SUM - Summerset Group

[winner69]

Roger - I reckon you will get your wish

But don't rush in and buy though ...could go even lower .......esp if it follows RYM down

[Beagle]

I'm in no hurry to buy back in mate, (chart looks bloody awful) and until the substantial overhang of the new IPO listing of Oceania is done and dusted I think institutions will be keeping their powder dry in this sector with the incumbent players. That and anecdotal feedback I'm getting is that if it wasn't for the current glut of immigrants looking to buy the Auckland housing market would be in trouble already, (many provinces already are). A friend of mine has his Kumeu property on the market and has good interest from Chinese buyers and not a single Kiwi buyer look at the place.
These companies are nothing but a form of real estate investment and with absolutely massive gains in real estate prices in recent years...and a Reserve Bank that's now determined to be proactive...you join the dots.

[Food4Thought]

New Zealand is a desirable place to live, with limited land. People want to live there. Not (for example) in the middle of the Australian outback. With demand, prices will stay solid. NZ is much more desirable than many other countries. I don't think that the demand will drop off. There are many financially wealthy people who are waiting to come to NZ and retire there. Global population is not shrinking. The reserve bank can only control so much, for now.

Long term, rosie.

[Beagle]

Hi Food4Thought. I agree with that and concur with others recent posts that demand is strong, that development projects are generally tracking well as is gradual expansion in development margin and history tells us that Real Estate prices don't really decrease per se but have been times in history where real estate prices have flat-lined for several years, (decreased in real inflation adjusted terms). We are seeing the first signs in this recent result that despite re-sales numbers being strong profits from same were anything but. The company has tried to explain that but I'm sorry, my corporate B.S. meter gave a solid reading. After discussing national real estate prices at some length recently with the GM of one of the major N.Z. real estate chains I am left pondering whether we are about to enter a protracted period of price stagnation, what with N.Z. residential prices being the third highest per capita in the developed world, rising interest rates and a cooling economy and all. Although new build margins will be strong for SUM my perception is resale margins going forward may be a significant headwind, possibly for quite some time.

[Goldstein]

At the moment the volumes are not huge. It'll be interesting to see if any big holders start to share your opinion Roger. There seems to be a massive correction going on with SUM. We're on the way to where the SP was 18 months ago.

[winner69]

I'm in no hurry to buy back in mate, (chart looks bloody awful) and until the substantial overhang of the new IPO listing of Oceania is done and dusted I think institutions will be keeping their powder dry in this sector with the incumbent players.

Probably a good reason for the sell down of overvalued shares in the sector.

Combined market cap of the 3 incumbents is $5.3 billion

Oceania reported to raise $300m

Assuming all investors keep their sector weighting constant and want to partake in the Oceania IPO that means 6% of current holdings need to be sold. The actual number wil be higher as instos don't hold 100% of these three.

Are instos feeding say 10% of their SUM, RYM and MET holdings into the market?

Heck $6.50 for RYM and $2.50 for SUM just might happen

Maybe a trade sale of Oceania would be better.

Or is this conjecture just a load of ****.

[Goldstein]

Probably a good reason for the sell down of overvalued shares in the sector.

Combined market cap of the 3 incumbents is $5.3m

Oceania reported to raise $300m

Assuming all investors keep their sector weighting constant and want to partake in the Oceania IPO that means 6% of current holdings need to be sold. The actual number wil be higher as instos don't hold 100% of these three.

Are instos feeding say 10% of their SUM, RYM and MET holdings into the market?

Heck $6.50 for RYM and $2.50 for SUM just might happen

Maybe a trade sale of Oceania would be better.

Or is this conjecture just a load of ****.

I suspect you combined market cap of 5.3b

If your idea has merit W69, then it appears that the 6% is not being felt evenly. MET is roughly the same as it was at the beginning of the year, while RYM is down and SUM is being hung out to dry.

WIth the market caps at
RYM 3.8b
MET 0.9b
SUM 0.6b
the effect could be quite magnified if punters decided to hold a greater proportion of RYM and MET.

[Beagle]

I suspect MET at a retail level is by far the most unloved stock in this sector. Questions regarding management's ability were somewhat mitigated by Infratil's purchase but the retail investor never got a look in as the SP gapped up immediately. One suspects the significant and ongoing correction in RYM and SUM is now a momentum issue, exacerbated by institutions keeping their powder dry for the Oceania IPO effectively mitigating the support these stocks would otherwise receive. As more and more holders get sick of seeing their investment value eroded I can't see any of the institutions helping them out and therefore expect the negative momentum to continue until, at earliest, the Oceania IPO is out of the way.
Disc: Currently not holding any stock in this sector and no plans to change this approach anytime soon.

[Vaygor1]

….. These companies are nothing but a form of real estate investment and with absolutely massive gains in real estate prices in recent years...and a Reserve Bank that's now determined to be proactive...you join the dots.

The average length of tenure for a retirement village resident is 6-7 years, so when it comes to resales, the impact of the gain in NZ's housing economy is not reflected into SUM's underlying profit until 6-7 years after the previous sale/resale.

Here is the percentage change in NZ house prices since 1981 I have updated this since posting it on the RYM thread back in May this year.

Attachment 6145
Source - http://www.rbnz.govt.nz/statistics/k...prices_values/

To gauge the increase in NZ average house prices over any 6-7 year period, take the area above the x-axis within the chosen period and subtracted the area (if any) below.

To say there has been massive gains in real estate prices in recent years flies in the face of this data. In fact, the last 6-7 years has seen the smallest increase in NZ average house prices in any 7-year period since 1981 (or even earlier probably, if the data went back that far).

And I know the Auckland/Christchurch factor can skew this a bit, but in all my life I have yet to hear any kiwi say "I am so upset at buying my house 7 years ago, I could of got it much cheaper today".

[Beagle]

http://www.stats.govt.nz/browse_for_...ent-in-nz.aspx

Perhaps living in Auckland gives one a unique perspective.

If you have a look on page 9 you'll see the average house price according to statistics N.Z. basically flat-lined between mid 1997 and late 2001, more than 4 years.
Its hard to find reports on this but talking to older folk there were considerable periods in the 1960's and 1970's where house prices showed very little appreciation.

My contention is simply that house prices have seldom been less affordable and indeed as mentioned above I've heard reports we are the third highest on a per capita basis in the OECD. Further the Reserve bank are nothing if not zealous in their approach so my (admittedly forward looking theory) is that lack of affordability will be the main driver of a period of stagnation going forward. I'm getting reliable feedback the provinces are already being seriously affected by rising interest rates.
Going forward I foresee the gains on resale won't be of the same magnitude these companies have come to enjoy. That and their stretched PE ratio's will be questioned as EPS profit growth slows, exacerbated by the PE itself being less attractive due to higher interest rates. Asset values are stretched because we have enjoyed a prolonged period of exceptionally low interest rates...if people think that won't change when interest rates normalise then I wish them good luck with that.

At the moment the volumes are not huge. It'll be interesting to see if any big holders start to share your opinion Roger. There seems to be a massive correction going on with SUM. We're on the way to where the SP was 18 months ago.

Close to double the normal volume today.