SUM - Summerset Group

[winner69]

If they had 101 ‘contracted’ new sales as at end of December and only reported 71 sales in Q1 there’s obviously a long time between becoming ‘contracted’ and settlement


Maybe i don’t understand the lingo and what ‘contracted’ and ‘uncontracted’ and other words really mean.

[Beagle]

Not far for you to come along to the annual meeting and ask...just a thought.

[couta1]

As All the retirement sector stocks are long term plays for the majority of holders,blips like this shouldn't be much of a concern considering the strong tailwinds which are set to prevail for many more years yet to come.

[winner69]

As All the retirement sector stocks are long term plays for the majority of holders blips like this shouldn't be much of a concern considering the strong tailwinds which are set to prevail for many more years yet to come.

One only needs to look at the 8 year summary — the last page of this presentation
http://nzx-prod-s7fsd7f98s.s3-websit...947/295456.pdf

Main metric is what the value of the company is being ‘Total Equity’ - increasing at 23% pa

To really appreciate the impact of the booming property market over the last years do a little sum like Underlying Profit divided by Total Sales — profit per sale has gone from $35k in 2011 to $154k in 2018. This is from both resales and the increasing development margin. Price increases have been the main contributor to the staggering growth in profit.

Looking forward to seeing how much Summerset’s (and others) value grows isn’t so much about the level of sales but how much they make on each sale (new and resales) — ie the state of the property market (prices) will be a key determinate over the next five years or so. I doubt we will see the same booming property prices over the next five years.

Last quarter’s sales numbers not really a blip — long term trend is still up (at least the resales trends). Nothing to worry about — just think long term ......but watch overall property price trends.

[Baa_Baa]

[snip]Price increases have been the main contributor to the staggering growth in profit.

Looking forward to seeing how much Summerset’s (and others) value grows isn’t so much about the level of sales but how much they make on each sale (new and resales) — ie the state of the property market (prices) will be a key determinate over the next five years or so. I doubt we will see the same booming property prices over the next five years.

Last quarter’s sales numbers not really a blip — long term trend is still up (at least the resales trends). Nothing to worry about — just think long term ......but watch overall property price trends.

Given the total number of units increasing year on year and the growth projections, the recent years performance in new sales, needs to be fixed. Can't rely just on property prices going up forever to sustain the "staggering growth in profit".

Spot the problem?
Attachment 10449
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[Beagle]

One only needs to look at the 8 year summary — the last page of this presentation
http://nzx-prod-s7fsd7f98s.s3-websit...947/295456.pdf

Main metric is what the value of the company is being ‘Total Equity’ - increasing at 23% pa

To really appreciate the impact of the booming property market over the last years do a little sum like Underlying Profit divided by Total Sales — profit per sale has gone from $35k in 2011 to $154k in 2018. This is from both resales and the increasing development margin. Price increases have been the main contributor to the staggering growth in profit.

Looking forward to seeing how much Summerset’s (and others) value grows isn’t so much about the level of sales but how much they make on each sale (new and resales) — ie the state of the property market (prices) will be a key determinate over the next five years or so. I doubt we will see the same booming property prices over the next five years.

Last quarter’s sales numbers not really a blip — long term trend is still up (at least the resales trends). Nothing to worry about — just think long term ......but watch overall property price trends.

Thanks for pointing that out mate. That last page really does throw up some quite staggering stat's including 7 year CAGR in underlying profit of 43% and 70% CAGR in IFRS profit. My view is that the IFRS profit growth will underwrite underlying profit growth for many years as the current surprisingly low number of resales regains significant upward momentum. At a national level I don't see house prices increasing like they have for the last decade but neither do I see a collapse coming like what's affecting many Australian cities. Worth noting that throughout the GFC RYM continued to grow underlying profit and also worth noting that RYM never grew underlying profit over a 7 year period at a CAGR of 43% or anything remotely like that. Also RYM's forward PE is now double SUM's with the latter never been lower and not exposed to the rapidly declining property market. As a numbers man its absolutely impossible for me to make a case for myself to own RYM but SUM should fly once they can regain sales momentum.

[Beagle]

As All the retirement sector stocks are long term plays for the majority of holders,blips like this shouldn't be much of a concern considering the strong tailwinds which are set to prevail for many more years yet to come.

Agree 100%.

[percy]

Retirement village operators price their units to local house prices.
Local house prices go up,unit prices go up.
Local house prices go down,unit prices go down.
Swings and round-abouts.

[BlackPeter]

I do not accept SUM's explanation of an increase in 'Average days to settle' after construction is complete. Why aren't they selling them down before construction has even started?... let alone 1/2 way finished? Other companies sell down their entire village off the plans. I treat this part as a poor excuse and put it down to a slack sales team. I am satisfied that the housing market plays virtually no part in this.

I guess we would need to find out when they count a unit as "sold". If this is "possession date" than it would be hard to sell a unit before it is finished, wouldn't it? Most of the buyers would need to first sell their old house to have the funds to buy in, and they only can do that if & when they physically are able to move into the unit ...

Which means that average days to sell do play a significant role. Buyer can only sell their house when the unit is finished (or if they are very sure it will be finished by the sell date of their old home).

[The Rocket]

I think you Guys are looking at this with rose tinted glasses. NZ and the rest of the World are in a start of a down trend (e.g. NZ looking at lowering interest rates again and other countries are too even Trump calling for lower interest rates) House prices will drop in NZ and it will take longer to sell houses. Retirement sector will do the same and drop prices for units, villas etc. They did go up when house prices went up. It is not a Blip it is a start of a trend. I said it first SUM will be $5.00 by Christmas.