SUM - Summerset Group

[Beagle]

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

Depends which yardstick you use mate. Still trading above its 100 day MA which is my "go too" TA indicator but yes its broken down through the 30 day MA. Not many stocks have been immune to the recent sharemarket correction and with the NZX50 down ~ 8% from its recent high some degree of collateral damage has to be expected.

LLL - Yes there are waiting lists at some of SUM's villages and other villages the sales staff are struggling. Most people want to retire pretty close to where they used to live so the vacancy rate at some villages and long waiting lists at others is pretty ironic for shareholders and the people concerned.

[Lewylewylewy]

Well, i finally sold out. Terrible. I was thinking to get out when beagle jumped out, but decided to ride it out.

I finally made the move because the property market may have stalled, which was my original reason for the investment (property hedge attitude selling up my rentals). Makes little sense to hold with all that's possibly going on.

Might sit with a bit more cash for a while. There's only 1 stock that interests me as a long term hold currently, but even that one is not a great buy right now because there's some solution coming up.

[Lewylewylewy]

I do have concerns that what was previously an advantage for SUM is now a disadvantage, which is the in-house property development team as a fixed cost in a falling (static) market with an oversupply of unsold units.

Also, if sales are represented in underlying earnings (?), what will it look like if sales drop off?

[couta1]

I do have concerns that what was previously an advantage for SUM is now a disadvantage, which is the in-house property development team as a fixed cost in a falling (static) market with an oversupply of unsold units.

Also, if sales are represented in underlying earnings (?), what will it look like if sales drop off?

And the question to ask is will the % of the grey tsunami going into the Care centre side of the village increase going forward, the answer is yes,so you could have more regular occurences of a build up of unsold stock.

[oldtech]

I have sold about 60% of my holding - decided to keep some because previous times when I've sold the SP has normally shot up!

But unfortunately my daughter's portfolio is well and truly in the red with this one, so have very little choice there but to ride it out.

[Lewylewylewy]

Tough position. Even as a long term dividend growth, it's a poor hold without the fancy big growth years.

I too, kept a small holding, just for kicks.

[Beagle]

I do have concerns that what was previously an advantage for SUM is now a disadvantage, which is the in-house property development team as a fixed cost in a falling (static) market with an oversupply of unsold units.

Also, if sales are represented in underlying earnings (?), what will it look like if sales drop off?

This is where on my understanding of the matter underlying earnings gets a little bit into murky waters....actually almost creative accounting if they're carrying a lot of stock that subsequently might need to be discounted below independent valuation in some sort of clearance sale. What they do with their development book is book a development profit for all units "developed" or in their terminology "delivered" during the year regardless of whether they're sold or not. The book entry of development profit "realised" is the difference between the cost price of construction and independent valuation at year end (for those units unsold) and the difference to sale price for the sold units. If the market starts to fall however, so called previously "realized" development profit from unsold units can be reversed to a certain extent. The Auckland market is flatter than the Canterbury plains at present. The foreign buyer ban which came into effect on Monday this week in tandem with the lower immigration recently announced could easily tip the scales downward. The board needs to urgently change its policy to fixed weekly fees for life and initiate some other sales strategies, like discounting weekly fees to those who sign up off the plans like Ryman do.
A disappointing Q4 sales number in my opinion could see a 5 handle notwithstanding the recent fall.

[winner69]

This is where on my understanding of the matter underlying earnings gets a little bit into murky waters....actually almost creative accounting if they're carrying a lot of stock that subsequently might need to be discounted below independent valuation in some sort of clearance sale. What they do with their development book is book a development profit for all units "developed" or in their terminology "delivered" during the year regardless of whether they're sold or not. The book entry of development profit "realised" is the difference between the cost price of construction and independent valuation at year end (for those units unsold) and the difference to sale price for the sold units. If the market starts to fall however, so called previously "realized" development profit from unsold units can be reversed to a certain extent. The Auckland market is flatter than the Canterbury plains at present. The foreign buyer ban which came into effect on Monday this week in tandem with the lower immigration recently announced could easily tip the scales downward. The board needs to urgently change its policy to fixed weekly fees for life and initiate some other sales strategies, like discounting weekly fees to those who sign up off the plans like Ryman do.
A disappointing Q4 sales number in my opinion could see a 5 handle notwithstanding the recent fall.

All very complicated eh .....and as you say a bit murky ...but remember the Summerset finance team win awards so you can trust them to do the right thing.

There’s one part of Oceania reporting I can’t really grasp ....it looks like the % difference between independent valuations and they sell for is applied across the whole portfolio (unsold ones)

Never mind

[Lewylewylewy]

Sometimes i like to look at sum as a property investment.

If sum are building units, selling, and slowly growing underlying earnings (in line with the build rate), im happy because they're building operation is increasing the nta and therefore value. The underlying profit growth can be unextraordinary and i wouldnt mind so long as there's nothing fishy going on to cause that like troughing or an unprofitable business model.

In that case, it's a property play with a nice little return from the business (which could be regarded as the perfect tenant). I also like the idea of owning a bunch of new brick houses.

Of course, with the potentially lower growth rate from lower sales, drop in property market (lower nta), and higher costs from building and not selling, the PE must surely contract.

Maybe I'll buy in one the PE is more favorable. Or maybe I'll wait until the property market looks like it could pick up again, or once global events cool off.

[winner69]

All very complicated eh .....and as you say a bit murky ...but remember the Summerset finance team win awards so you can trust them to do the right thing.

There’s one part of Oceania reporting I can’t really grasp ....it looks like the % difference between independent valuations and they sell for is applied across the whole portfolio (unsold ones)

Never mind

Beagle .....all what you said one or several reasons why real NPAT is better guide than this underlying profit thing .....and as such the increase in book value.