OldGuy - agree wholeheartedly
No doubt about it - SUM shareprice will outperform RYMs over the next few years
Not saying RYM a dog - just SUM is better bet
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Ha yeah Roger agreed. I've set my expectations for the long term part of my portfolio very low. Definetely not the most thought out post of mine.
To be fair the average growth rate of SUM over the last 3 years is 36% including this year's forecast and RYM 15%. As noted above you have to be very careful with assumptions going forward as a lot of SUM's growth has come from significant expansion in their development margins growing from circa 15% to just over 20% as they've refined their development model and also from the lift in build rate from 300 units last year to 400 this year. I think SUM can grow a bit quicker than RYM over my valuation horizon (7-10 years) but I think its prudent to make an assumption at this stage they grow at similar rates over the medium term and better to be positively surprised down the track than not have one's medium term expectations met. These are long term investments hence the hound gets very conservative with long term growth projections.
I agree 100% that long term growth of 15% per annum is not something to be sneezed at and as long as the PE stays the same, (now that the PE is fair at least as far as I am concerned using my valuation methodology), we should see the SP double every 5 years, (quadruple in 10 years). I guess the main risk is that as RYM continues to get bigger and bigger the growth rate starts to tail off...and one could make a reasonable argument in my opinion that we're starting to see evidence of that already.
I too have pondered this but have satisfied myself this is not yet the case.
The reason behind the reduction in growth rate from 18%pa down to an abysmal 16%pa over 4 years (if one can call that a trend) is almost exclusively due to the very lengthy hold up in Brandon Park development in Melbourne, which is by the way a very large development. The reasons behind the holdup are summarised in this post:
http://www.sharetrader.co.nz/showthr...l=1#post636918
I offered a friendly wagered last year, after RYM's H1 announcement of 6% growth, that their full year result would still make the 15% mark.
http://www.sharetrader.co.nz/showthr...l=1#post620362
Unluckily for me, no one took me up on the offer.
Judging by this year's 9% H1 result and the language used in their announcement today, I have no hesitation in re-offering my wager of a rough-red on RYM making 15% underlying profit this financial year too.
On the condition RYM get the go ahead for Brandon Park so that by March 2018 they obtain half the rate of pre-sales contracts they got with Wheelers Hill, then referring below, I struggle to see where there growth rate is slowing over the next 4 to 5 years.
Attachment 8459
Right now RYM is cheap, so is SUM. Disc: Holding both.
Hi mate,
Thanks for sharing your perspective. Is Brandon park problematic in much the same way as the Boulcott site is for SUM ? Could it be years before they get the required consents ?