SUM - Summerset Group

[Lewylewylewy]

Always nervous holding shares with a divie that's less than the bank rate, as a change in circumstance can ruin the investment. I imagine investors are nervous about house prices stalling (don't want to rehash the arguement, but it does seem to be something that effects the SP, whether you like it or not - investors are factoring this in [IMO]). Also money leaving the country and Trump nerves could be causing people to cash up?

Thoughts?

[Ggcc]

Concerning the housing market...... Julian cook had this to say. "For shareholders, this should mean continued growth in earnings. We have discussed our approach to property market cycles in previous annual reports.
In short, demand for our villages is driven by the increased number of older New Zealanders and the value we o er them in that stage of life. This demand is not driven by the property market."

[macduffy]

http://www.summerset.co.nz/assets/In...t-2016-Web.pdf

I've had a good read through. Julian Cook talks about continued profit growth looking forward. Hard to figure the recent SP correction ?
Disc: Core long term portfolio stock holding.

SUM's 6 month chart is a series of rapid jumps and falls - the most recent a quick rise from around $4.80 to $5.40 and back down again. It seems to me that the stock is subject to extreme bouts of enthusiasm, followed by doubt as to whether it may have been overbought. I would expect another round of this treatment in due course. I hold.

[Beagle]

Minor amendment to previous posts regarding underlying EPS. EPS based on weighted average number of shares on issue is exactly 25.6697 cps, (slightly higher than previous calculation).
At $5.05 SUM currently trades on a 2016 PE of 19.67.
I think the market is presently a little obsessed with the potential for the property market to correct and its potential for impact on SUM.

[percy]

Page 19 SUM annual report.
"Since opening our first village almost 20 years ago,Summerset has seen two property downturns and during each,demand for our services remained consistent."
Other worthy quotes;
page 14.We deliver these results by providing our residents with an offering that meets or exceeds their expectations,ensuring they are proud to live at a Summerset village."
Pages 6 & 7's graph show shows very clearly the phenomenal growth SUM have enjoyed,yet it seems to me as though SUM has only recently achieved perfection in their business model.The developement margins are now excellent.
Therefore I think the future looks as though SUM will gain further momentum.
I was so impressed reading the annual report, I am considering adding to my "free" shares,even at over $5.

[Beagle]

The hound will be at the annual meeting "hounding" Julian Cook for information on indications regarding the development margin for FY17 in the meantime I note there was a big jump in development margin between 2H FY16 23.6% and 1H FY16 20.3% so if that flows through into FY 17 and beyond...

Regarding resales of existing units. Embeeded value is up 20% per unit on FY15, (source Results presentation with FY16 results)
Just sniffing between the lines I see resales as a proportion of stock on hand at the start of the year for the last five years were 11%, 10.6%%, 9.3%, 11.6% and 10.0% for 2016, average 10.5% churn.
2016 was slightly lower than average, (nice warm winter will do that for you) but if 2017 is a normal year we could expect 2828 x 10.5% 297 resales up considerably from 244 last year and taking into account much higher embedded value we could see last year's $15.4m gain on reslaes jump to 297 / 244 x 1.2 = $22.5m, an increase in profit from last year of $7.1m

EPS could climb by circa 12.5% ($7.1m / $56.5m) this year just from resale gains volume and embedded value expansion.
I expect development gains to also expand in line with volume expansion circa 450 / 400 = 12.5% plus possible further gains from increasing average development margin.

My base case taking into account profit growth from resale volume and margin expansion and development volume expansion only, (assuming no expansion in development margin) is therefore for 25% EPS growth in FY17.

[winner69]

Shareprice might be 4xx before the next update early April at the rate it's going down

Better be a boomer number or else there might be a bit more of a market over reaction

Jeez, pretty close to 4xx .......better be boomer numbers in a few weeks or else the xx might be 50

[JeremyALD]

Jeez, pretty close to 4xx .......better be boomer numbers in a few weeks or else the xx might be 50

Will be a good time to top up!

[couta1]

Will be a good time to top up!

$4.99 it is, any further offers.

[Beagle]

$4.99 it is, any further offers.

Hmmmmmmm. Well my base case is 2017 underlying earnings of 32 cps, see post #4267 above. At $5 it trades on a current year PE of only 15.6 ! I think this is absurd considering their track record since listing and the demographic tailwinds favoring the sector for at least the next 25 years.

Let it come down a bit more and I'll have to consider doing a Couta1