SUM - Summerset Group

[Beagle]

Welcome to the forum Mogul.

If they get $118m underlying this year and on average just grow underlying earnings at just 15% average per annum for the next 10 years, (i.e. Ryman type growth which has been proven to be sustainable for them), the power of 15% compounding for 10 years gives underlying profit of $477m in 2029 by my calculations.

The cool thing about the business model is it encourages compounding growth through them clipping the ticket over and over and over again on the same properties as well as building new ones so the pool of properties for repeat ticket clipping gets ever bigger and bigger and more valuable and each time they clip the ticket its on the higher price through increase in each units value. All very tax efficient too.

If you started with a clean sheet of paper you'd struggle to come up with a more cunning business plan if your life depended on it

[peat]

assuming constant compounding growth over long periods is unrealistic for many reasons

350 this last year. Mav says 400 as a goal, Beagle talks 600 and now a 1poster is throwing 800 around. Do I hear a k? Anyone?

Its great to have aspirations n all but before we start counting our retirees before they've even left university lets stay a bit calm and remind ourselves of sectoral balance and consider things patiently with due regard to business cycles, resource contraints, competition, demand, land availability, regulation, etc etc.
Plus a somewhat asymptotic looking chart. Remember what MET has actually shown us so far - that NTA is the best the market can do?
Even if this particular business goes perfectly to plan the market could change and mid-teens start to become considered a high PE. It does happen

(trying to play the voice of reason)

[kiora]

Now there is someone I would listen to.Assumptions are the mother of all FU's
And this
https://www.interest.co.nz/personal-...ng-residential

[winner69]

......

Remember what MET has actually shown us so far - that NTA is the best the market can do?
Even if this particular business goes perfectly to plan the market could change and mid-teens start to become considered a high PE. It does happen


(trying to play the voice of reason)

Good post Peat

Yes Peat, when markets are at all time highs and rather euphoric one should consider the voice of reason.

MET was touted around the world, the for sale sign was up. As you say when it came down to fronting up with hard cash (real money) NTA was the best they could achieve. Has to be a lesson in that.

The buyer wants a reasonable medium to long term return on his investment. Paying say 1.5 times NTA would have diluted those returns quite significantly ...the old adage is buy at high multiples and expected long term returns diminish.

Yes mid teens could one day (maybe sooner than we think) be considered a high PE

I sometimes ask myself if I had $2 billion and bought Summerset what am I getting for my bucks besides $1 billion of assets and how will ever make a decent return on that $2 billion investment.

[winner69]

Good question. For your $2b you are getting around $64 m per year of development margin p.a. which I forecast will at least double over the next decade plus all the capital gains on investment property of $2.82 b, so if capital gains moderated to 3 % p.a. (much higher currently), that would be $85 m per year tax free taking an IFRIS view. Also would expect this normalised capital gain to double as the asset base doubles over the next 8-10 years. Hard to see much money being made in care but essential service in my view.

The MET comparison is interesting. Has been a poor performer over many years and the Board seems to have waived the white flag at what appears to be a bargain price. SUM seems more comparable to RYM to me (not quite as strong operationally and brand wise but less expensive at today’s share price).

Disc. Hold SUM, RYM and OCA

Understand all that but at sometime in the future won’t I still need a ‘greater fool’ to buy all those assets at 2 times book value to make the $2 billion investment I make now worth while?

[Beagle]

assuming constant compounding growth over long periods is unrealistic for many reasons

350 this last year. Mav says 400 as a goal, Beagle talks 600 and now a 1poster is throwing 800 around. Do I hear a k? Anyone?

Its great to have aspirations n all but before we start counting our retirees before they've even left university lets stay a bit calm and remind ourselves of sectoral balance and consider things patiently with due regard to business cycles, resource contraints, competition, demand, land availability, regulation, etc etc.
Plus a somewhat asymptotic looking chart. Remember what MET has actually shown us so far - that NTA is the best the market can do?
Even if this particular business goes perfectly to plan the market could change and mid-teens start to become considered a high PE. It does happen

(trying to play the voice of reason)

Expanding into Australia. RYM have enjoyed mid teens growth or thereabouts for more than 2 decades.

Each to their own. My model tells me a fair PE for a no growth company is presently 11. Forward PE of 14 given SUM's superb track record of growth since it listed is a compelling metric. Technically its in a nice uptrend and while I grant you that's steepened lately there are very good reasons for that including a resurgent Auckland property market and the pending reallocation of ~ 1.5 Billion from the MET takeover.

$8.70 looks expensive relative to where it was six months ago, (well done to those that bagged themselves an exceptional bargain in the mid $5's in winter 2019, called and actioned as such by myself and other astute investors), but it looks very cheap relative to the $8 eighteen months ago and the forward PE speaks for itself. I think the outlook for the foreseeable future is very positive and has significantly improved since last winter.
For what its worth I am right on my maximum self imposed limit of 10% portfolio allocation (to any one share), and my intention is to let that ride, long term.

Might be a bit bumpy but buckle up and enjoy the ride https://www.interest.co.nz/personal-...1+January+2020

__________________________________________________ __________________________________________________ ____________________

MET - Interested parties approached them, not touted per se. We'll see what happens there, $7 looks too cheap to me even with their somewhat chequered track record.

[winner69]

Property market on fire

Even higher record prices

Best bit is the surge in activity ....generally increasing sales numbers means increasing prices

https://www.reinz.co.nz/Media/Defaul...ber%202019.pdf

[Beagle]

Bindi Norwell CEO of REINZ says a real shortage of houses now. "With insufficient properties on the market to satisfy buyer demand, it suggests that buyers are being more definitive when it comes to purchasing as they are aware of the need to move quickly on properties and areas with high demand. This is backed up by the decrease in the median number of days to sell which is at its lowest point for 3 years".

SUM shareholders can feel proud that their company is one of the biggest developers in the country provided much needed housing for older folk thus freeing up houses for others. I am expecting very strong conditions for the foreseeable future.

[trader_jackson]

Forsyth increased SUM's target price from $7.20 to $8.90 with outperform rating and "do not view as expensive on a 16x PE" Beagle must have helped right the report
They were right to call ARV's share price at $1.78 (when it was sub $1.30 just over 6 months ago), maybe they'll be right about sum other operators as well? Then again with the share price already in the high $8, intriguing they can give it an outperform rating

[macduffy]

Forsyth increased SUM's target price from $7.20 to $8.90 with outperform rating and "do not view as expensive on a 16x PE" Beagle must have helped right the report
They were right to call ARV's share price at $1.78 (when it was sub $1.30 just over 6 months ago), maybe they'll be right about sum other operators as well? Then again with the share price already in the high $8, intriguing they can give it an outperform rating

Outperform the market, that is.