MET - Metlifecare - one for the fundies?

- NZ's largest operator of retirement villages.
- Current market cap ~235 million.
- Primary assets are their retirement village units, valued by DCF of their expected generated revenue stream over a 40 year time horizon.
- Recently completed capital raising to strengthen balance sheet.
- Operating earnings have remained solid to end of 1H09 (31 Dec 08)
- Recent losses due to a revaluation of investment property reflected in their income statements.
- I believe divvies have been suspended until 2010.

This stock is currently trading at about 0.4x NTA* (approximately $2).

Could be worth a punt if you expect the housing market to turn around strongly. The ageing population should assure that demand keeps up for their units in the medium-long term. You may also simply believe that the undervaluation will be corrected with a change in market sentiment.

Not really much point getting into technicals as it's a very thinly traded stock. I might post a price chart later though.

* Source ASB Securities

My parents private village got bought by these guys a year or so ago. Since then theyve put up prices, slashed services etc. The result is miserable "customers" and staff, and they now have about a dozen houses empty for the first time.
So yes the ageing population may be growing, but the smart oldies wont be moving to metlifecare.

I used to have shares in this once but sold up in May 2007, I remember it took days to find a buyer then.
Since then I have not given it a thought, it only trades on alternate Thursdays and my current screening process drops it.

Find it hard to believe you can buy in for two bucks a pop but I would not touch it now. Apart from the lack of trades, I am not keen on the management.

regards
Paper Tiger

PS You could have a look at Ryman

Thanks for the input...still think it might be a bit underdone.

Will have a look at Ryman as well.

Any opinions on them?

Operationally Ryman are miles ahead of Metlifecare.

And no - I dont work for Ryman, but have knowledge of both at a corporate level.

There hasn't been much discussion about this company for a couple of years. I suspect it's because there are so few shareholders.

I'm unsure why they made their announcement today about undertaking a strategic review of their capital and ownership structure. In terms of the ownership structure, I don't see how they can influence this. If the 85% shareholder wanted to takeover MET then they would have done so by now and I can't see how MET could influence this.

They want to improve the capital structure and share trading liquidity to capitalise on future growth opportunities. I suspect this is signalling a capital raising of some description although I don't see how this will increase share trading liquidity because you will still have roughly the same number of shareholders, just more shares held by each shareholder. That is, unless they are able to somehow introduce new shareholders through the main shareholder diluting their holding.

We'll see in a fortnight I guess.

I wonder if it was signalling a potential sell down much like the Somerset one. Drop the mian SH down to 50% will increase liquidity.

Yes good point CJ. Having thought about potential motivations I can only come up with the same answer. It would make sense given that most of the directors are linked to the main shareholder, so I suppose it may have been those directors that initiated the strategic review.

It seems an unfortunate time to sell down their holding. It looks like they picked up most of their shareholding in 2003 at $3.90 per share, although they did pick up more shares at $1.08 during the capital raising in early 2009. Given they would probably need to offer the shares at a discount to current market price they appear to have done pretty badly out of their investment. I bet they wish they had put their money behind Ryman instead.

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Originally Posted by Felix

Yes good point CJ. Having thought about potential motivations I can only come up with the same answer. It would make sense given that most of the directors are linked to the main shareholder, so I suppose it may have been those directors that initiated the strategic review.

It seems an unfortunate time to sell down their holding. It looks like they picked up most of their shareholding in 2003 at $3.90 per share, although they did pick up more shares at $1.08 during the capital raising in early 2009. Given they would probably need to offer the shares at a discount to current market price they appear to have done pretty badly out of their investment. I bet they wish they had put their money behind Ryman instead.

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This is very odd. Surely trading at 50% of net tangible property assets cannot go on forever??!!

Who are NZ Retirement Villages? Why would they be content with management and directors that deliver destruction of shareholder value while praising themselves for their "excellent performance against a challenging back drop"

!! ??

Meanwhile Ryman trades at 200% net tangible property assets and humbly credits their performance due to good service and consistent and simple operating model.

Will be interesting to wee outcome of the strategic review. Hopefully some improvement in liquidity and possibly some value will start to be realised....

:confused:

Timely. Good way to invest in property when you can get it at 50% below market value!

http://www.nzherald.co.nz/business/n...ectid=10761913

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Originally Posted by _Michael

This is very odd. Surely trading at 50% of net tangible property assets cannot go on forever??!!

!! ??

Meanwhile Ryman trades at 200% net tangible property assets and humbly credits their performance due to good service and consistent and simple operating model.

Will be interesting to wee outcome of the strategic review. Hopefully some improvement in liquidity and possibly some value will start to be realised....

http://www.sharetrader.co.nz/images/.../confused1.gif

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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

Sauce,
thank you for your posts on MET and Summerset threads.Always well thought out and informative.

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Originally Posted by percy

Sauce,
thank you for your posts on MET and Summerset threads.Always well thought out and informative.

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Thanks Percy,
Your posts are always on the money so to speak :)
Cheers
Sauce

Proposed merger between Metlifecare, Vision Senior Living and Private Life Care to make a bigger listed company.

Also read the Herald article

best wishes
paper Tiger

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Originally Posted by SparkyTheClown

Will being bigger make MetLifeCare a better company?

Or is it simply going to grow the company's problems? I'm not sure marketshare alone will give MetLifeCare the fillip it needs to prosper.

I struggle to see why Metlife is an attractive proposition when Ryman is a proven, growing company with a great formula. Arguably Ryman is one of NZ's best run companies. Summerset looks like Ryman Jr, so is probably the second best option here.

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MetLifeCare definitely need to change their formula as it has simply not worked thus far. I would assume from the other companies involved in the merger, that they are now trying to emulate Ryman's formula. Good luck to them, they'll definitely need it.