SUM - Summerset Group

[Snow Leopard]

Ok ...I have 4 k shares in RYM and SUM.....what about you guys

So, if the Tiger's holding in SUM is larger than your combined holding in RYM & SUM by approximately a quarter and his holding in ARV is larger again and his combined holdings in Retirement Home shares is about half the total portfolio percentage of allfromacells SUM weighting...

What does any of this have to do with the share price?

Best Wishes
Paper Tiger

All numbers are purely to make the puzzle more interesting.

[troyvdh]

..what does any of this have to with share price"..... You have absolutely no idea what I'm getting at do you...Troy.......I guess your young yes.....go well mate...

[winner69]

Roger - not quite $38 but even a modest 20% per year gain would give you $14

And 20% pa is a lot less than the 30% pa the shareprice has been going up since it floated


Then of course SUM could get re-rated by the market with higher multiples

[Beagle]

Roger - not quite $38 but even a modest 20% per year gain would give you $14

And 20% pa is a lot less than the 30% pa the shareprice has been going up since it floated


Then of course SUM could get re-rated by the market with higher multiples

Ironic you bring that up mate. This morning I was thinking given their average annual compound growth rate in underlying EPS has been 48% for the five years since they listed, and if the multiple stayed the same, (which is less than RYM) but they grew at half their historic average rate for the next three years as this young company continues to mature and refine its development model and then for the next two years they revert to the long term sector average RYM appears to be able to enjoy (15% per annum) where's the share price five years from now ? (this sort of vision casting
five years out is what serious investors like Warren Buffet do ? $5.40 x 1.24 x 1.24 x 1.24 x 1.15 x 1.15 = $13.61.

Roughly the same $14 you came up with mate. 2.59 times your money over five years. All that's required is the vision to see what's possible and a healthy dose of patience.

Of course if they can demonstrate they can continue to grow at the above rate, (which is extremely conservative compared to how they have grown so far), I do suspect, as you obviously do, that we'll also see an increase to at least RYM's multiple of 23 so a further re-rating of 10% (PE 21 to a PE of 23) on top of that to give a resulting SP of ~ $15.

Since listing 5 1/4 years ago they've more than tripled in price. I think the most likely thing is we'll see that repeated.

On another theme, as predicted a while ago, massive demand due to ever increasing immigration will continue to see the N.Z. housing market extremely well supported.
http://www.sharechat.co.nz/article/6...-around-1mhtml NO worries regarding housing prices for SUM shareholders.

[Beagle]

Enough of looking forward, (as much fun as that is), how does its relative value compare to the past ?

Looking at my 31 March 2016 balance sheet I see they're recorded at $4.43 and they've grown underlying earnings for the year at 50% so that suggests a SP of ~ $4.43 x 1.5 = $6.65 is fair value on 31 March 2017.

Looking back to 31 March 2015, (I didn't hold at that stage as Norah Barlow was still on the board), is even more interesting. The SP looks like it was $3.40 and they grew underlying earnings in the calendar / financial year ended 31 December 2015 by 55%.
On a relative PE basis comparing the price today $5.40 to two years ago we should be $3.40 x 1.55 x 1.5 = $7.91 as at 31 March 2017 !

My conclusion. Looking back historically, SUM today are extremely cheap relative to the underlying PE they have generally traded at in recent years.

Maybe Mr Market thinks they don't have any more super normal growth left in them ? I suspect the market may be a little conservative on that front...or maybe I am a little bullish but I don't think an assumption of underlying growth averaging 24% per annum for the next three years, (half their compound annual average for the last 5 years), is too bullish.

[Snow Leopard]

It is alright, and can even be fun, to take the raw numbers of past performance and multiply them up and invoke the name of the great Warren B. but...

If you get down to the fundamentals of how it all really works and why what has happened in the past did happen in the past and what is likely (aka your best guess) to happen in the future based on those same fundamentals and past happenings then and only then can you really come up with a reliable valuation for the assumptions your make.

Of course the future likes to get a copy of your tip sheet and rip-it to tiny little pieces and scatter them on the four winds to the twelve corners of the world.

However with a benign future and a windless year or two then SUM is very definitely a 18% pa growth stock with a current value of $5.37 rising to $6.15 at years end.

For the benefit of everybody, and especially somebody, these are not predictions of the actual share price that I expect to be attained on said dates.

Best Wishes
Paper Tiger

[brend]

to late to buy some today and clip the dividend ticket? forgotten how this works :P

goes ex divy on wednesday.

[Beagle]

SUM 2016 underlying earnings to 31 December 2016 25.5 cps at $5.40 = historic PE of 21.2
RYM underlying earnings to 31 March 2016 31.6 cps at $8.90 = historic PE of 28.1
Their balance dates are clearly different but even aligning them as closely as possible and using projected earnings for RYM for the year ended 31 March 2017, (giving them the benefit of the doubt and assuming they can achieve their stated target of 15% underlying earnings growth), we get eps of 36.34 cps which puts them on a 2017 PE 24.5

Conclusion even giving RYM the benefit of one quarter and assuming they hit their target for 31 March 2017 they are trading at a PE premium of 3.3 to SUM and yet SUM has been growing since it listed at roughly three times the rate.

If SUM were trading on the same PE as RYM and I think there's a strong argument for at least that PE if not higher considering the vastly higher current growth rate a fair price for SUM would be 24.5 x 25.5 = $6.25.

I still think RYM are expensive, picked it three years ago at around the current level to do nothing and have been right, now going on record and saying we've got at least one more year of RYM treading water before they're good value, and that assumes they can achieve their 15% underlying earnings growth for FY18...some people myself included think that might be a tough ask for them.

Worth noting that SUM now have a five year track record of consistently meeting or beating their build rate guidance. Build rate target going up 12.5% this year from 400 to 450.
Development margin was up in the mid 23's % in 2H FY16 from mid 21's% 1H Fy16...fairly obviously they continue to refine and improve their development model and as the company continues to grow they get ever increasing economies of scale and efficiencies.

Join the dots folks, we should see earnings growth this year comfortably exceed RYM's earnings growth yet again.

[Joshuatree]

Thanks Roger. Have you got the comparison figs with new kid Arvida which has been out performing all others?

[winner69]

Thanks Roger. Have you got the comparison figs with new kid Arvida which has been out performing all others?

Assuming $21m (+31%) underlying profit for F17 that's 6.3 cents a share and PE of 21/22 (not historical)

Seems like ARV is liked by the market already - even more so than SUM - good effort by the NE boy on the block

t_j will be pleased