SUM - Summerset Group

[BlackPeter]

Australia announce royal commission into retirement villages

http://www.thebull.com.au/articles/a...ommission.html

guess probably not a good time for summerset to go to aus now.

guess they can feel happy there will be no investigations here if the banking investigations is anything to go off, as they say nz is squeaky clean.

Why would you say that? Sure - there are some bad apples in the Australian system, but none of them is called Summerset (or Ryman). And yes - there are some bad resthomes in New Zealand as well. Does not reflect on the whole industry - it even opens up chances for newcomers to be better ...

Obviously - there are as well the children who expect 5 star service for their parents but prefer not to pay for it. They never did anything to earn their inheritance but they feel a sense of entitlement. These parasites are everywhere, but they won't impact on the industry.

[bull....]

Why would you say that? Sure - there are some bad apples in the Australian system, but none of them is called Summerset (or Ryman). And yes - there are some bad resthomes in New Zealand as well. Does not reflect on the whole industry - it even opens up chances for newcomers to be better ...

Obviously - there are as well the children who expect 5 star service for their parents but prefer not to pay for it. They never did anything to earn their inheritance but they feel a sense of entitlement. These parasites are everywhere, but they won't impact on the industry.

royal commission will create uncertainty as to future regulations etc that will come out of it and they will come with some certainty.
look at all the extra costs the banks are getting now due to there royal commission and they still havnt finished.

[BlackPeter]

royal commission will create uncertainty as to future regulations etc that will come out of it and they will come with some certainty.
look at all the extra costs the banks are getting now due to there royal commission and they still havnt finished.

Well, yes - uncertainty is never good for a sector. On the other hand - bank shares didn't drop through the bottom despite the investigation (but yes, there have been some up and down) and I'd expect that the banking investigation created more unrest looking at the findings.

At the end - as long as there is demand, it will be good business for good operators to satisfy it, unless you expect the government to take over the complete aged care sector (heavens forbid ...). Don't see that happening.

[bull....]

Well, yes - uncertainty is never good for a sector. On the other hand - bank shares didn't drop through the bottom despite the investigation (but yes, there have been some up and down) and I'd expect that the banking investigation created more unrest looking at the findings.

At the end - as long as there is demand, it will be good business for good operators to satisfy it, unless you expect the government to take over the complete aged care sector (heavens forbid ...). Don't see that happening.

only have to look at the performance of the hospital operators in aus , dismal due to cutbacks to funding , regulation to see where the retirement sector will go over there. my personal opinion is these sectors should be socialised as not for profit sectors more as a needs based service which only provides a stay in business return.
I also see nz sector as only a good investment until it becomes saturated and that nz sector is a race to build as many places as quickly as they can to beat there competitors this speeding up the time it will take to reach saturation. once stauration is acheived the govt here can regulate the sector as well without fear of the building stopping. make hay why the sun shines is my motto for the sector.

[Sinvester]

Welcome to the forum Sinvester. Without any doubt the risk to the sector apart from property prices is dominated by Government policy. At this stage Govt has chosen not to release the preliminary findings of the tax working group for reasons best known to them but there is speculation that a capital gains tax may be less likely than previously thought. In any event its worth noting that the sale of an occupation right falls under the financial arrangements section of the Income tax Act and would presently be exempt from any capital gains tax on property per se, unless the Act was changed such that a possible new proposed Capital Gains tax also includes gains under financial arrangements which I think is very unlikely.

Human resources is another area of significant challenge for the sector. One shouldn't underestimate the additional costs imposed by the pay equity settlement last year as the process works its way through, caregivers will eventually earn as much as $27 per hour in 2020 or is it 2021, (Couta1 help me out here mate).
This affects retirement village operators with a more intensive care operation the most. ARV, OCA and RYM. SUM least affected due to its predominant independent living care model.

The significant pay rises accorded to Nurses in the DHB settlement are presently causing some waves in the retirement sector as there is presently a significant difference between what DHB's are now paying Nurses and what retirement village companies are paying. My understanding is this is probably only a temporary matter as funding increases should be forthcoming for all those in care but I will ask the CEO of OCA about this on Wednesday night at the shareholders association presentation.

Due to the tax policy working group's present work and risk from Govt policy change I have kept my sector exposure at a very modest level up until quite recently with the OCA placement but my sense is that the Govt policy intervention risks now appear lower than I previously thought so I am looking at increasing my stake in OCA and SUM fairly considerably as opportunities present themselves in the coming months.

This is a sector with huge demographic tailwinds and the structure is such that these companies are all very tax efficient. I think RYM, ARV and MET shareholders will also do very well over the long run and I wouldn't rule out buying RYM if the SP corrects to somewhere near historical normal valuation metrics.

P.S. I got on with the job of adding a bit to my OCA holding this morning.

Thank you sir very much appreciate it.

[peat]

these are real risks bull....
which is why portfolio sector allocations (and hence limits) need to be considered otherwise one could be almost 100% invested in the sector
and also, even some companies which aren't specifically in the retirement sector but peripherally related to caring for sick and/or old people eg healthcare (yes even my beloved Ebos) and VHP could also be considered as subject to similar risks.

But one must also have faith in managements to respond well. If they do well in good times they're more likely to hatch a cunning plan in the bad times as well.

[bull....]

be interesting whats come out in the royal commission. if the banking and insurance one is anything to go by there will be some very sad tales.

did you relise over the last yr in aus 1 service provider per week is being closed down due to non compliance and abuses in failures of care.

[BlackPeter]

be interesting whats come out in the royal commission. if the banking and insurance one is anything to go by there will be some very sad tales.

did you relise over the last yr in aus 1 service provider per week is being closed down due to non compliance and abuses in failures of care.

Some operators woes are some other operators opportunities I don't assume they send all the old ones these closed down operators looked after into detention camps? Though than - this is the Ossie way to detain people in need of help - isn't it?

Bad genes of their criminal fore-fathers coming through ... ?

[bull....]

Some operators woes are some other operators opportunities I don't assume they send all the old ones these closed down operators looked after into detention camps? Though than - this is the Ossie way to detain people in need of help - isn't it?

Bad genes of their criminal fore-fathers coming through ... ?

quite correct.
although i think your find the ones that are left will make less money going forward.

[bull....]

https://www.fool.com.au/2018/09/17/i...sion-meltdown/

good write up on todays big news

It will be good news the royal commission into aged care will give grey power and aged concern plenty of ammo in nz to lobby the govt here to follow suit.