SUM - Summerset Group

[winner69]

I can see peat and bp debating for a while and then agreeing to disagree

if 'risk' is price volatility then imho sum is only slightly 'riskier' now than in the past. If one takes the spikes and says its become heaps more 'risky' than a few weeks ago (like the present) one should note that at times its been just as 'risky' in the past.

My tuppence worth and my calculations on chart

[BlackPeter]

It is a risk for the company if price goes lower because it demonstrates that investors are losing faith and the reason they are losing faith is because the business isnt doing so well. Price tells us what the world thinks of the company's prospects. You say its no risk for the day to day operations but it is because apart from their being a high chance that negative sentiment has some basis in reality , price falling also means less availability of capital to expand.

The reason for rating something high-risk is so that one can have expectations based on that. Eg yes I will go for high risk because I am expecting a high return. Or no I wont go for high risk because it is unlikely that the risk I am taking will be sufficiently rewarded for me to take that risk. thats the point.

You still seem to believe in the efficient market theory. Personally I think that the story about father Christmas is more credible ;

Price has nothing to do with the the financial risk of a security, or do you think that in times of the cybercr*p bubbles there was no risk in buying Bitcoins? What about all the other bubbles in history? You could even argue that the financial risk (to the investor, i.e. as you define it) is always the highest when a stock peaks. You certainly can't say that about the retirement industry now.

SUM SP cycled various times by up to 50% ... without any material changes to its fundamentals or risk rating.

But anyway - we will need to agree to disagree, but if you don't, then I can live with that as well ;

Just for disclosure - I am not holding SUM at the moment (but still lots of OCA).

[BlackPeter]

I can see peat and bp debating for a while and then agreeing to disagree

You did beat me to it ;

Just wondering - given that this prediction was spot on ... could you try next weeks Lotto numbers or maybe next months stock prices :

[Beagle]

The $106m question is will this virus have any material impact on the underlying assumptions that went into the forecast of no growth for 2020 ?
Will those who were looking to move to a village for lifestyle reasons, (most of SUM's units are independent living and therefore the sale of these units are predominantly lifestyle discretionary decisions made by home owners), reevaluate the risk of living in closer proximity to neighbours and decide they are better off to stay in their own homes for the foreseeable future ?
Does this make it harder for SUM to sell its units, especially apartment ones where people live very closely together ?
Does this suggest the virus risk poses some downside risk to SUM's forecast of no growth ?
Will we see the scheduled August forecast update result in a downgrade to underlying profit actually declining this year ?
Will SUM's considerable stock of unsold units lurch higher still ?

I was thinking around $6.50 is fair value underlying PE of 14, but I think there is some risk to the downside. Might wait for NTA at $5, probably safer buying down there.

[macduffy]

I'm not so sure about "lifestyle choice". Most of the elderly people that I know have moved into retirement village apartments and villas because they find property maintenance getting beyond them and health problems appearing or increasing. Certainly, there is an element of lifestyle there and concerns about the perceived risk in villages will probably defer some decisions to move for a while but I wouldn't overstate the financial impact on retirement companies. The market's reaction is another matter though!

[Beagle]

I'm not so sure about "lifestyle choice". Most of the elderly people that I know have moved into retirement village apartments and villas because they find property maintenance getting beyond them and health problems appearing or increasing. Certainly, there is an element of lifestyle there and concerns about the perceived risk in villages will probably defer some decisions to move for a while but I wouldn't overstate the financial impact on retirement companies. The market's reaction is another matter though!

Average entry age is 80 so yes, for sure the factors you mention are often the catalyst for the move but some will defer the shift as a precautionary measure, I think that much is a given and SUM have already been struggling to sell their units for years.

[winner69]

Ryman continued to grow earnings through the worst recession the world had seen since the Great Depression.

[Beagle]

Think you meant the great recession...probably why they command a PE premium to SUM.
SUM's underlying earnings quite likely to decline in 2020 in my opinion.

[BlackPeter]

Ryman continued to grow earnings through the worst recession the world had seen since the Great Depression.

True - but still - Rymans shares at the end of the GFC have been on special (I think down 50% on pre GFC highs) as well. This is not about problems for the industry, it is about buying great companies still cheaper by telling everybody the industry will have problems.

[Beagle]

I think you are right about downside risk to this years sales. Inertia often kicks in at times like these. So less people looking to move where it is lifestyle choice until worst of virus behind us. Soft year potentially gets softer. Long term prospects still strong, so if it gets to $5, will be great buying.

Not just less volume of sales but could be at lower prices too. As recently as last month Westpac were extremely bullish on house price growth predicting 10% growth this year in the national average price. Not any more ! https://www.interest.co.nz/property/...y+7+March+2020