SUM - Summerset Group

[JayRiggs]

If they can improve 2nd half underlying profits by about 20%, then I think share price can get back to $3.60 by March next year.
Just give it time and she'll be right.

“No matter how great the talent or efforts, some things just take time. You can't produce a baby in one month by getting nine women pregnant.”

― Warren Buffett

[nextbigthing]

You can have a lot of fun trying. Just saying.

[Tevita]

You can have a lot of fun trying. Just saying.

Speak for yourself. Are your fingernails chewed down to the quick? Forget that Mormon stuff.

[winner69]

OMG ....all those SUM unrealised gains might turn into realised losses or something similar.

From interest.co.nz -

In Westpac's latest Home Truths newsletter, the bank's chief economist Dominick Stephens said the housing market was expected to stage a brief resurgence this year, "before a more pervasive downturn ensues."

"For some time the Westpac economics team has been forecasting a modest resurgence of house price inflation this year, before the market turns more decisively negative later next year," Stephens said

"Despite our near term bullishness, we anticipate a period of falling house prices later in the decade.

Dominic's report here
http://www.interest.co.nz/sites/defa...ugust_2014.pdf

Never mind - just an economists view and a bank one at that so a lad of rubbish. Just as well Westpac making heaps of money now if they are going to have lots of bad debts later in the decade

[noodles]

OMG ....all those SUM unrealised gains might turn into realised losses or something similar.

winner69, you will be banned from the thread if you continue to imply any correlation between NZ house prices and SUM profits

No, there is no elephant in the room. Or is the room just painted grey?

[winner69]

Latest population estimates say 274,000 of the population is 75 plus

That's 2.9% more than a year ago, and 22% more than 10 years

Growth rate of those 75plus is accelerating

Interesting 57% of the oldies are females. Does this sort of stat have any bearing on how they work out what villages should look like?

[Beagle]

Two factors account for the bulk of retirement village financial success:

1. House price inflation, and
2. The development of new villages.

The rest is all pretty insignificant.

I agree with that for SUM but IIRC RYM makes about one third of its recurring profits from the day to day operation of the villages themselves, SUM could too but apparently are too risk averse to build dementia facilities.
Most of the survey's I've read or heard of show we're in the top three countries on a per capita basis in terms of how expensive our real estate is.
With our economy being arguably the only one in the world where the Reserve bank puts up interest rates significantly while many of our biggest exports are tanking its only all the new migrants that are stopping the real estate market from dropping already. What happens if migration drops off...you guys can join the dots. I think with SUM's result we have seen the first of many future disappointments with margins on resale which going forward may be considerably lower than what these sort of companies have become accustomed too.
Just as well SUM are working towards expanding their development margins on new units, they'll need that extra profit to cover the shortfall in resale's and extra staff costs.

[Beagle]

Shortfall in resales? They were up 23%!

I think you're getting way too hung up on the dementia stuff tbh. They say that their business model is centred on a "continuum of care", which I think is what the market mostly wants. Provided the new villages are consistent with this, I don't see a problem. Also, I'm not so sure that dementia is as profitable as you say. In fact, you might want to have a look at this when you get a chance (http://www.grantthornton.co.nz/asset...ice-review.pdf). IIRC, it clearly shows that the care side of the industry is failing to cover costs, while the independent living/retirement village side is booming.

in addition, I'm not sure that you should be holding RYM's profit on village operations in such high esteem. Perhaps that's why they failed to oust SUM as the best operator for the last 5 years running and have had far more bad press about wages and poor operating conditions for staff? perhaps that part of their business model is ultimately unsustainable?

Don't get me wrong. RYM is definitely an incredibly successful company, but I think that SUM has every chance of being just as good in 5 to 10 years's time, and I can't wait for the SP to eventually show it!

Margins on unit resale's were down reflecting what the company said was quicker turnover but I suspect that's only part of the story and price appreciation isn't as much as they'd hoped for which is also my concern going forward.
Thanks for the link I'll have a look. Couta1 working in the field is more in the know regarding the attributes of why these developments should have dementia units, I'm sure he'll chime in when he's sick of falling over on the ski field.

[macduffy]

I took Roger's point about "shortfall in resales" to refer to the likelihood that if house prices in general were to fall it would impact on the prices that villages would be able to charge for their units. Both because of a reduced ability to pay those higher prices due to lower sale prices of the customers' homes and the lower level of activity in the market generally. I guess we will have to wait and see if/when this happens.

[couta1]

Margins on unit resale's were down reflecting what the company said was quicker turnover but I suspect that's only part of the story and price appreciation isn't as much as they'd hoped for which is also my concern going forward.
Thanks for the link I'll have a look. Couta1 working in the field is more in the know regarding the attributes of why these developments should have dementia units, I'm sure he'll chime in when he's sick of falling over on the ski field.

I won't go over all the reasons I've put on here for having dementia units but they all add up to one very important factor that being MARKET DISADVANTAGE if your competitors all have dementia units with an ever increasing demand and you don't. PS-Hospital units cost more to run than dementia units do.