SUM - Summerset Group

[winner69]

This seems good

Summerset aims to become New Zealand's first retirement village operator with Dementia Friendly Accreditation, chief executive Julian Cook said.

[couta1]

This seems good

Summerset aims to become New Zealand's first retirement village operator with Dementia Friendly Accreditation, chief executive Julian Cook said.

Just corporate spin mate, I would rank SUM behind OCA and RYM for overall care standards and that includes Dementia.

[Beagle]

Solid result but based on a growing rate in development margin of new units but for how long will be interesting. A lot to like in this report but a lot more for me to ponder going forward. The number of sales was down YoY and they've really kept their cards close to their chest in terms of revealing how sales are going in the current FY. I'm not sure how development margin maintains in future with a stagnant market in Auckland, but this was also touched on in their annual report with development margin expected to go down to 20-25% which I assume is fair.

There would be a overhang of unsold units but the Chair and CEO report notes that their is currently still good demand for them in the current year. I'm interested to see the Q1 sales numbers just to alleviate any doubts. This is likely to be more of a short term issue with the peak saturation of retirees still not here yet.

I do note that SUM now have the largest land bank in the country and were the largest builders in FY18. What I gather from the land banking is that there is still low hanging fruit in regional areas for land to be acquired at this stage. I'm sure with them exclaiming the build rate will go up to 600 in the next few years that this can only be a good thing.

My view on price - Ultimately can't complain with a good result such as this. I am cautiously optimistic in terms of selling in the new year but there are many variables at work. I wouldn't be upset getting in at this price since I am long term, and at current PE of 14.5 its perhaps better value than a lot of overvalued stocks on the NZX. I'll hold my small position for now and look to accumulate this year as opportunities present.

You Sir have hot the nail directly on the head. I couldn't agree more.

[Tiddlywinks]

You Sir have hot the nail directly on the head. I couldn't agree more.

Beagle you've been dogging SUM for months...

[Beagle]

Done the first pass through the full year reports.

Last year was 96 pages long with the financials beginning on Page 33.

This year is a 140 behemoth with an extra 39 pages of pretty pictures before the financials start of Page 72.

That is your first warning sign.

That the company itself is flagging that margins are somewhat extraordinary and they expect them to normalise is your second warning sign.

Forward P/E of 10 that is your third.

Cash flow is the life blood of every company. Follow the money.
Value SUM off of that.

Mr Market disagrees with your assessment.
What IF....the story about 133 units delivered in December too late to settle was true and they had a ripper FY19 Q1 sales result. All the sceptics would have red faces then including me.

Despite the toughest construction market (arguably ever) they still delivered all the units they said they would, in fact they have never failed a delivery target ever in their history. They still deliver a record development margin in this construction market...that beggars belief.
43% compound annual underlying earnings growth since they listed about 7 years ago. Who else has ever done that ?
Got to give credit where its due.
One thing about this company, the numbers sure SUM up and are very impressive.

[Baa_Baa]

Mr Market disagrees with your assessment.
What IF....the story about 133 units delivered in December too late to settle was true and they had a ripper FY19 Q1 sales result. All the sceptics would have red faces then including me.

Despite the toughest construction market (arguably ever) they still delivered all the units they said they would, in fact they have never failed a delivery target ever in their history. They still deliver a record development margin in this construction market...that beggars belief.
43% compound annual underlying earnings growth since they listed about 7 years ago. Who else has ever done that ?
Got to give credit where its due.
One thing about this company, the numbers sure SUM up and are very impressive.

Welcome back Beagle.

[Maverick]

I've been thinking a bit on this report. There's something I can't get my head around. I'd appreciate any enlightenment.
we are told: (I am only using villa figues with tenure lenghts keep things simple)
Total resales fy2018 was 301.
average stay in a villa is 8 years.(mentioned in the general blurb)
average stay in a villa fy 18 was 5.3 years.(mentioned in the last few pages)
it takes about 3 months to resell a unit.

to my way of thinking , the full fy2018 number of resales (301)should equal the full unit stock level somewhere from 8 - 5.3 years ago (actual was 1646 units in 2012). Ie they are now , on average, up for resale as our tenants have finished their average tenure.

Here is my problem,you have to go back to fy 2000 to get to that low 300 stock level.

i can only conclude that in fy 2000 sum were leasing to 60 - 65 yr olds who are only now expiring , say, at 80- 85 years old. (18 yrs later in 2018)

We know know the current average new comer arrives at 78 years old and is only staying 5.3 years.
If I am right......This recent " super charged churn" means SUM is behaving more like OCA but with villas rather than care suits. When added to the large volume of units being added particularly in the last six years then SUM,s DMfees should start to sky rocket.

I can't see it any other way but I have been wrong before. ....am I missing something?

[Beagle]

Sorry mate I am not entirely sure where you are coming from.
Looked up last year's annual report
Total resales of occupation rights FY18 301, FY17 300, FY16 244, FY15 245, FY14 172, FY13 174, FY12 164
Development margin growth over the years has been very impressive
12%, 13.2%, 15.7%, 20%, 22.2%, 27.3% and 33% for 2018.
Disc: I have been accumulating a few, very slowly.
Haven't had time to read the full report for FY18 yet but the headline numbers impressed me sufficiently to look at taking a modest stake again.
Snow Leopard tells me there's lot of pictures...so I am hoping some are of happy residents with their dogs.
I think where some confusion might be arising is that they've built a lot of units in recent years. In the long run resales will jump significantly, yes I couldn't agree more.
We could plausibly see a similar sized jump this year as was the case between FY16 and FY17 noted above. Maybe 340-350 resales this year ?

[Maverick]

Sorry mate I am not sure where you are coming from.
Looked up last year's annual report
Total resales of occupation rights FY17 300, FY16 244, FY15 245, FY14 172, FY13 174, FY12 164
Development margin growth over the year has been very impressive
12%, 13.2%, 15.7%, 20%, 22.2%, 27.3% and 33% for 2018.
Disc: I have been accumulating a few, very slowly.
Haven't had time to read the full report for FY18 yet but the headline numbers impressed me sufficiently to look at taking a modest stake again.
Snow Leopard tells me there's lot of pictures...so I am hoping some are of happy residents with their dogs.

Thanks for responding Beagle.
Let me try another way to explain my quandary.....
Sum had 1646 total units in
2012. The average occupation of a resident is somewhere around 6 -8 years.so...... shouldn't (averaged out more or less) all of those 1646 units now be resold in 2018. Not just 301 as actually recorded.
Either loads are now sitting empty.But we are told they resell well. So that means in 2012 the average tenure was a lot longer.ie ...the tenants were younger so they are still living on them.
Check out the last three or so pages of graphs on the invester presenation where the pictures should help make sense of what I'm trying to say.
Again. I'm not saying I'm right but I can't see any other reason for the low resales.

[Beagle]

Will try and find SUM time to have a good look over all the material in the next few business days mate. (Been donkey deep with all the info with AIR today).