SUM - Summerset Group

[Bikeguy]

Excellent result from SUM.
I think this is a nice example to demonstrate what I've been saying on the OCA thread about the predictability of resale volume..

That the combined new sales + resales from whatever appropriate past tenure period = today's resales.

SUM is just about all villas , their tenure is 8 years.
Today's resales = resales + new sales from around 2014-2015.

From this graph one can see evidence the number of resales comes directly from new builds 8 years or so prior. Also that we can soon expect a relative tempering of the strong growth in resales SUM has created to date. That is surely the reason they have moved over the ditch, to keep increasing their build rate.

It is an excellent update and sales were exactly on track.
The biggest takeaway from me from this update
…very strong contracted stock …strong pre-sales continue…Demand for the village has been very high…Pre-sales of Serviced Apartments at our Te Awa main building are strong.

All seems very well indeed in RV land. Great job as always SUM.
Blue- new sales
Red -resales
Yellow -new+ re sales
Attachment 14782

Very well laid out, thank you.

[winner69]

And Mav …. You didn’t add that resale margins this time around are based on current prices less the sales prices of 8 years ago

[Ggcc]

https://app2.msci.com/eqb/gimi/small...PublicList.pdf

Looks like Summerset and A2 deleted out of the small indexes

[Sideshow Bob]

That's pretty good....

https://www.nzx.com/announcements/424495

Summerset Group is pleased to report 360 sales for the quarter ending 31 December 2023, comprising 186 new sales and 174 resales. Total settlements for the quarter were 30% higher than Q4 2022 (277 total settlements).

[winner69]

That's pretty good....

https://www.nzx.com/announcements/424495

Summerset Group is pleased to report 360 sales for the quarter ending 31 December 2023, comprising 186 new sales and 174 resales. Total settlements for the quarter were 30% higher than Q4 2022 (277 total settlements).

Pretty good it is Bob

Scott Scoullar seemed more upbeat than usual …that’s good as well

[Muse]

Pretty good it is Bob

Scott Scoullar seemed more upbeat than usual …that’s good as well

A very positive update IMO

[Greekwatchdog]

For Bars review...

Summerset (SUM) reported record new sales and resales in 4Q23, with resales in particular ahead of our expectations. The strong Q4 resales numbers resulted in FY23 resales up +16% from its weak FY22. More importantly, resales as a proportion of overall stock for SUM is now back at its long-run average, indicating a normalised, or close to fully normalised, market. The aged care stocks have had a good holiday season, up ~+10% on average over the last month. We see SUM's update as supportive of further gains for the sector. SUM trades at ~1.1x P/B value and a ~+45% premium to Ryman Healthcare (RYM) on an EV/Annuity EBITDA basis. Retain NEUTRAL.

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NZX Code	SUM
Share price	NZ$10.86
Target price	NZ$10.50 (from 10.15)
Risk rating	Medium
C&ESG rating	A-
Market cap	NZ$2,511m
Avg daily turnover	226.8k (NZ$2,131k)

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Financials: Dec/	22A	23E	24E	25E
Rev (NZ$m)	413.8	464.3	499.9	539.7
NPAT* (NZ$m)	171.5	181.6	182.8	184.4
EPS* (NZc)	74.4	78.2	78.4	79.1
DPS (NZc)	22.3	24.0	25.0	26.0
Imputation (%)	0	0	0	0

*Based on normalised profits

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Valuation (x)	22A	23E	24E	25E
PE	14.6	13.9	13.9	13.7
EV/EBIT	18.1	17.6	17.7	16.9
EV/EBITDA	16.9	16.4	16.3	15.5
Price / NTA	1.1	1.1	1.0	1.0
Cash div yld (%)	2.1	2.2	2.3	2.4
Gross div yld (%)	2.1	2.2	2.3	2.4

What's changed?

• Earnings: Underlying earnings +2%/+1%/+1% driven by increased new sales and resale gains.
• Target price: Increased to NZ$10.50 (from NZ$10.15) on increased annuity EBITDA from higher resale gains.

Strong resales point to an improving housing market backdrop — commentary suggests forward indicators remain positive


New sales were expected to be solid given deliveries skewed to 2H23, but the strong resales result, +16% YoY for FY23 and 4Q23 sales comfortably above trend, indicate a genuine pick-up in demand, supported by an improving NZ housing market as shown in REINZ data. SUM's 4Q23 resales of 174 were comfortably a record for the company and +16% ahead of our expectations. Resales were up +26% YoY for the quarter. We view this as another sign that the housing market has begun to improve. SUM stated it, ‘was optimistic for the year ahead, seeing positive signs that the residential property market is improving, and with strong levels of demand and pre-sales already’. Additionally, the most recent REINZ data points to an improving housing market with sales up +36% on a three month rolling basis since its trough (seasonally adjusted), with days to sell down -37% from their peak.

Solid new sales given 2H delivery skew


SUM had previously flagged its FY23 deliveries would be 2H skewed and thus stronger new sales towards the year end. Pleasingly, SUM has delivered this, with new sales of 186 for 4Q23 marginally ahead of our expectations, and growth of +34% YoY for the quarter or +4% for FY23. SUM does not disclose prices or margins achieved in its quarterly updates, but our Montgomerie-Ibbotson pricing index indicates SUM has continued to hold its unit prices broadly flat for the last 18 months.

SUM has (finally) delivered its first units in Australia


In 4Q23 SUM delivered its first 10 units at its first Australian village (Cranbourne North​​​​​​​) with residents to move in in 1Q24. This timing is in line with its expectations over the past 18 months but nearly two years later than originally planned. At its FY19 result it indicated its first village would open in late 2021/early 2022, this was pushed to early 2023 at FY21, then delayed to 4Q23 in 2022.

[bull....]

no mention of margins achieved in the announcement. the important bit

[Ferg]

no mention of margins achieved in the announcement. the important bit

Yes margins are important bull but the more important issue lately for RVs has been about shifting volumes. As they say "volume fixes everything". Get the volumes moving and we will see a return of confidence. Without volumes there is nothing; as we saw when residential sales slowed which increased the days to sell for RVs. I say get the volumes first and work the margins later. So patience my dear fellow, patience.

The trouble for RVs is if they give away too much margin on (re)sales this has a huge double whammy impact on the business => lower reported NPAT due to portfolio devaluations and a consequently lower NTA on investment properties => puts pressure on the SP, unless Mgmt & BoD can paint a picture of a bright future. So it's a bit of a balancing act between getting volumes and not giving away margins....which in fairness applies to most businesses.

[bull....]

Yes margins are important bull but the more important issue lately for RVs has been about shifting volumes. As they say "volume fixes everything". Get the volumes moving and we will see a return of confidence. Without volumes there is nothing; as we saw when residential sales slowed which increased the days to sell for RVs. I say get the volumes first and work the margins later. So patience my dear fellow, patience.

The trouble for RVs is if they give away too much margin on (re)sales this has a huge double whammy impact on the business => lower reported NPAT due to portfolio devaluations and a consequently lower NTA on investment properties => puts pressure on the SP, unless Mgmt & BoD can paint a picture of a bright future. So it's a bit of a balancing act between getting volumes and not giving away margins....which in fairness applies to most businesses.

i agree focus on one metric alone is not healthy
i do not agree with your saying volumes fix everything though. maintaining volume is important to keep the lights on but does not necessarily mean profits at the end of the day.
also re-sales are where they make the good profits and this is the important bit for me in working out the DCF valuation guess on the value of each property they have in there portfolio. At the moment we are seeing the original batch of retiree's move on hence why good re-sales volumes are being reported.
They are getting killed on development margins and this was pretty evident it was to happen hence my oringinal call on cash crunch coming.
anyway i agree with you its a balance between good revenue and achieving good margins is crucial.

I would be interested to hear your view on why you dont think the DMF is used to cover some of the exp's over and above the fee's collected weekly.