noodles
29-06-2013, 09:12 PM
Since buying a small parcel of Metlifecare(MET) shares a couple of weeks back, I've been confused by it's relative under-valuation to other listed retirement village shares. To me, on many fundamental valuations, MET appears cheap compared to it's peers. Obviously, it is not all about fundamentals. Management and other factors must also come into play. It is clear to me that it is way more complex to value these companies compared to say a retail share.
This thread is to discuss valuation criteria of these listed stocks. MET, SUM, and RYM. So I thought I'd kick off a list of criteria. Some criteria are common for most stocks, but I think a few are peculiar to this industry. Please suggest any additions.
-NTA. Net Tangible Assets. A stock would appear to be cheaper if it is valued less than it's NTA
-Price to Earnings Ratio
-Price to Operating Cashflow
Note: Of these 2 ratios, I'm not sure what is more important. I guess it is price to Op cashflow?
-Dividend yield
-Occupancy %
-Sales Settlements (resales and new sales). I guess this could be compared to NTA, Market Cap, or EV so we can get a
comparison with other listed vehicles. But the key here is the growth year on year.
-Number of new units built per year. This could also be compared to NTA, Market Cap, or EV so we can get a comparison with
other listed vehicles. But I thin the key here is the growth year on year.
-debt to equity ratio
-historical earning growth
-future earning growth and PEG
-new sales margin%
-resale margin %
-unrealized gains
-size of land bank relative to construction rate.
Other factors to consider:
-Does the company need to go back to shareholders for additional equity. RYM has never had to do this. MET has done this recently.
-Location. Given the price growth of residential property varies across the country and profit is derived from capital gains, there can be variation between listed vehicles. For instance, MET is mostly based in Auckland and nearby cities. They may get a greater capital gain uplift than other companies.
-Quality of management. Do they deliver on promises?
-Type of care provided. Margins for hospital care beds are higher than rest homes. I think RYM may be better place here.
-What type of agreement they have with their customers. I understand it is deferred settlement. But what percentages are used. Do they differ much between the companies?
- Nature of profits. Do some companies make more from capital gains rather than Care. In which case, what type of profit is more predictable. Surely Care would be better quality earnings.
Of these valuation criteria, I'd be interested to know what people think is the most important. What drives future cash flows!
I also wonder if these stocks are just a bet on residential housing in NZ in general? If so, how important is growth of national house prices on future profitability. What would happen if NZ house price flat-lined or even dropped?
This thread is to discuss valuation criteria of these listed stocks. MET, SUM, and RYM. So I thought I'd kick off a list of criteria. Some criteria are common for most stocks, but I think a few are peculiar to this industry. Please suggest any additions.
-NTA. Net Tangible Assets. A stock would appear to be cheaper if it is valued less than it's NTA
-Price to Earnings Ratio
-Price to Operating Cashflow
Note: Of these 2 ratios, I'm not sure what is more important. I guess it is price to Op cashflow?
-Dividend yield
-Occupancy %
-Sales Settlements (resales and new sales). I guess this could be compared to NTA, Market Cap, or EV so we can get a
comparison with other listed vehicles. But the key here is the growth year on year.
-Number of new units built per year. This could also be compared to NTA, Market Cap, or EV so we can get a comparison with
other listed vehicles. But I thin the key here is the growth year on year.
-debt to equity ratio
-historical earning growth
-future earning growth and PEG
-new sales margin%
-resale margin %
-unrealized gains
-size of land bank relative to construction rate.
Other factors to consider:
-Does the company need to go back to shareholders for additional equity. RYM has never had to do this. MET has done this recently.
-Location. Given the price growth of residential property varies across the country and profit is derived from capital gains, there can be variation between listed vehicles. For instance, MET is mostly based in Auckland and nearby cities. They may get a greater capital gain uplift than other companies.
-Quality of management. Do they deliver on promises?
-Type of care provided. Margins for hospital care beds are higher than rest homes. I think RYM may be better place here.
-What type of agreement they have with their customers. I understand it is deferred settlement. But what percentages are used. Do they differ much between the companies?
- Nature of profits. Do some companies make more from capital gains rather than Care. In which case, what type of profit is more predictable. Surely Care would be better quality earnings.
Of these valuation criteria, I'd be interested to know what people think is the most important. What drives future cash flows!
I also wonder if these stocks are just a bet on residential housing in NZ in general? If so, how important is growth of national house prices on future profitability. What would happen if NZ house price flat-lined or even dropped?