SUM - Summerset Group

[ratkin]

I now hold SUM too

[ratkin]

A good result, though the stock hasn't moved.

It seems a little unloved by the market, or maybe it hasn't proved itself enough yet to warrant funds buying in.

More broker attention would help. Forsyth Barr cover SUM but I don't know if FirstNZ, HHG or Craig's do yet.

I had been tempted to sell down a bit, but on the basis of today's result, I think I am happy to hold this for a while.

I shouldnt worry , Ryman was the same many years ago , unloved and boring , the rat made a killing on that stock , hopefully this one will eventually follow suit

[ratkin]

Good to see one of the directors has been buying on market , even if the amounts are small

[percy]

And that's a great announcement from CEO Norah Barlow this morning.

https://www.nzx.com/companies/SUM/announcements/226217

“Sales are strong. Last year sales were the highest in the company’s history. We are on track to exceeding that record,” Mrs Barlow said.
Over the half year, Summerset completed 68 new units across four developing sites. Its full year target was 155 units.
“We have started building at our newest village in Dunedin and are in a good position to reach our full year target,” Mrs Barlow said.
“The company is in a robust position and the team has been working incredibly hard over this half year. We are expecting to exceed IPO forecasts if trading momentum continues. We will keep the market informed throughout the course of the year.

Most encouraging.Very positive future.

[Jim]

Most encouraging.Very positive future.

I thought they are paying out a small div but they push it to the FY

[Sauce]

The most significant news for SUM shareholders, in my opinion, is the increase in development/new sale margins. If this trend continues and they can close the margin gap between them and RYMAN it will be a good sign for investors.

[BIRMANBOY]

I cannot see them (retirement facilities) paying much in dividends because by their very nature...all excess cash will be used to grow their base business which is very cash reliant in having to fund new homes and properties... Constant forced growth means bugger all in dividends. Maybe in the future if they plateau out regards demand.

I thought they are paying out a small div but they push it to the FY

[CJ]

I cannot see them (retirement facilities) paying much in dividends because by their very nature...all excess cash will be used to grow their base business which is very cash reliant in having to fund new homes and properties... Constant forced growth means bugger all in dividends. Maybe in the future if they plateau out regards demand.

Agree - Ryman has strong operating cashflows but it all goes back into development. Plus I dont think they pay much in the way of tax so they cant impute their dividends. [edit - just checked. Ryman doesn't impute at all which makes sense. The operating model of Retirement villages, especially historically when they use to be able to depreciate builds, meant they were always in a tax loss position.}

[percy]

I cannot see them (retirement facilities) paying much in dividends because by their very nature...all excess cash will be used to grow their base business which is very cash reliant in having to fund new homes and properties... Constant forced growth means bugger all in dividends. Maybe in the future if they plateau out regards demand.

RYM [and I expext SUM] pay out a small % of their profit.What you must consider is how wisely they put to use the money they don't pay out.If they can make 15% plus on that money you will enjoy great compounding profits,which will drive the SP.
If you can earn over 15% you are indeed best to look at company's that pay out most/or all of their profit.

[Sauce]

I cannot see them (retirement facilities) paying much in dividends because by their very nature...all excess cash will be used to grow their base business

Agree - Ryman has strong operating cashflows but it all goes back into development.

Actually I believe RYM have a very healthy dividend payout ratio of 50%.

The cashflows that are reinvested in villages over and above the other 50% of shareholders funds that is retained (not paid out as a dividend) represents cash from the refundable license to occupy, and could not be paid out as dividends anyway. It is this ability for RYM to "Recycle" its capital from village to village that allows it to generate such high returns.

Would you prefer they paid out 100% of underlying profits? Not me. The 50% "shareholder funds" they retain for growth are able to generate a 30% internal rate of return. This is BECAUSE they can recycle the capital by generating ever growing refundable occupancy right cashflows.

This is so so much better than getting more in the way of dividends, that you should consider losing your left arm to find businesses like it, particularly when the downside risk is reasonably limited (downside risk is arguable I suppose, but at least in my view).

As an owner, I know I can't get a 30% compounding rate of return if I am holding the cash, so I prefer them to keep as much of their underlying profits as they feel they can safely put to work at those excess returns. That said, from my perspective, Ryman (and perhaps SUM also) are, and will always be, a great payer of dividends. With those dividends growing fast.

Regards,

Sauce