to asset backing which reflects this and others are trading at an unwarranted premium. OCA also coming into contention with yesterday's fall as a value long term growth story.

For someone on the record as saying you have three times the position as last time you danced with this "dog" you're sure doing a good job of bagging it. Something doesn't add up .:confused:

Just convincing myself that if the squiggly line starts falling I’ve got to get out and not be tempted to stay in because it could be a long term hold.

Only in in the hope of that $6 plus takeover

But nobody listens to me anyway

[Beagle]

I want some exposure in my portfolio to this sector. Thing is, if its not MET at a 40% discount to NTA or OCA at a 25% discount then all the others are trading at a premium to NTA, (significant premium to likely Covid 19 adjusted NTA), and for the life of me I cannot work out how that is warranted when we're already in a deep worldwide recession...so I will stay out of shares trading at prices that are not supported by the fundamental's.

I started buying at around the current level, low $4's in late 2019 well before any talk of a takeover. I see long term value here even if others don't.

[bull....]

I think taking NTA at face value is the wrong way to value companies anyway. MET accounts at face value implies 40% discount to NTA at current pricing but this is wrong you need to do an adjusted NTA calculaton take the balance sheet figures and go to note 3.1 in the accounts which explains all there property calculations. you need to work out in this environment what is a fair value now not on what there assumptions figures they used in the annual report as they are outdated now and not fit for the current environment.
the adjusted NTA figure is the best figure to use.
as an example even a 10% fall in assumptions make a dramatic difference to NTA and also remember when asset values fall and debt doesnt NTA gets crushed

[Balance]

Interesting observing the debate between Metlife vs Summerset.

Lots of grains of truth in most of the comments with the most important observations imo being :

1. The industry as a whole is on a sound footing with excellent long term prospects due to aging population etc etc etc.

2. Question of really of relative values between Rym, Sum, Met, Arv & Oca.

Fact is, we are but little minnows in the stockmarket - the ones determining the ongoing values (and takeover prices) are the institutions and private equity funds.

With Metlife, really a question imo of when it goes back to $5.00 - either another offer comes to the table or the arb funds finish selling. One or the other will happen - question of time.

[blackcap]

as an example even a 10% fall in assumptions make a dramatic difference to NTA and also remember when asset values fall and debt doesnt NTA gets crushed

Very good points there Bull. NTA needs to be seen in context of the BS. If Assets are $100 and Liabilities are $50 then NTA is $50. There is a bit of leeway.

But another company with Assets of $500 and Liabilities of $450 also has NTA of $50. But that NTA is far more subject to the asset portion. Not much leeway there.

[Beagle]

Leverage will always amplify movements in equity position you have in property. That is why MET having the lowest leverage is a very pertinent point. Cash flow is extremely important in a recession. That is another profoundly good reason why having the lowest debt level's in the sector is presently an advantage. I am surprised these basics seem lost on some here.

[BlackPeter]

...

MET without corporate activity not cheap at the moment ......let us all hope that reason will prevail with EQT or a greater fool rides into town and gives us 6 bucks or more.

Hmm - you still holding? Just wondering why anybody who wants to sell would call potential buyers "greater fools"? Though, obviously - this would make a lot of sense if you first want to buy more (and cheaper) MET shares before handing them over for a premium.

In that spirit .... lets all hope for the greater fool waiting for us to first buy some more shares in the low $3 range before they take them off us for say $6+ ;);

[peat]

Hmm - you still holding? Just wondering why anybody who wants to sell would call potential buyers "greater fools"? Though, obviously - this would make a lot of sense if you first want to buy more (and cheaper) MET shares before handing them over for a premium.

In that spirit .... lets all hope for the greater fool waiting for us to first buy some more shares in the low $3 range before they take them off us for say $6+ ;);


well its been a successfully strategy, I think a lot of us made on the way up thanks to Beagle, I pointed out how to make money on the way down.

Rinse and repeat?

[bull....]

yes beagles trader calls have sometimes been good

[Beagle]

yes beagles trader calls have sometimes been good


I started buying at around the current level, low $4's in late 2019 well before any talk of a takeover. I see long term value here even if others don't. You obviously missed this above. I owned SUM shares for many years and have attended every annual meeting since they were listed, (except yesterday's virtual one when I have no shares).

Enough of the Bull**** already.

[winner69]

MET has often traded above Book Value (NTA) in the past

Currently at 60% of last reported Book Value and say 70% of estimated year end Book Value

[Cyclical]

MET has often traded above Book Value (NTA) in the past

Currently at 60% of last reported Book Value and say 70% of estimated year end Book Value

That's an inflammatory EOY (we're only 2 months away) book value you've got there Winner. You trying to rile the dog?

[winner69]

That's an inflammatory EOY (we're only 2 months away) book value you've got there Winner. You trying to rile the dog?

No my guess

There will have six months since the 7 buck figure but maybe a bit low.

Also when thinking about it revaluations are being done now so probably any negatives won’t have that much impact in F20 but will hurt F21.

But good chart though ....shows Book Value has steadily increased and MET does often trade above Book Value

[Cyclical]

No my guess

There will have six months since the 7 buck figure but maybe a bit low.

Also when thinking about it revaluations are being done now so probably any negatives won’t have that much impact in F20 but will hurt F21.

But good chart though ....shows Book Value has steadily increased and MET does often trade above Book Value

Yeah, I wouldn't expect that much of an impact so soon, particularly as there was good growth prior to C19 letting rip. From where is the chart sourced? EQT? :D

[winner69]

Yeah, I wouldn't expect that much of an impact so soon, particularly as there was good growth prior to C19 letting rip. From where is the chart sourced? EQT? :D

Mine ...all mine

[Snow Leopard]

Just convincing myself that if the squiggly line starts falling I’ve got to get out and not be tempted to stay in because it could be a long term hold.

Only in in the hope of that $6 plus takeover

But nobody listens to me anyway

I always listen to you carefully even though that dog is continually yapping round your heals.

[bottomfeeder]

I see unprecedented demand coming for lifestyle residential. The recession will have a lot of people over 65 assessing their wealth and long term future. Its a natural progression that in such times everyone wants to "set themselves up" so that the future is clear rather than uncertain. The only way to protect yourself from the inflationery pressures that are to come, is an investment in property. Commercial may not be the same safe haven, because those values are based on return on investment, ie rental income, but residential type investments, especially those that have relatively short term turnover will become the go to investment. Now tgat I have my stock of MET, I need to ramp up the value of course.

[Balance]

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%).

[Cyclical]

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%).

Hmm, based on that, it would appear the RYM and MET share prices got mixed up. Bring on those insto's!

[Balance]

Hmm, based on that, it would appear the RYM and MET share prices got mixed up. Bring on those insto's!

No surprises there - Gearing is great when market is going up - nasty when the market is going down.

[Beagle]

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%).

Thanks for sharing. Supportive of a number of different favourable characteristics of MET's villages that we have discussed at length. Very robust population demographics :) More likely to shift earlier into an independent living environment too, also favours MET.

[Balance]

I would be urging the directors to forget about the share buyback and new developments in the interim.

Instead, resume dividend payments and MET can actually increase the dividend payout because of its low gearing.

In the low and potentially negative interest rate environment we are heading into, that should send a rocket up the share price.

Onwards and upwards!

[Ace]

I would be urging the directors to forget about the share buyback and new developments in the interim.

Instead, resume dividend payments and MET can actually increase the dividend payout because of its low gearing.

In the low and potentially negative interest rate environment we are heading into, that should send a rocket up the share price.

Onwards and upwards!

I personally would prefer the buyback. Higher dividend might be nice although we know how the market will react if the dividend has to be reduced in the future. I’m not sure if a higher dividend would be sustainable in the long run.

[Beagle]

I would be urging the directors to forget about the share buyback and new developments in the interim.

Instead, resume dividend payments and MET can actually increase the dividend payout because of its low gearing.

In the low and potentially negative interest rate environment we are heading into, that should send a rocket up the share price.

Onwards and upwards!

I'm not especially keen on unimputed dividends and would prefer they try and negotiate a settlement with EQT and failing that they might as well spend a few million trying to sue for specific performance and reinitiate the $30m buy-back if that fails.

No point doing new developments in the current market if all they were achieving was 13% development margin in a strong real estate market as essentially they would be lucky to break even in the new environment. Really they need a total top to bottom comprehensive review of all aspects of their development model putting a microscope on every single cost. As a starting point they should go back to every supplier and contractor and ask for 20% better pricing and look for alternative suppliers and contractors for those who don't agree. Bottom line is their existing suppliers have been doing really well out of MET and going forward its MET that need to make proper margins.

[winner69]

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

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

[bottomfeeder]

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

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

Yep thats why I bought into MET and am buying into OCA

[Joshuatree]

Sauce stopped posting a while ago but said he still reads threads. If so, hi ya sauce and thanks.

[Bjauck]

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

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

I have probably misinterpreted the table, but given those returns on equity and capital, it looks like MET and RYM are expensive, with SUM followed by OCA being the cheaper shares to buy currently?

[winner69]

I have probably misinterpreted the table, but given those returns on equity and capital, it looks like MET and RYM are expensive, with SUM followed by OCA being the cheaper shares to buy currently?

Table is an attempt to show a reason why MET (in particular) and OCA trade at below Book Value - rather than determining relative ‘cheapness’ which is rather subjective anyway.

To my way of thinking MET’s return on the capital/assets they have is very low (so low they probably aren’t covering their cost of capital and as such not making any real positive economic returns) that they ‘deserve’ to be trading below book value.

On these return measures OCA not as bad as MET and RYM and SUM have made good returns on invested capital.

Return on Invested Capital v PWC assessed cost of capital here -
MET 2.7% v 8.9% PWC assessed WACC
SUM 10.8% v 8.8%
RYM 10.0% v 9.9%
OCA 4.0% v 6.6%

SUM and RYM returns higher than cost of capital (value creation) - good
MET and OCA returns don’t cover cost of capital (value destructive) - not good

[Balance]

Table is an attempt to show a reason why MET (in particular) and OCA trade at below Book Value - rather than determining relative ‘cheapness’ which is rather subjective anyway.

SUM and RYM returns higher than cost of capital (value creation) - good
MET and OCA returns don’t cover cost of capital (value destructive) - not good

Good table - historical of course now.

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!

[limmy]

There are lots of factors going for MET currently which give it a lot more upside than downside:-
Conservative gearing
40% discount to NTA
Share buy back prior to the takeover offer. - cash rich
2020 dividends not yet paid
Potential to win the court case to restore the price to $7
Possible out of court settlement, say $6.40 ? (10% discount to NTA )
Asia Pacific Village group have sold all their shares, no more to dump to short the market
Other potential buyers in the background
Grey tsunami, people continue to grow old despite the lockdown...
Even if there's no takeover, it's still a very viable business, with dividends for the foreseeable future, unlike non essential businesses.

My 2 cents worth.
Are there any more factors, that I may have missed out ?

[Bjauck]

I see unprecedented demand coming for lifestyle residential. The recession will have a lot of people over 65 assessing their wealth and long term future. Its a natural progression that in such times everyone wants to "set themselves up" so that the future is clear rather than uncertain. The only way to protect yourself from the inflationery pressures that are to come, is an investment in property. Commercial may not be the same safe haven, because those values are based on return on investment, ie rental income, but residential type investments, especially those that have relatively short term turnover will become the go to investment. Now tgat I have my stock of MET, I need to ramp up the value of course. However it will be investment in productive job creating business that will be necessary to rebuild the economy.

Income cuts and higher unemployment does not seem to be a great scenario for residential property values.

[Balance]

However it will be investment in productive job creating business that will be necessary to rebuild the economy.

Income cuts and higher unemployment does not seem to be a great scenario for residential property values.

Zero or negative interest rates will be the big driver of property prices in the next few years.

Meanwhile, if anyone offer you their $700,000 property at $420,000 , what would most people do?

Contact of mine bought a property early last year for $510k vs CV of $615k at a closed tender. Could not believe his luck when other buyers shied away.

[Baa_Baa]

Zero or negative interest rates will be the big driver of property prices in the next few years.

Meanwhile, if anyone offer you their $700,000 property at $420,000 , what would most people do?

Contact of mine bought a property early last year for $510k vs CV of $615k. Could not believe his luck.

Yes it's very much already happening, friend in March offers $620k (unconditional cash) against $650k ask, turned down, house didn't sell, he makes another offer $550k later in April, they settle on $565k. Just the beginning I think.

[Balance]

Yes it's very much already happening, friend in March offers $620k (unconditional cash) against $650k ask, turned down, house didn't sell, he makes another offer $550k later in April, they settle on $565k. Just the beginning I think.

What was the CV?

Since Nov 2019 when Kiwibuild was scrapped, property prices had been rising and in most sales, went for 10% to 15% above CV.

[allfromacell]

Surprised to see Aussie house prices actually up in April, no one seems to panicking there just yet. There was however a big fall in volume which is important for retirement villages, lower house sales = less people buying retirement units.

https://www.realestate.com.au/news/resilient-australia-property-market-sees-rise-in-home-values-despite-covid19/?fbclid=IwAR3eiKIlAhjHVODsfXBxWiq592rNhLeRfIj-781jL9SZdshFmEnOLhvukU0

[winner69]

Bank commentators with their 6% to 9% fall in property prices and a quick recovery are dreaming. They seem to overlook (conveniently) many factors.

Bagrie is more pragmatic

https://www.stuff.co.nz/life-style/home-property/300002353/bumpy-ride-ahead-for-housing-market-in-postcovid-world

[winner69]

Chart below from MET half year presentation

Suppose it’s good but what does it actually show / mean ..or Is just a pretty picture to give one the warm fuzzies

The columns are ‘Price over 30 June 2015 Valuation’ and the line with circles is ‘Median Sale Price Movement from June 30 2015 to Application’

[Bjauck]

Bank commentators with their 6% to 9% fall in property prices and a quick recovery are dreaming. They seem to overlook (conveniently) many factors.

Bagrie is more pragmatic

https://www.stuff.co.nz/life-style/home-property/300002353/bumpy-ride-ahead-for-housing-market-in-postcovid-world

Those who say NZ property will be propped up by returning Kiwis - that will be great if they all have a large nest egg from which they can buy our expensive houses and support themselves. Otherwise they will be competing with the rest of us for jobs, income and social welfare in our battered economy.

[Bjauck]

Surprised to see Aussie house prices actually up in April, no one seems to panicking there just yet. There was however a big fall in volume which is important for retirement villages, lower house sales = less people buying retirement units.

https://www.realestate.com.au/news/resilient-australia-property-market-sees-rise-in-home-values-despite-covid19/?fbclid=IwAR3eiKIlAhjHVODsfXBxWiq592rNhLeRfIj-781jL9SZdshFmEnOLhvukU0

Surprising figures. Are these figures recorded as at settlement date? There is usually a few weeks delay from the date of the Sale and Purchase agreement (perhaps longer if the property is high value and for owner occupation) .

[Balance]

$330 billion in bank deposits - what happens when interest rates go negative in the doomsday scenarios painted here by some posters?

[allfromacell]

Surprising figures. Are these figures recorded as at settlement date? There is usually a few weeks delay from the date of the Sale and Purchase agreement (perhaps longer if the property is high value and for owner occupation) .

I understand they use a combination and are widely accepted as the most up-to-date price data for Aus house prices. Auckland HPI tends to track Syd / Melb pretty well.

"The Home Value Index aims to measure month to month movements in the value of Australian housing markets. Rather than relying solely on transacted sale prices to provide a measure of housing market conditions, the CoreLogic Daily Home Value Index is based on a ‘hedonic’ methodology which includes the attributes of properties that are transacting as part of the analysis. Understanding factors such as the number of bedrooms and bathrooms, the land area and the geographic context of the property allows for a much more accurate analysis of true value movements across specific housing markets. This method also allows for compositional change in consumer buying patterns when measuring capital gains."

https://www.corelogic.com.au/research/monthly-indices

[Longhaul]

Interesting article on Barron's - https://www.barrons.com/articles/cash-is-king-as-deal-making-goes-mia-51587119478

“We are seeing a number of buyers look to invoke MAC clauses as a result of the pandemic,” said Sarah Shaw, Partner at international law firm Hogan Lovells. In the U.S., MACs are common but the threshold is very high; in Europe MACs are less frequent but, where included, the question of whether or not they can be invoked ultimately depends on how “material adverse change” is defined.


“However, this typically carves out macro-economic events and as such would tend not to capture a market downturn triggered by COVID-19. Overall, we are finding that a buyer may have a stronger case for walking away from a deal in light of the pandemic if the sale agreement includes termination rights for a breach of the interim period covenants,” Shaw added.

[winner69]

Chart below from MET half year presentation

Suppose it’s good but what does it actually show / mean ..or Is just a pretty picture to give one the warm fuzzies

The columns are ‘Price over 30 June 2015 Valuation’ and the line with circles is ‘Median Sale Price Movement from June 30 2015 to Application’

Even a walk in the rain and thinking about this chart didn’t make it any clearer

Either it’s put in there to show things are good ...or by referencing it 2015 trying to hide some recent trends.

Possibly it’s saying prices actually received are higher than valuations ...just maybe

[Balance]

Interesting article on Barron's - https://www.barrons.com/articles/cash-is-king-as-deal-making-goes-mia-51587119478

“We are seeing a number of buyers look to invoke MAC clauses as a result of the pandemic,” said Sarah Shaw, Partner at international law firm Hogan Lovells. In the U.S., MACs are common but the threshold is very high; in Europe MACs are less frequent but, where included, the question of whether or not they can be invoked ultimately depends on how “material adverse change” is defined.


“However, this typically carves out macro-economic events and as such would tend not to capture a market downturn triggered by COVID-19. Overall, we are finding that a buyer may have a stronger case for walking away from a deal in light of the pandemic if the sale agreement includes termination rights for a breach of the interim period covenants,” Shaw added.

Reaffirms what my investment banker friend in Australia said - Buyers are trying to wiggle their way out of contracts by citing MAC to try and NOT pay pre-Covid-19 prices.

In MET's case, I think the directors have EQT on the hook.

May take a while but I support the directors taking EQT to court for the $7 takeover price (67% upside vs a few millions spent - good risk/reward equation).

[Longhaul]

In MET's case, I think the directors have EQT on the hook.

It does seems to suggest that the general position (and MET's position) is that Covid-19 is itself not the MAC.

Maybe the coin toss is more like 60-40 now.

[Bjauck]

Reaffirms what my investment banker friend in Australia said - Buyers are trying to wiggle their way out of contracts by citing MAC to try and NOT pay pre-Covid-19 prices.

In MET's case, I think the directors have EQT on the hook.

May take a while but I support the directors taking EQT to court for the $7 takeover price (67% upside vs a few millions spent - good risk/reward equation).

This point has been well discussed. Who knows but If I were a gambler, my money would be on MET losing the case. There were many pieces of existing legislation that include emergency provisions, including amongst others The Health Act and the Epidemic Preparedness Act. The existing law would alone would account for the impact on MET. Therefore MET would not be able to rely on new laws having the impact on MET operations.

In addition, I do not think it would be in the best interests of either the company or the residents of the villages to force a reluctant purchaser to complete in today's environment or circumstances.

[Longhaul]

Another interesting article. I'm posting these as it may help other members try to assess the validity of both parties' claims so they can draw their own conclusions.

https://www2.deloitte.com/dl/en/pages/legal/articles/covid-19-mac-klausel.html

"Whether the COVID-19 pandemic can cause a right of withdrawal by the purchaser under a MAC clause depends on its specific wording. Often, commonplace MAC clauses do not explicitly cover the case of an almost worldwide or global shutdown due to a mass spread of a viral disease. In many cases, changes in the general economic conditions or the industry of the target company are unlikely to be covered by the definition of the MAC. In fact, pandemics are often even explicitly excluded from the possible reasons for a withdrawal right in conventional MAC clauses.

Even if the relevant MAC clause does not explicitly exclude pandemic cases, it is questionable whether the COVID-19 pandemic is covered by the scope of the MAC clause. In the case of MAC clauses as commonly used, it could be discussed whether the COVID-19 pandemic could be considered as a natural catastrophe, similar to an earthquake or hurricane. However, this seems highly questionable, as pandemics, although of natural origin, are unlikely to be considered as natural events."

[peat]

such an interesting discussion and as readers of this thread will know I have put a bit of time into understanding it and am pleased now that more and more people are taking the time to do so.
It is interesting to hear how case law has operated in the past however the bulk if not all of the judicial interpretation for this one should go into the specific contract. However precedents do sit there in the universe of input especially where a judge may determine a lack of clarity in the contract.

But given no one knows the outcome the only way to play it is from a risk reward scenario. currently there is more chance of reward and little possibility of risk. Just another version of buy low sell high I guess.

In some ways the pandemic has made the retirement sector even more valuable yeh? Relatively speaking at least. And depending on future valuations of course but stability of earnings is a good thing.
If guidance is met then the business will have shown a well worthwhile resilience which will enhance its value

[Cyclical]

Nice summary there peat.


Just another version of buy low sell high I guess.

Could be seeing multiple versions of that as it goes back and forth with a war of words and court appeals. But at the end of the day, even if the ultimate ruling goes against MET, it surely doesn't have significant downside to the current share price and you'd expect would represent a good long term hold, especially if they can meet the guidance when so many other companies are going to really struggle in the current climate. Not wanting to do too much crystal ball gazing, but with the QE ultimately watering down the currency and the likelihood that interest rates are going to be tiny for the foreseeable future, you'd expect property prices will be going through the roof in about 5 years, if not before. Same too for the grey hair count, unless we have years of this nasty virus culling off the poor oldies...heaven forbid. My main medium/long term concern would be CGT or something similar to take the heat out of the property market while at the same time not bumping the OCR up too much, and the impact that my have on the sector.

[Snow Leopard]

It does seems to suggest that the general position (and MET's position) is that Covid-19 is itself not the MAC.

Maybe the coin toss is more like 60-40 now.

Just remind me:

What is a MAC?

[winner69]

Just remind me:

What is a MAC?

Material Adverse Change ....as outlined in the SIA

[bottomfeeder]

Obviously the market thinks that the company will not succeed on specific performance, but they have to take the case to get damages. So realistically hoping that there is a reduced offer coming up.

[Baa_Baa]

Obviously the market thinks that the company will not succeed on specific performance, but they have to take the case to get damages. So realistically hoping that there is a reduced offer coming up.

“The market” would think (hope) that, wouldn’t they, when there’s a possibility that the suitor can be forced into paying a price well above what the “market” had valued this for a very long time. The alternative is to hold, possibly for a very long time until the “market” decides it was wrong? If ever. This is Imo the worst sector investment compared to the others, simply due to the uncertainty about a take over offer or whether it can ever return to the multiples of the sector leaders. Sentiment is a killer and this stock does not defy sentiment, it is captured by it. MET has underlying issues that have not surfaced in discussion here, the “market” is telling us that but some or many refuse to accept it hoping for a rabbit out of the hat. Or a long wait for sentiment to reverse, if ever.

[Balance]

“The market” would think (hope) that, wouldn’t they, when there’s a possibility that the suitor can be forced into paying a price well above what the “market” had valued this for a very long time. The alternative is to hold, possibly for a very long time until the “market” decides it was wrong? If ever. This is Imo the worst sector investment compared to the others, simply due to the uncertainty about a take over offer or whether it can ever return to the multiples of the sector leaders. Sentiment is a killer and this stock does not defy sentiment, it is captured by it. MET has underlying issues that have not surfaced in discussion here, the “market” is telling us that but some or many refuse to accept it hoping for a rabbit out of the hat. Or a long wait for sentiment to reverse, if ever.

You have lost me, Baa Baa - all the retirement village operators fell sharply between 2018 to 2019 due to a combination of falling NZ property values and the pending (subsequently rejected) CGT. You can check out the charts and sp falls yourself.

It was EQT's proposed takeover of MET which re-rated the whole sector.

Now they are all trading well below their pre Covid-19 share prices too.

So are you saying that all the retirement village operators (RYM, OCA, SUM & MET) are non-performers, judging by their share prices now?

[allfromacell]

“The market” would think (hope) that, wouldn’t they, when there’s a possibility that the suitor can be forced into paying a price well above what the “market” had valued this for a very long time. The alternative is to hold, possibly for a very long time until the “market” decides it was wrong? If ever. This is Imo the worst sector investment compared to the others, simply due to the uncertainty about a take over offer or whether it can ever return to the multiples of the sector leaders. Sentiment is a killer and this stock does not defy sentiment, it is captured by it. MET has underlying issues that have not surfaced in discussion here, the “market” is telling us that but some or many refuse to accept it hoping for a rabbit out of the hat. Or a long wait for sentiment to reverse, if ever.

Well to be fair it was hardy that long ago when the omniscience Mr Market valued MET at $6.50, 53% higher than today's closing price. It's fair to say this stock hasn't performed as historically well as it's peers but it's also difficult to point to a period when it's been so relatively cheap. Negative sentiment has always created me more opportunity than not, it's a fickle thing really and patience is often rewarded.

[Scrunch]

It does seems to suggest that the general position (and MET's position) is that Covid-19 is itself not the MAC.

Maybe the coin toss is more like 60-40 now.

Unless the market factoring in a very low non-takeover price, the market saying its nothing near 60-40. Discounting the takeover price slightly for time-value of money, with a $6.8 effective takeover price and a 10% chance of success, the underlying non-takeover price is just under $4 ($3.95*90%+$6.8*10%=$4.24). This seems a plausible non-takeover value. If the success likelihood was 10%, at present you are paying circa 30c for a possible takeover to occur.

If the takeover chance is increased to 40%, the underlying non-takeover price needs to drop down to heaps to around $2.50. I don't believe the underlying value is anywhere near that low, so the market is not pricing in a chance of success as high as 40%. If 40% were the real chance of success, the share price should be nearer $5 than its current price.

[Balance]

You have lost me, Baa Baa - all the retirement village operators fell sharply between 2018 to 2019 due to a combination of falling NZ property values and the pending (subsequently rejected) CGT. You can check out the charts and sp falls yourself.

It was EQT's proposed takeover of MET which re-rated the whole sector.

Now they are all trading well below their pre Covid-19 share prices too.

So are you saying that all the retirement village operators (RYM, OCA, SUM & MET) are non-performers, judging by their share prices now?

Example :

SUM was $7.81 in 2018, fell to $5.45 in 2019 and then, took off to $9.23 when EQT bid for MET.

Now it is trading at $6.24 - 33% below the $9.23 level.

So what is the sp telling us?

[Snoopy]

Just remind me:

What is a MAC?


It is what they serve up at McDonalds post the Big Mac downsizing.

https://www.google.co.nz/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=2ahUKEwjEke_o-pnpAhWVTX0KHc3-AM8QFjABegQIAhAB&url=https%3A%2F%2Fwww.nzherald.co.nz%2Flifestyle%2 Fnews%2Farticle.cfm%3Fc_id%3D6%26objectid%3D122646 12&usg=AOvVaw1RCt17OzO7dcV5nw3txOhS

SNOOPY

[dobby41]

Well to be fair it was hardy that long ago when the omniscience Mr Market valued MET at $6.50, 53% higher than today's closing price.

When there was an offer of $7 on the table.

[allfromacell]

When there was an offer of $7 on the table.

I'm meant before the offer in September 2018.

[Balance]

I'm meant before the offer in September 2018.

Likewise for all the other RV stocks - Ryman, Summerset & OCA - and now they are all trading well down, having risen up on the coattails of EQT's bid for MET.

[Bjauck]

Well to be fair it was hardy that long ago when the omniscience Mr Market valued MET at $6.50, 53% higher than today's closing price. It's fair to say this stock hasn't performed as historically well as it's peers but it's also difficult to point to a period when it's been so relatively cheap. Negative sentiment has always created me more opportunity than not, it's a fickle thing really and patience is often rewarded. It was valued at $6.50 because St Nicholas came along with a goody bag full of cash. It looks like the jolly fellow thought MET was a naughty child after all and has taken his sack away now.

[Balance]

It was valued at $6.50 because St Nicholas came along with a goody bag full of cash. It looks like the jolly fellow thought MET was a naughty child after all and has taken his sack away now.

Likewise all the other RV stocks?

[Bjauck]

Likewise all the other RV stocks? MET was the only one subject to a takeover offer.

Met, Sum, and Arv are all down by approx 12% from their SPs on 1/11/19
Rym is down by approx 8%
Oca is down by approx 29%

If you think that the MET directors can successfully push through the agreement from prior to the Covid declaration of an emergency, then it is looking cheap.
Otherwise you need to value it on its merits relative to others in the sector.

[Balance]

MET was the only one subject to a takeover offer.

Met, Sum, and Arv are all down by approx 12% from their SPs on 1/11/19
Rym is down by approx 8%
Oca is down by approx 29%

If you think that the MET directors can successfully push through the agreement from prior to the Covid declaration of an emergency, then it is looking cheap.
Otherwise you need to value it on its merits relative to others in the sector.

Yes, but notice how it was that bid which put a rocket under all the other RV stocks and they are all down now?

[Cyclical]

MET was the only one subject to a takeover offer.

Met, Sum, and Arv are all down by approx 12% from their SPs on 1/11/19
Rym is down by approx 8%
Oca is down by approx 29%

If you think that the MET directors can successfully push through the agreement from prior to the Covid declaration of an emergency, then it is looking cheap.
Otherwise you need to value it on its merits relative to others in the sector.

You put it like that and suddenly OCA is looking comparatively cheap and MET not so much. Really curious to understand why OCA has pulled back about 15% in the last 2 or 3 weeks. Someone's been selling up large in that time.

[Jonboyz]

You put it like that and suddenly OCA is looking comparatively cheap and MET not so much. Really curious to understand why OCA has pulled back about 15% in the last 2 or 3 weeks. Someone's been selling up large in that time.

Quality over technicals? RYM > MET/SUM/ARV > OCA

[Balance]

You put it like that and suddenly OCA is looking comparatively cheap and MET not so much. Really curious to understand why OCA has pulled back about 15% in the last 2 or 3 weeks. Someone's been selling up large in that time.

I can tell you one thing which I will not do (again) - buy anything like OCA from Macquarie.

They are well known to milk any entity they are selling down dry and use financial engineering to 'enhance' yield but somehow or another, always find willing buyers to buy the pig with the lipstick on.

Like Forsyth Barr, I guess - the punters think that they are the clever ones despite being sold dogs-a-barking non stop!

[stoploss]

I can tell you one thing which I will not do (again) - buy anything like OCA from Macquarie.

They milked any entity the sell down dry, use financial engineering to 'enhance' yield and somehow or another, always find willing buyers to buy the pig with the lipstick on.

If they're hat good you be buying Macq stock ??

[Balance]

If they're hat good you be buying Macq stock ??

Have a look at the Macquarie stock chart.

[Cyclical]

I can tell you one thing which I will not do (again) - buy anything like OCA from Macquarie.

They've exited out of there now though, right? I had OCA earlier last year and eventually ran out of patience with the Macquarie overhang and sold out in the low $1.something...impecably bad timing on my part of course. OCA has been good to me so far this year, but if this sell down continues, the green will start to go a bit autumnal...

PS, sorry for discussing this on the MET thread.

[peat]

I can tell you one thing which I will not do (again) - buy anything like OCA from Macquarie.

They are well known to milk any entity they are selling down dry and use financial engineering to 'enhance' yield but somehow or another, always find willing buyers to buy the pig with the lipstick on.

Like Forsyth Barr, I guess - the punters think that they are the clever ones despite being sold dogs-a-barking non stop!

But OCA was a good buy off Macquarie at 79c. At that time market rising etc etc and there were plenty of opportunities to pass the parcel. But I didn't even buy any then because of the Macquarie taint
However the last dump by them was brilliant and at punters expense so yeh they are the vampire squids of the Tasman Sea.

What is wrong with their chart? Take it to here if you want https://www.sharetrader.co.nz/showthread.php?5134-MQG-Macquarie-Group


oh and don't worry Cyclical I have it on good authority that threads are meaningless concepts in post covid world.

[Balance]

But OCA was a good buy off Macquarie at 79c. At that time market rising etc etc and there were plenty of opportunities to pass the parcel. But I didn't even buy any then because of the Macquarie taint
However the last dump by them was brilliant and at punters expense so yeh they are the vampire squids of the Tasman Sea.

What is wrong with their chart? Take it to here if you want https://www.sharetrader.co.nz/showthread.php?5134-MQG-Macquarie-Group


oh and don't worry Cyclical I have it on good authority that threads are meaningless concepts in post covid world.

They are masterful players at the art of cobbling together sub-standard assets & businesses, and after a period of ‘consolidation & restructuring’ flog off as a quality piece of sub-standard business for a huge gain.

[Beagle]

https://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=12329794 Very interesting. Auckland house prices up 5% in the 3 months to 26 March 2020.
Everyone is throwing darts trying to guess the impact of Covid 19 but the best guide to the future is the past and in the GFC over the following 22 months the market fell only just over 4%.

Maybe taking into account the rise in the first 3 months of this year, once the dust settles from this virus real estate prices will be basically unchanged compared to the $7.00 NTA as at 31 December 2019 ?

[jonu]

https://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=12329794 Very interesting. Auckland house prices up 5% in the 3 months to 26 March 2020.
Everyone is throwing darts trying to guess the impact of Covid 19 but the best guide to the future is the past and in the GFC over the following 22 months the market fell only just over 4%.

Maybe taking into account the rise in the first 3 months of this year, once the dust settles from this virus real estate prices will be basically unchanged compared to the $7.00 NTA as at 31 December 2019 ?

Once the dust settles? Do you mean 5 years time?

[ynot]

https://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=12329794 Very interesting. Auckland house prices up 5% in the 3 months to 26 March 2020.
Everyone is throwing darts trying to guess the impact of Covid 19 but the best guide to the future is the past and in the GFC over the following 22 months the market fell only just over 4%.

Maybe taking into account the rise in the first 3 months of this year, once the dust settles from this virus real estate prices will be basically unchanged compared to the $7.00 NTA as at 31 December 2019 ?

We will have higher unemployment this time compared to post GFC.

[Beagle]

Once the dust settles? Do you mean 5 years time? Who knows but we seem to be doing really well so far in N.Z.


We will have higher unemployment this time compared to post GFC. And MUCH lower interest rates. Saw 2.8% today.

[Cyclical]

https://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=12329794 Very interesting. Auckland house prices up 5% in the 3 months to 26 March 2020.
Everyone is throwing darts trying to guess the impact of Covid 19 but the best guide to the future is the past and in the GFC over the following 22 months the market fell only just over 4%.

Maybe taking into account the rise in the first 3 months of this year, once the dust settles from this virus real estate prices will be basically unchanged compared to the $7.00 NTA as at 31 December 2019 ?

I reckon at worst, give or take 10% drop over the next 2 years, maybe more if you adjust for inflation, but then we could be in for a period of deflation anyway. Maybe the market will be flat for another year or 2 after that before it goes gang busters. It would be worse if Auckland hadn't already had a couple of years of negligible growth (barring the last quarter). Predicted big drops in the property market are over rated. Of greater concern is the ability for depth fueled expenditure against the house.

[ynot]

Who knows but we seem to be doing really well so far in N.Z.

And MUCH lower interest rates. Saw 2.8% today.

In the long run I would suspect you will need a job to maintain your mortgage, irrespective of interest rate ?

[peat]

people in retirement homes have no mortgage usually and a govt backed annuity.

[King1212]

Master Beagle..can u spare a minute or two on TLT bought back. Thanks

[bottomfeeder]

people in retirement homes have no mortgage usually and a govt backed annuity.

Even if they have no cash flow to pay the levy, it plus penalties can be recovered on the sale if the unit in several years time, most of the time. So I can't see met profits coming down.

[Balance]

https://www.oneroof.co.nz/news/37881

House prices in NZ predicted to fall between 10% to 15%, and then stage fastest recovery in the world due to NZ being seen as ‘safe’ haven and other favourable factors at play in 2021.

[traineeinvestor]

https://www.oneroof.co.nz/news/37881

House prices in NZ predicted to fall between 10% to 15%, and then stage fastest recovery in the world due to NZ being seen as ‘safe’ haven and other favourable factors at play in 2021.

Thanks for posting.

Lots of predictions out there and it's quite possible that, if enough predictions are made, one of them might turn out to be correct.

[Balance]

Thanks for posting.

Lots of predictions out there and it's quite possible that, if enough predictions are made, one of them might turn out to be correct.

Up to each of us to make up our mind with the mass of information (or mis-information planted by some parties in financial websites and even, ST) out there to act in accordance with our strategy.

To be well informed is to be forearmed.

To be mis-informed is to be taken advantage of.

[dobby41]

Thanks for posting.

Lots of predictions out there and it's quite possible that, if enough predictions are made, one of them might turn out to be correct.

About sums it up.

[dobby41]

Up to each of us to make up our mind with the mass of information (or mis-information planted by some parties in financial websites and even, ST) out there to act in accordance with our strategy.

To be well informed is to be forearmed.

To be mis-informed is to be taken advantage of.

Wise words.
DYOR

[Joshuatree]

Master Beagle..can u spare a minute or two on TLT bought back. Thanks

How about Private Messaging rather than publicly clogging up the threads and cross promoting, its easy.

[King1212]

Come JT ...aw yeah...don't be like that.

How is your BBOZ...hope u sold at $20...or trapped way up there.?

[Beagle]

I don't have an opinion on the share in question as its not one I am interested in.

Latest announcement does not give me any comfort that there's going to be a negotiated settlement anytime soon.
https://www.nzx.com/announcements/352813

[Bjauck]

I don't have an opinion on the share in question as its not one I am interested in.

Latest announcement does not give me any comfort that there's going to be a negotiated settlement anytime soon.
https://www.nzx.com/announcements/352813

Despite these impending legal shenanigans during an epidemic to force through the pre-covid agreement, maybe directors can still spare some of their effort and attention to actually running the company.

It seems like neither the current directors nor APVG actually want to be responsible for the business now!

[Beagle]

Despite these impending legal shenanigans during an epidemic to force through the pre-covid agreement, maybe directors can still spare some of their effort and attention to actually running the company.

It seems like neither the current directors nor APVG actually want to be responsible for the business now!

In what respect ? They have been working hard to mitigate the risks of Covid 19 and try and progress this scheme for the benefit of shareholders. Just one of those things are challenging enough but to manage both at the same time...I would think they've been working as hard as they can.

[Bjauck]

In what respect ? They have been working hard to mitigate the risks of Covid 19 and try and progress this scheme for the benefit of shareholders. Just one of those things are challenging enough but to manage both at the same time...I would think they've been working as hard as they can. I should have rephrased my post. Since APVG said they would not go ahead, I hope the directors energy and focus still remains on the business rather than the impending legal dispute. Pursuing APVG through the Courts may well benefit the current shareholders, but will it benefit the residents and the business?

[Balance]

In what respect ? They have been working hard to mitigate the risks of Covid 19 and try and progress this scheme for the benefit of shareholders. Just one of those things are challenging enough but to manage both at the same time...I would think they've been working as hard as they can.

As a shareholder, I am 100% behind the directors spending a few million dollars and taking EQT to court - now that they have QC opinion to do so.

As naive a comment as one can get about directors being able to focus on one thing only.

[macduffy]

I should have rephrased my post. Since APVG said they would not go ahead, I hope the directors energy and focus still remains on the business rather than the impending legal dispute. Pursuing APVG through the Courts may well benefit the current shareholders, but will it benefit the residents and the business?

There's no evidence that I can see that directors/management aren't focused on the business. Same applies to the others in the sector.

[Bjauck]

...
As naive a comment as one can get about directors being able to focus on one thing only.Perhaps...However, I would like to see a breakdown of board meetings and the time devoted to each issue facing the company.

Disc: A returned shareholder since the APVG termination.

[macduffy]

Perhaps...However, I would like to see a breakdown of board meetings and the time devoted to each issue facing the company.

Disc: A returned shareholder since the APVG termination.

Perhaps you'll be able to ask for that at the shareholders' meeting tentatively scheduled for June/July, if it goes ahead.

[peat]

I believe that of the two legally enforceable outcomes an enforced takeover would be the correct outcome. However, I also dont believe that this is the most likely outcome.
So if the outcome is for damages, how would that be calculated and does it relate to the share price ? And who would it go to. Obviously MET would need to be reimbursed costs etc but there is more damage than costs there is the lost opportunity for shareholders to sell at $7. How do we as shareholders get compensated for our loss.

[crighton100]

As a resident of a MET village [& a shareholder],I thought you all seem a little worried about how the villages are being run.Well the CEO has been working from home since the start of lockdown 4 [using the digital things of today to keep in contact with all the HO staff & all of us residents with regular contact to all].HO are keeping the village managers well informed on what to do & how to impliment & I can tell you the village I am in has been running extremely well,with staff going the extra mile all the time,nothing seems to be a problem & any request is dealt with more or less straight away.In all Sowry's contact he is always stressing the wellbeing of us is his priority.They have set up an online virtual place for the residents with all sorts of stuff to stop the boredom of the lockdowns.Lucky for them we have had no one depart the village so far since lockdown.So I do think they are putting enough effort into running the business [like the boss said the last thing they want is a virus in a village].Hope some of you took note of an earlier post where I said PPH was a good bet.Happy days

[Balance]

As a resident of a MET village [& a shareholder],I thought you all seem a little worried about how the villages are being run.Well the CEO has been working from home since the start of lockdown 4 [using the digital things of today to keep in contact with all the HO staff & all of us residents with regular contact to all].HO are keeping the village managers well informed on what to do & how to impliment & I can tell you the village I am in has been running extremely well,with staff going the extra mile all the time,nothing seems to be a problem & any request is dealt with more or less straight away.In all Sowry's contact he is always stressing the wellbeing of us is his priority.They have set up an online virtual place for the residents with all sorts of stuff to stop the boredom of the lockdowns.Lucky for them we have had no one depart the village so far since lockdown.So I do think they are putting enough effort into running the business [like the boss said the last thing they want is a virus in a village].Hope some of you took note of an earlier post where I said PPH was a good bet.Happy days

Thanks, crighton100.

Appreciate your feedback as usual.

[Cyclical]

Thanks, crighton100.

Appreciate your feedback as usual.

Seconded. Great feedback from the inside. Cheers crighton100.

[Bjauck]

As a resident of a MET village [& a shareholder],I thought you all seem a little worried about how the villages are being run... Thanks for the update. What is the feeling among residents concerning the standoff between directors and APVG?

[bottomfeeder]

I think a good business model would be for MET to capitalise levies and recover them from the sale of the unit. It gives the company more competitiveness, more potential for increased profit from interest. Virtually giving residents access to sentinel loans on their unit equity. This would give the residents more cash in their hands to spend on a day to day basis, such as presents for the grandkids. After all MET has access to capital such as CR. There would be an increased demand for their units then.

[crighton100]

Thanks for the update. What is the feeling among residents concerning the standoff between directors and APVG?
I am mid 70's,most in the village are 80's & above.The CEO at the start explained in simple english what the takeover was all about & that nothing would change for us as that was part of the agreement.To tell you the truth most of the inmates dont give a stuff [they only think if its not going to change thinks they dont give a monkeys.So no problems there.

[Longhaul]

Very reassuring to see some volume building at current prices. That 4.25 was fairly solid resistance. Perhaps the market is slightly changing its view on the takeover situation?

[bull....]

As a resident of a MET village [& a shareholder],I thought you all seem a little worried about how the villages are being run.Well the CEO has been working from home since the start of lockdown 4 [using the digital things of today to keep in contact with all the HO staff & all of us residents with regular contact to all].HO are keeping the village managers well informed on what to do & how to impliment & I can tell you the village I am in has been running extremely well,with staff going the extra mile all the time,nothing seems to be a problem & any request is dealt with more or less straight away.In all Sowry's contact he is always stressing the wellbeing of us is his priority.They have set up an online virtual place for the residents with all sorts of stuff to stop the boredom of the lockdowns.Lucky for them we have had no one depart the village so far since lockdown.So I do think they are putting enough effort into running the business [like the boss said the last thing they want is a virus in a village].Hope some of you took note of an earlier post where I said PPH was a good bet.Happy days

your pph tip was surpuurb timing

[Cyclical]

Very reassuring to see some volume building at current prices. That 4.25 was fairly solid resistance. Perhaps the market is slightly changing its view on the takeover situation?

Yep, or maybe the market is looking beyond a likely failed takeover and more at the underlying performance and fundamentals of the company.

[Longhaul]

At this price it's kinda hard to see downside over the medium term regardless of the takeover. I think Beagle's advice of holding only as much as you are comfortable holding for the long term is/was spot on.

[bull....]

Yep, or maybe the market is looking beyond a likely failed takeover and more at the underlying performance and fundamentals of the company.

on the charts a break upside of 4.25 might open up testing the pivot highs back around 4.50 - 60