SUM - Summerset Group

[Beagle]

Hi Roger. From what I know about you from your other posts, I'm surprised by the above sentiment. I would have expected a more cautious outlook from you. If housing were a share or bond, would you buy it on fundamentals and market outlook (interest rate rises coming, immigration to be slowed, possible change of government?) Rental return of 3% if lucky, before costs (property management, maintenance, rates, insurance etc), which from my experience drops returns to sub 2%. Price supported by low interest rates which can really only go up from here (inflation figures just released show inflation now above 2%) and demand. Once the demand is suppressed or supply increased, price rises can not continue (all else being equal - wages etc). Just look at the lack of price growth in the ChCh market now that supply side of the equation is addressed.

It may take some large external catalyst for Akl prices to crash (fall +20%) but at best I can see a long sideways (5years+) period coming with little potential for upside.

Its all about supply and demand. BNZ believe there are circa one million Kiwi's presently overseas. One presumes the majority of those still hold N.Z. residency and passports and are entitled to return at any time. Forgetting about how the Govt might tinker with immigration requirements for new entrants for a minute think about that number and then take a quick glace around the world on the geopolitical front and N.Z. looks increasingly attractive by the day ! OECD report says we're one of the most lightly taxed countries in the world too !
No capital gains tax for one thing. AKL market could indeed go sideways inflation adjusted for a few years, maybe not even keep up with inflation so reduce gradually in real terms. That's not a concern for SUM who have six years land supply on hand. Any temporary dip could actually be good for the company as it gives them an opportunity to acquire more land at much more attractive prices.
(Bare land has historically had a very high beta in regard to changes in the real estate market overall). Long term a temporary dip in real estate prices could be a very good thing...why do you imagine Julian Cook just organized an expanded debt facility ? Take advantage of any attractive land acquisition opportunities is the obvious answer.

No issues with most of the country but returning to the Auckland market which seems a bone of contention with a lot of folk.
Fact is building companies are only building just over (from memory), 10,000 homes a year and circa half the immigrants, (35,000) per year want to live in Auckland. We're short about 4,000 homes per annum according to what I've read. Until that's fixed, which won't happen anytime soon as the industry is basically at peak capacity already there's no let up in the demand supply imbalance.
SUM are building in other parts of the country as well as Auckland. Some people get myopic vision and think Auckland's problem is symptomatic for the company generally.
By my estimate SUM is presently trading at $5.17 at only 16.15 times FY17 underlying earnings. That's extremely cheap for this sector let alone for the company that's achieved the highest compound growth rate average for this sector over the last 5 years (48% per annum). SUM housing and care is a needs based supply. Massive demographic tail winds for this sector for at least the next 25 years by which time I will have talked Julian Cook into allowing me to have two dogs in my waterfront retirement unit at Hobsonville when I move in at 80 (God willing I live that long).

Disc: Watching this one closely, already my #1 investment position on the NZX but if it drops much more I might have to consider doing a mini Couta1

[Ggcc]

Hey couta. A family member of mine is a nurse and fully believes that caregivers should get paid more than what they were on. When I questioned her whether she would want more money. Her response was "no and they fully deserved the increase. Being a caregiver is hard work and they have been underpaid for a long time."

So what I am saying is not all nurses want more money and yes this is one case. They deserved the increase was her response without hesitation. Have you spoken to nurses who have argued the pay increase? I do appreciate your input as you are fully involved inside the industry..

Cheers

[couta1]

Hey couta. A family member of mine is a nurse and fully believes that caregivers should get paid more than what they were on. When I questioned her whether she would want more money. Her response was "no and they fully deserved the increase. Being a caregiver is hard work and they have been underpaid for a long time."

So what I am saying is not all nurses want more money and yes this is one case. They deserved the increase was her response without hesitation. Have you spoken to nurses who have argued the pay increase? I do appreciate your input as you are fully involved inside the industry..

Cheers

As posted above, I will do a survey over the next week(Haven't been doing much work this week hence all the posting) I'd say your family member is the exception though, and remember once a few get an increase, they all get an increase, whether they want it or not. By the way, does your family member work in aged care? Are they in an older age bracket, just out of interest? PS-Nurses working for the DHB's are on a significantly higher rate than those working in aged care.

[Ggcc]

As posted above, I will do a survey over the next week(Haven't been doing much work this week hence all the posting) I'd say your family member is the exception though, and remember once a few get an increase, they all get an increase, whether they want it or not. By the way, does your family member work in aged care? Are they in an older age bracket, just out of interest? PS-Nurses working for the DHB's are on a significantly higher rate than those working in aged care.

My family member is working in a private practice not in aged care. She did mention she receives higher than the nurses inside the retirement sector.... Not by a lot. Also mentioned the new nurses usually work there to get experience, or the really old ones who should have given up nursing a long time ago..... Ie wet healing rather than dry healing of wounds..... You know what I mean with that of course. I look forward to your survey, but as we know the unions will decide the best course of action, as most nurses are aligned with union representatives.

[couta1]

So far the Nurses union nor any other union has been able to bring pay equity to aged care nurses in comparison to their DHB and private practice colleagues, this needs to change.

[LAC]

My family member is working in a private practice not in aged care. She did mention she receives higher than the nurses inside the retirement sector.... Not by a lot. Also mentioned the new nurses usually work there to get experience, or the really old ones who should have given up nursing a long time ago..... Ie wet healing rather than dry healing of wounds..... You know what I mean with that of course. I look forward to your survey, but as we know the unions will decide the best course of action, as most nurses are aligned with union representatives.

I am quite familiar with the nursing industry, DHB nurses are significantly higher than retirement sector. Nurses who can't get into the DHB from graduating settle for retirement villages but then DHB's almost never want nurses that have only worked in the retirement sector because the roles of nurses in DHB vs Villages are so much different (especially the process, drug handling, medical system etc.).
It's a very tough industry with horrible shifts and below average pay to other less stressful jobs in NZ, those working in aged care are paid a lot less but have less risks as to working in the DHB environment. Specialized nurses have it a little better in terms of earning power but they tend to get deployed to other DHB's quite a bit. Private hospitals pay a lot better with better work hours but once again if you ever decide to get back into a Govt hospital it's pretty difficult.

[couta1]

The slide continues, went to grab Sum more at close but got shut out, Ryman doing okay, lots of reef fish want those Oceania shares aye. PS-Another potential 3 days of selling for the Oceania sellers.

[JeremyALD]

It amazes me that this is headed towards $5 given the outstanding results and momentum SUM have. I'll be topping up soon to make this my #1 share. Im thinking of trying to time my entry though, so will see if it heads lower in the short term.

The thing I love about SUM is there are so many tailwinds that if you're willing to hold for the long term you can't really go wrong (or at least that's what I tell myself). Plus a roughly 2% dividend yield isn't that far off the banks.

Roger we seem to be doing similar things investment wise at the moment?!

[sonny n share]

Some retirement villages not paying tax
http://nzh.tw/11841788

[Baa_Baa]

Some retirement villages not paying tax
http://nzh.tw/11841788

Maybe someone here can explain how that works? How they can get away with it, given the profits they make and returns to shareholders. Wouldn't want this to turn out to be a rort, or for the IRD to rule adversely, let alone back date a ruling.