SUM - Summerset Group

[artemis]

Few years ago when I've decided to get into the sector I was going to buy RYM but my broker (Craigs) suggested SUM and I bought it (well before knowing about this forum). This one has become my happiest holding, indeed I follow what Couta1 and Beagle comment about it as I look forward to learn more.

Notice you are in Wellington where SUM annual shareholder meetings are held. Last year I had the pleasure of meeting Beagle, Couta1 and Iceman there. I hope to be there again this year, possibly others from Sharetrader. If you post or PM me nearer the time we can arrange to touch base.

Last year the board and senior managers scooted off to visit a new village before we could grill them. Disappointing, hopefully different this time.

[dobby41]

$10000!. I burried 2 people for less than that

Digging a hole in the forest doesn't count.

[macduffy]

Ironic you suggest that. Just 10 minutes ago I got my calculator out and realized that $81.7m underlying profit is a 4.7% beat of the mid point of their guidance range issued in December 2017 ($78m) and what do you know, the shares are up 4.7% today. Often I wonder how efficient and rational the market really is. Just when I think it isn't, you get an example like this which almost completely restores my faith in the efficient market hypothesis theory.

No point in thinking we can ever Buy the rumour, Sell the fact, then?

[trader_jackson]

I have to say, these were great results.
What wasn't so great was the outlook
or lack of

Looked to me like OCA and SUM are about to swap positions - SUM build rate topped out and seem to be focusing on that next-to-no-profit-dog-like care stuff while OCA (and possibly that other dog) is just beginning to ramp up development, as their care offerings are already 'right up there'

[Beagle]

Julian Cook gave an interesting interview with NBR which unfortunately for some people is behind the paywall. SUM interesting insights in there.
I will work on my profit forecast for 2018 and 2019 next week if I get time. Disc: Not selling very happy holder. Long term track record of stellar growth speaks for itself.

[BobbyMorocco]

I have to say, these were great results.
What wasn't so great was the outlook
or lack of

Looked to me like OCA and SUM are about to swap positions - SUM build rate topped out and seem to be focusing on that next-to-no-profit-dog-like care stuff while OCA (and possibly that other dog) is just beginning to ramp up development, as their care offerings are already 'right up there'

It sounds to me like SUM have a bit leftover to sell so they're going to focus on selling those as well as put more effort into their care rather than continuing to increase their build rate right now. I'm not concerned because the results were fantastic but there is little point in increasing the build rate if there's still plenty leftover to sell.

It will be interesting to see if the leftover stock is unsold because it was late getting delivered or if it's because they are starting to top out and struggling to sell them. My gut tells me it's the former and that SUM will increase their build rate again. Definitely too early to say there's any problems at SUM. Going off the massive increase in earnings there's no problem at all!

[Beagle]

Most of the unsold stock is serviced apartments. It was explained to me that these are sold to needs based customers so the vast majority are built before they are sold as people need to see what they are moving into and usually move in quite quickly based on need. Churn rate on these is less than 2 years IIRC so hopefully you get my point about need. Expansion into Australia looks promising, Julian sounded very upbeat about that in his NBR interview.

[value_investor]

I like the result a lot, I wouldn't be too worried about a lack of information on future builds/projects. There's a lot of units in the pipeline that is still in the land bank. The fact that the dividend is only rougly 30% of underlying profits which is at their low range points to more cash in the business being used instead of giving it out.

FY18 will be an interesting one. For the first time in a few years I think we will see zero growth in house prices or even a small drop. With the government intention now on building and controlling speculators it will affect the market as whole too. I'm not sure how sustainable that development margin will be going forward. They've done amazingly well to manage 29%.

[Beagle]

Very early to make a call on 2018 profit but my preliminary modelling suggest they should go close to $100m underlying profit.
Much of the profit growth will be based on resales of existing units with embedded value this year of $152K per unit v last year of $114K per unit.
I'm expecting an announcement on Australian expansion sometime in 2018.

[James108]

I think Summerset have a great second mover advantage in terms of going into Aus. Hopefully a few good scalps from Ryman before they commit to this.