SUM - Summerset Group

[winner69]

Back on topic

rough and dirty way to estimate/guess/project/forecast Summerset underlying earnings is to take the number of expected sales and multiply that by a realised fair value adjustment number. Method has worked pretty well over the last few half years so must be pretty robust

See a trend in this series of numbers - $43k, $61k, $63k, $70k?

Hint - it reflects improved development margins and rising property prices in general

All part of the reason why Summerset reported NPAT will be ~$120m this year - about 55 cents a share - at a PE of 12 share price over $6 later this year / early next year

That trend noted above will accelarate this year. The $70k likely to be $75k - one reason why reported profit will be $120m plus this year (55 cents a share)

[Beagle]

That trend noted above will accelarate this year. The $70k likely to be $75k - one reason why reported profit will be $120m plus this year (55 cents a share)

I agree mate. Market conditions are highly supportive.

[Grunter]

That trend noted above will accelarate this year. The $70k likely to be $75k - one reason why reported profit will be $120m plus this year (55 cents a share)

I don't think it's particularly wise to go off the "unrealised" figure for the retirement village sector. Best to consider the realised NPAT.

In any case, realised NPAT was $37.8 million last year, and this year could be $45 million if Summerset exceed expectations.

[Beagle]

I don't think it's particularly wise to go off the "unrealised" figure for the retirement village sector. Best to consider the realised NPAT.

In any case, realised NPAT was $37.8 million last year, and this year could be $45 million if Summerset exceed expectations.

Yes and No. I think more to the point with the significant repricing of most of N.Z's housing stock, (certainly in all the popular locations), this really underwrites their realised profit for many years to come.

Metlifecare call this embedded value, (the difference in the current value of all their stock less what current residents historically paid for their occupation licences). Embedded value is growing at an extremely rapid pace which augers extremely well for medium term profit growth and as we all know its profit growth that drives the SP

[winner69]

Real investment pros when valuing companies like Summerset tend to look at what the assets are worth - thus put a relative heavy weighting when assessing value on things like book value (which includes unrealised gains). After all a $500k unit is worth $500k whether its sold or not.

Underlying profit a good ongoing measure of how management is performing in their role of building and selling things.

Price book ratios a better guide than PE ratios

[Grunter]

Real investment pros when valuing companies like Summerset tend to look at what the assets are worth - thus put a relative heavy weighting when assessing value on things like book value (which includes unrealised gains). After all a $500k unit is worth $500k whether its sold or not.

Underlying profit a good ongoing measure of how management is performing in their role of building and selling things.

Price book ratios a better guide than PE ratios

No, they don't. You can't use unrealised profit in a DCF because there is no cash flow generated from the value of the asset increasing on paper. The only time that the asset affects the valuation of the company is when it generates a cash flow by being sold. These cash flows are unable to be determined as to when they will be generate because you can't determine when the asset will be sold/resold etc etc, nor for how much. The value of the asset stays on the balance sheet, not the cash flow sheet.

Retirement Villages are valued using a DCF model by professional analysts.

[Beagle]

The embedded value is one of the most critical factors in any valuation methodology because it underpins assumptions used by analysts in their DCF model's. There's already a vast body of evidence around how frequently these units change hands so analysts will be looking at the embedded value to assess future profit expectations.

[Grunter]

The embedded value is one of the most critical factors in any valuation methodology because it underpins assumptions used by analysts in their DCF model's. There's already a vast body of evidence around how frequently these units change hands so analysts will be looking at the embedded value to assess future profit expectations.

Which is factored in when they assume house price growth and sales figures to project future revenue. Unrealised adjustments are set to zero for future estimates.

[winner69]

NZ Super Fund sold a few shares - things like Yum and Coke must be seen as better bets

[Beagle]

Which is factored in when they assume house price growth and sales figures to project future revenue. Unrealised adjustments are set to zero for future estimates.

Seen plenty of DCF models and know how they work...just a whole bunch of estimations. Hardly surprising that we don't agree, it seems the analysts using their fancy DCF models don't either !
Five different analysts using five different sets of assumptions arrive at five completely different end results resulting in...you guessed it, five completly different recommendations, see so called consensus detail, scroll down a bit on the page that comes up with this link...looks like five different colours to me !
http://www.4-traders.com/SUMMERSET-G...438/consensus/

Never seen such a wide spread of opinion on a stock before. DCF valuations must be a really exacting process