SUM - Summerset Group

[Beagle]

New immigration stat's out yesterday, some sort of record...now a whopping 71,000 something and reported today that those looking to migrate overseas has hit a some multi year low, sorry forgot how many years.

The BNZ estimate there's approx. one million Kiwi's currently living overseas. The world has got more and more crazy with every passing month. I see no let up whatsoever in the number of Kiwi's wanting to come home somewhere safe and insatiable demand from new immigrants wanting someone safe to reside.

I think the market demand dynamics are hugely supportive of real estate prices for the foreseeable future. Other tailwinds in this sector are very strong for at least the next 20 years.
Underlying PE is cheap for this sector. CEO is starting to hit his straps. I expect SUM to be one of the best long term growth stories on the NZX over the short, medium and long term.

[Lewylewylewy]

Dear Lewy...I would appreciate an explaination as to why you thinks a property correction will have significant impact on retirement entites..like do you believe that an owner of a property worth say $1m...becomes say $900k...will not continue to purchase a retirement unit for say $400k...I just dont get it honestly mate.

lol Dear Lewy

To answer your question: Excluding any mechanics of the business, if property prices go up, so does the value of the assets SUM owns (NTA) and therefore one may choose to value the SP higher

In terms of the mechanics of the business, there's a lot of discussion on this thread regarding this, everyone seems to have their own ideas. I will try not to dredge up the argument for everyone's sanity, but I will skirt the fringe by saying that if property prices go up, SUMs customers will have greater disposable income, which must be a good thing

[jmsnz]

lol Dear Lewy

To answer your question: Excluding any mechanics of the business, if property prices go up, so does the value of the assets SUM owns (NTA) and therefore one may choose to value the SP higher

In terms of the mechanics of the business, there's a lot of discussion on this thread regarding this, everyone seems to have their own ideas. I will try not to dredge up the argument for everyone's sanity, but I will skirt the fringe by saying that if property prices go up, SUMs customers will have greater disposable income, which must be a good thing

Well, yes they will have more disposable income, but that is only party of the issue and doesn't take account of:
a) SUM/RYM etc are selling a licence to occupy, they aren't selling the unit they will recycle that capital cost of the unit many times so what they get for that licence is still very profitable for them
b) An aging population means that there is growing not reducing demand for old age care so demand will hold the price up
c) A reduction in house prices really only affects the people at the margin of affordability of moving into one of these units, there is still enough demand to fill them
d) When the time has arrived for Mum/Dad to move then they have to move and whether or not their house is worth less than was last year of not won't be the top consideration for Mum/Dad or the family

I think where it might get interesting is if house prices got so high that they became generational assets but then families would be faced with the capital funding of Mum/Dad's retirement unit in return for tenure in the generational home. Ok for single child families not good for larger families.

Another interesting point for me is that through the GFC RYM share price fell significantly but their profitability and performance didn't. That to me suggests a disconnect between how the market thinks of these types of businesses and what actually happens. Yes they did less development, but the churned as many units as usual, which is (sadly) the nature of their business.

[Lewylewylewy]

...Another interesting point for me is that through the GFC RYM share price fell significantly but their profitability and performance didn't. That to me suggests a disconnect between how the market thinks of these types of businesses and what actually happens. Yes they did less development, but the churned as many units as usual, which is (sadly) the nature of their business.

Which is exactly why I mentioned that I think that medium term the price will go down, but short term and long term is up. At some point there will be a catastrophe, and SUM will become cheap to buy

Population grows, land is a finite resource. So as long as population keeps increasing and people keep getting older, SUM (and other shares with business based on land) will continue to be a good bet. This is why half of my top 10 favourite shares are property based.

[winner69]

quote jmsnz

Another interesting point for me is that through the GFC RYM share price fell significantly but their profitability and performance didn't. That to me suggests a disconnect between how the market thinks of these types of businesses and what actually happens. Yes they did less development, but the churned as many units as usual, which is (sadly) the nature of their business.

The 'disconnect' was general market sentiment - most things went down. even the best stocks were rerated downwards, irrespective of company performance.

If there is another 'catastrophe' as lewy describes won't just see the likes of SUM and RYM fall in price and become 'cheap' again - most things will be 'cheap' with very few places to hide.

[James108]

Dear Lewy...I would appreciate an explaination as to why you thinks a property correction will have significant impact on retirement entites..like do you believe that an owner of a property worth say $1m...becomes say $900k...will not continue to purchase a retirement unit for say $400k...I just dont get it honestly mate.

It seems reasonable to me that the price the retirement operators can achieve for their units correlate strongly with house prices. I would say it is likely more of a pricing thing than a demand thing.

[Lewylewylewy]

Another factor is that without growth in property values, SUM can't revalue their assets and borrow (leverage) against them to buy more. This equates to their future growth prospects dropping and therefore the PE will drop (IOW SP).

[Beagle]

http://www.stuff.co.nz/business/prop...rement-village

Thanks to Couta1 for e.mailing me the article.

[winner69]

Some days the SUM share price goes up and other days it goes down ....

.....but at the end of the no matter what the share price keeps trending up ...up ...up (about 30% a year)

For those with a short time frame attention there have been times when SUM has been a good buy and times when the panic button needs to be hit ......but medium/long term no worries

Revaluations might not be as high for the next year but sales will keep happening (eh Troy) .... and SUM share price will still keep rising from these levels. Same factors affect RYM but as they are over valued the part that the sahre price will keep rising might night entirely apply to them.

For baabaa - the red line is only drawn on and not calculated but if I bothered calculate it I don't think it would be too much different

[Beagle]

Some days the SUM share price goes up and other days it goes down ....

.....but at the end of the no matter what the share price keeps trending up ...up ...up (about 30% a year)

For those with a short time frame attention there have been times when SUM has been a good buy and times when the panic button needs to be hit ......but medium/long term no worries

Revaluations might not be as high for the next year but sales will keep happening (eh Troy) .... and SUM share price will still keep rising from these levels. Same factors affect RYM but as they are over valued the part that the sahre price will keep rising might night entirely apply to them.

For baabaa - the red line is only drawn on and not calculated but if I bothered calculate it I don't think it would be too much different

Beautiful image mate...picture says a thousand words...