SUM - Summerset Group

[percy]

Mr Scoullar said that the motivation to move into a retirement village is often driven by life events, not the property market.

“Our residents are driven by factors like community, security or health, which lead them to look at an offering like ours. These influences don’t change significantly even in a difficult property market. As a result, we continue to see good levels of demand across our portfolio.”


I take SUM's Mr.Schoullar's comments are applicable to ARV,OCA and RYM too.

[MauroNZ]

Mr Scoullar said that the motivation to move into a retirement village is often driven by life events, not the property market.

“Our residents are driven by factors like community, security or health, which lead them to look at an offering like ours. These influences don’t change significantly even in a difficult property market. As a result, we continue to see good levels of demand across our portfolio.”


I take SUM's Mr.Schoullar's comments are applicable to ARV,OCA and RYM too.

I can tell one close example, my across the road neighbour could not keep looking after his wife after her dementia moved to an upward level.

Before that, I knew an 80+ lady living on her own without any close family and often falling at home and able to stand up again on her own.

[bull....]

there announcement today confirms the slowdown has started

[winner69]

there announcement today confirms the slowdown has started

And market reacting …….down across the sector

And that’s the last piece of real news until May

Wonder how much more the share prices will fall

[alokdhir]

And market reacting …….down across the sector

And that’s the last piece of real news until May

Wonder how much more the share prices will fall

As most are already of the view that this is going to be the most telegraphed recession of all times ...thus most likely market has already overcooked the steak ...

Still some will try to play it on the downside thus falling into someone's trap ...as they already looking value buys then otherwise ...only what stops immediate rebound or fast recovery is the fact that property down cycle lasts longer then simple recession ...normally 2-4 years ...thus we can have long accumulation period giving all enough time to get in ...how much lower may eventually depend on market sentiment as they are already down on their knees !!!

[Greekwatchdog]

For Bars review out this morning.

OUTPERFORM

Summerset (SUM) released its 4Q22 sales metrics with some brief comments on the current environment. In the fourth quarter SUM had 139 new sales and 138 resales. SUM acknowledged the “tough market conditions” in the last few months of the year, with increased settlement times but also reiterated that demand remains robust and its customers are not focussed on the property market as a reason to move (or not to move) into a retirement village. The released 4Q22 unit sales numbers were below our estimates, but we believe this should not surprise the market given commentary at SUM's investor day, 8 December 2022, of expanding settlement times. Total 4Q22 sales were up +18% versus a COVID-19 impacted 4Q21, but the second half was down -3% sequentially on the first half, respectable numbers given the very challenging backdrop. We reiterate our OUTPERFORM rating with a reduced target price of NZ$11.10 from NZ$11.95. ​​​​​​
link

NZX Code	SUM
Share price	NZ$9.22
Target price	NZ$11.10 (from 11.95)
Risk rating	Medium
CESG rating	A-
Market cap	NZ$2,079m
Avg daily turnover	189.6k (NZ$2,032k)

link

Financials: Dec/	21A	22E	23E	24E
NPAT* (NZ$m)	141.2	155.6	158.6	179.2
EPS* (NZc)	62.1	67.8	69.1	78.1
EPS growth* (%)	41.5	9.3	1.9	13.0
DPS (NZc)	18.5	20.5	21.0	23.5
Imputation (%)	0	0	0	0

*Based on normalised profits

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Valuation (x)	21A	22E	23E	24E
PE	14.9	13.6	13.3	11.8
EV/EBIT	18.3	16.9	16.6	14.6
EV/EBITDA	17.0	15.6	15.3	13.5
Price / NTA	1.1	1.0	0.9	0.9
Cash div yld (%)	2.0	2.2	2.3	2.5
Gross div yld (%)	2.0	2.2	2.3	2.5

What's changed?

• Earnings: FY22/FY23/FY24 underlying EPS down -13%/-14%/-14%. Annuity EBITDA down -9%/-7%/-8%.
• Target price: Reduced to NZ$11.10 (from NZ$11.95).

Slowing, yes, but not grinding to a halt


Q4 resales and new sales were up +22% and +15% versus 4Q last year, respectively. However, 4Q21 still had a meaningful lockdown/COVID impact in Auckland in particular. 2H22 sales declined by -3% versus 1H22, a decent outcome given the dramatic slowdown in the housing market overall. The glass half empty takeaway is that sales are taking longer to settle and that unit prices have plateaued while the glass half full approach notes that demand is still strong and prices are holding up despite the largest nominal decline in NZ residential house prices for >40 years.

Forecasts down ~-7–14% driven primarily by lower new sales but earnings are still growing


We have reduced our forecasts relatively meaningfully to reflect; (1) lower than expected Q4 sales; (2) slightly reduced new sales pricing given continued weakness in the NZ housing market; and (3) lower deliveries and therefore new sales units over the next 24 months. SUM signalled at its investor day in December 2022 that it would not grow deliveries as much as previously suggested in FY23, but that it had the ability to flex up should the market improve. This is a sensible decision, in our view. While our downgrades are meaningful, we note that; (1) we still expect SUM to grow underlying earnings by ~+10% and annuity EBITDA by ~+4% in FY22 versus FY21, in a year that has arguably been the most difficult in the sectors history bar the initial COVID-19 uncertainty; (2) for the three year period from FY22–FY25 we forecast an annuity EBITDA CAGR of +16%, largely driven by the maturing of existing villages; and (3) on our revised numbers SUM is valued at 13x 12 month forward PE and around 1x NTA, both close to all time lows.

[Manukatana]

Newbee here.. knowing that we will have a larger population with more elderlies in the future, am I wrong to think that investing in retirement village sector like SUM is a good idea?

[limmy]

It's a good sector to invest in. It's currently not favoured by many because of falling property prices.

[winner69]

From BusinessDesk

Cyclone Gabrielle has forced aged-care provider Summerset Holdings to evacuate its Te Awa village in Napier twice in the past 24 hours.

Summerset Holdings said residents from Summerset Palms had to evacuate the village in Te Awa last night and this morning on the advice of Civil Defence.

“While it appears their homes are safe and dry, currently the flooding around the village has meant it’s not safe to stay there,” head of communications Logan Mudge said.

Residents are either going to evacuation centres or staying with family and friends.

“All our residents and staff are doing OK in the circumstances but undoubtedly many are very tired and stressed,” Mudge said.

“Things continue to be very difficult in the Hawke's Bay but we’ve had managed to receive intermittent updates from our team on the ground.

The Summerset village in the bay of Napier still remains on generator power in the main building – although residents are “doing well” under the circumstances.

“For those residents without power, the team at the village are assisting with provision of food and drinking needs where we can,” Mudge said.

Across Summerset’s other cyclone-affected villages, its Havelock residence currently has power but due to the situation in the region being “really fluid”, the aged-provider was trying to get a generator to the village in case the power went out again.

The Hastings village had only a small generator for essential power needs and was also trying to access a bigger generator.

Summerset was tracking Cyclone Gabrielle’s progress and listening to advice from local authorities, Mudge said.

Summerset had also provided extra support for its village teams in the most affected regions across the North Island.

At Warkworth's Summerset Falls, the care facility has been without power since Monday, and used a generator to continue operating. Today power was restored to the care centre, but power was still out for some of the independent living residents.

“We have an Emergency Response Team in place monitoring our villages around the country and our village teams are working hard caring for residents and checking in on them,” Mudge said.

“The worst appears to be over for the village at this point, but we are on alert in case things change.”

Ryman Healthcare told BusinessDesk this morning that Ryman had “offered help to our competitors” which also included Summerset.

In response, Summerset said aged-care providers in NZ were “collaborating” and pulling resources together to help each other.

[Bjauck]

Thanks for BD article, W69. It underlines a benefit of village life in a weather emergency - the access to generators and village management looking after residents. I can attest to different villages looking after one another too. I rang a SUM village to see if they had emergency accommodation if needed for my elderly relative, who has been assessed as eligible for respite care. They said that they could only provide emergency accommodation for residents from other villages in the area.

Let’s hope that SUM villages are not located on flood plains in the first place though.