SUM - Summerset Group

[BlackPeter]

Just while we are talking it appears SUM slipped below the 685 support level. Currently trading for 675. Next stop could be around 630;

I am sure there will be a good time again to BUY them :

[Beagle]

They built ~ 450 units in 2017 and are on track to build the same number again in 2018. As we all know, the same build rate doesn't really cut the mustard in this game and the company has a track record of increasing its build rate either every year or every second year, which is great provided the market is there for the extra units. By my reckoning then seeing as there was no build rate uplift this year we are due for one to be announced for FY19, probably with the annual result announcement in February 2019. If I recall correctly Julian Cook mentioned at the February 2018 results presentation that they're looking to expand their build rate to ~ 600 units per annum over the next 2-3 years. If they can't sell 450 units per annum how are they going to sell 600 units per annum ? Is the market really going to grow to this extent over the next couple of years or is it getting somewhere near saturation already ? Thoughts ?

That said this correction has been pretty swift...maybe once we're back to the half price reversion Couta1 theory to half RYM at ~ $6 this will be great buying again.

[macduffy]

If the much talked about grey tsunami is still building then this "pause" is really only that. Nothing - or at least not much - increases in a straight line! SUM may not be a great stock to trade but as a long term hold it's still one of my favourites.

[Maverick]

If the much talked about grey tsunami is still building then this "pause" is really only that. Nothing - or at least not much - increases in a straight line! SUM may not be a great stock to trade but as a long term hold it's still one of my favourites.

The total pipeline of units is 9161. When divided by the extra number of units required each year (1800 and increasing to 2200 by year 2023) means there is enough pipeline supply to meet demand for about 5 years. That does not allow for any of the expected increased penetration over that time (Penetration is the ratio of 75 year olds opting to go to a village - currently 12.4 %).
It seems supply and demand is well balanced for the next five years. Beyond the 5 years demand increases further. No doubt more paddocks will be bought in the mean time.

Ryman produced 458 extra units last year which was their lowest new build rate since 2014 (in 2017 they produced 600), and yet despite that, they produced yet another record profit. So I don't subscribe to the idea that companies must be building ever more units to grow profits. (FYI, RYM have sold pretty well everything they built each year including 2018, unlike SUM which now seem to have 200 unsold units.

So my conclusion is that unit production is not overdone.There is plenty of forward looking aging/demographic statistics for everyone to smoothly adjust the "pipeline tap" as required.

SUM may well have empty units for now but I am not concerned. In fact I applaud them for pushing forward in anticipation what WILL be needed and fighting for more market share.

Disc holding SUM and a truck load of OCA

[Ggcc]

Well whatever has been explained, the price keeps dropping and who knows where it will end......... I still think the company will better their underlining profit from last year, otherwise we should have heard about that by now. Well at least one would think so. Luckily I don’t need the money right now, as I don’t want to sell now, when tomorrow it will fly back up if I sell.......

[Beagle]

The total pipeline of units is 9161. When divided by the extra number of units required each year (1800 and increasing to 2200 by year 2023) means there is enough pipeline supply to meet demand for about 5 years. That does not allow for any of the expected increased penetration over that time (Penetration is the ratio of 75 year olds opting to go to a village - currently 12.4 %).
I personally do not see an oversupply of units now or over the next five years.

Ryman produced 458 extra units last year which was their lowest new build rate since 2014 (2017 they produced 600), and yet despite that, they produced another record profit. So I don't subscribe to the idea that companies must be building ever more units to grow profits. (FYI RYM have sold pretty well everything they built each year including 2018, unlike SUM which now seem to have 200 unsold units.

So my conclusion is that unit production is not overdone.There is plenty of forward aging/ demographic statistics for everyone to adjust the "pipeline tap" as required.

SUM may well have empty units for now but I am not concerned. In fact I applaud them for pushing forward by anticipating what WILL be needed and fighting for more market share.

Good rebuttal. Holding costs are cheap,$125m recently borrowed at 4.2% locked in for 7 years, only just over $5m per annum to hold about 200 extra units assuming an average cost of $600K each. Directors were confident at the annual meeting that they would sell all units built and didn't seem concerned. If they can get an extra 5% development margin on 200 units with an average sale price of say $800K that's an extra $8m in development profit so provided they aren't holding those units more than 18 months the strategy they're employing could make common sense.

Fundamental's are getting more and more compelling by the day but TA looks like a real worry and it appears its now broken down through the 200 day MA.

[winner69]

Julian has sort of said 450 new sales this year ...wouldn't keep harping on about delivering 450 new units and how sales are aligned to deliveries

Add say 320 resales and expect underlying proft to be in excess of $115m


That's about 51 cents a share ....so at 660 on a PE of about 13


Getting close to OCA multiples .....maybe the market is finally coming to terms that retirement companies should only trade at about these multiples.....meaning both OCA and SUM are about fairly valued right now ....and ARV is catchoing up


RYM reigns supreme as on of the global leaders and valued differently because of that

And of course if the big crash does come expect further contraction in multiples

[Beagle]

Look for Julian to issue underlying FY18 profit guidance in November / December of about $100m and reaffirm they are on track to "deliver" 450 units. Remember that deliver is industry speak for completion of the unit, not delivery to new customers who have bought them. My expectation is they will struggle to get more than 400 confirmed sales this year and the unsold stockpile of units will increase further.

I'm expecting about 45 cps underlying earnings now, (anecdotal gossip of some discounting to get sales done will in my opinion trim their 2H development margin a little).

At $6.60 I have them on a forward PE of about 14.7. I have OCA on a forward PE of 10-11. Remembering that SUM deal predominantly in independent living units where people make lifestyle choices when they've sold their homes (average entry age about 80) and OCA is more needs based and average entry age is older and average unit price is cheaper I continue to believe RYM and SUM are more vulnerable to a real estate market downturn and OCA is more defensive and on considerably better metrics.

Looking at the TA, SUM now broken through 200 day MA and looking very sick. RYM very close to breaking down through 200 day MA. OCA still in a nice uptrend.
SUM fair value and RYM still overpriced in my opinion even after the recent decline from $14.00 to $11.79.
I wouldn't touch MET with all their old units and imbedded problems therein. That's how I see it. Continue holding stocks in an uptrend (OCA the only one of the 4 retirement stocks I follow). I suspect SUM and RYM will probably inflict more pain on holders in the near term before eventually resuming their long term uptrend again.

Disc: I only own OCA in this sector at present.

[Lewylewylewy]

Does anyone know if there's still a waiting list on SUM villages?

[RupertBear]

Look for Julian to issue underlying FY18 profit guidance in November / December of about $100m and reaffirm they are on track to "deliver" 450 units. Remember that deliver is industry speak for completion of the unit, not delivery to new customers who have bought them. My expectation is they will struggle to get more than 400 confirmed sales this year and the unsold stockpile of units will increase further.

I'm expecting about 45 cps underlying earnings now, (anecdotal gossip of some discounting to get sales done will in my opinion trim their 2H development margin a little).

At $6.60 I have them on a forward PE of about 14.7. I have OCA on a forward PE of 10-11. Remembering that SUM deal predominantly in independent living units where people make lifestyle choices when they've sold their homes (average entry age about 80) and OCA is more needs based and average entry age is older and average unit price is cheaper I continue to believe RYM and SUM are more vulnerable to a real estate market downturn and OCA is more defensive and on considerably better metrics.

Looking at the TA, SUM now broken through 200 day MA and looking very sick. RYM very close to breaking down through 200 day MA. OCA still in a nice uptrend.
SUM fair value and RYM still overpriced in my opinion even after the recent decline from $14.00 to $11.79.
I wouldn't touch MET with all their old units and imbedded problems therein. That's how I see it. Continue holding stocks in an uptrend (OCA the only one of the 4 retirement stocks I follow). I suspect SUM and RYM will probably inflict more pain on holders in the near term before eventually resuming their long term uptrend again.

Disc: I only own OCA in this sector at present.

I was thinking OCA was actually starting to trend down Mr Beagle