SUM - Summerset Group

[BlackPeter]

Forward of PE of 11.1 implies EPS in F17 of 44 cents (on NPAT seeing you don't do underlying stuff)

But last year EPS was 67 cents

You borrowed t_j's abacus or something

SUM ridiculously underpriced at the moment


Footnote - since 2002 RYM has averaged a PE of 16 on real earnings

Sorry for the slack reply - had my focus this morning on MPG ...

No, winner - I don't use T_J's abacus. I am proud owner of my own slide ruler (actually I own 2 of them) and learned in school how to operate them

My forward EPS is based on the average of the consensus forecasts for the next three years. And yes, you are right - analysts do see a drop in EPS. I suppose this expectation is based on the assumption that property prices (and with that revaluation gains) are likely to grow slower in the foreseeable future than in the recent past. I do share this view.

[Jantar]

I keep looking at SUM as a potential investment, and keep deciding "not yet, but let's watch a bit longer". What is off-putting as far as investing in SUM is concerned is the apparent eps of 66 cps against the total dividend for the year of 7.7 cps unimputed. I want to at least do better than simple bank rates, so on that basis SUM is only worth $2.20 to me. Over the past 12 months there has been a drop in SP of $0.70, so there isn't even the prospect of decent capital gain to make it a worthwhile investment.

Maybe the longer term investors in this company can explain what it is I am missing.

[blackcap]

I keep looking at SUM as a potential investment, and keep deciding "not yet, but let's watch a bit longer". What is off-putting as far as investing in SUM is concerned is the apparent eps of 66 cps against the total dividend for the year of 7.7 cps unimputed. I want to at least do better than simple bank rates, so on that basis SUM is only worth $2.20 to me. Over the past 12 months there has been a drop in SP of $0.70, so there isn't even the prospect of decent capital gain to make it a worthwhile investment.

Maybe the longer term investors in this company can explain what it is I am missing.

I am presuming a lot of the "EPS" are non cash earnings and therefore they do not have the cash to pay a higher dividend? I hold some SUM as well but not enough to really care about the day to day gyrations of the SP. Have held since more than 5 years ago in the $1.60 range so cannot moan too much. But it would be nice to see Earnings declared as dividends. (or at least a higher %)

[BlackPeter]

I keep looking at SUM as a potential investment, and keep deciding "not yet, but let's watch a bit longer". What is off-putting as far as investing in SUM is concerned is the apparent eps of 66 cps against the total dividend for the year of 7.7 cps unimputed. I want to at least do better than simple bank rates, so on that basis SUM is only worth $2.20 to me. Over the past 12 months there has been a drop in SP of $0.70, so there isn't even the prospect of decent capital gain to make it a worthwhile investment.

Maybe the longer term investors in this company can explain what it is I am missing.

You missed (and keep missing) significant growth in an industry which is bound to keep growing well above average. Just look at SP growth and capital growth over the last 5, 3 or 2 years ... and while the last year was a bit bumpy, capital did grow in that year significantly (and SP somewhat as well).

You could have bought a share 5 years ago for $1.70. It is now around $4.85 (and holders got some divvies on top of that) ... just wondering whether your bank account appreciated that much over the same time frame? Certainly not thanks to the interest rates. SUM had over the last 8 years a CAGR of 20% and future predictions put it still into the 17 to 18% range. That's exactly what you are missing if you don't buy ...

However - nobody can tell you, whether it might be cheaper tomorrow or next week - i.e. waiting might be a good idea (or maybe not). DYOR and feel free to leave the gains to others

[Ggcc]

I am quite happy watching everyone find that perfect time to invest in this great company and I do understand how much this pay increase will be in investors minds. Like banks in aussie being forced to pay new taxes, all will be passed on though some way or other onto customers. I think summerset will be a perfect investment for long term holders. I am waiting and salivating at these prices as I try not to push the buy button. I bought at $5.15 roughly averaging $3.85. I intend to buy more, but my larger funds are only available in a few weeks 😊

[Bjauck]

I keep looking at SUM as a potential investment, and keep deciding "not yet, but let's watch a bit longer". What is off-putting as far as investing in SUM is concerned is the apparent eps of 66 cps against the total dividend for the year of 7.7 cps unimputed. I want to at least do better than simple bank rates, so on that basis SUM is only worth $2.20 to me. ...

From NZX site, SUM dividends:
y/e
31/3/15 3.5c
31/3/16 5.25c
31/3/17 7.7c

I do not know of any term deposits that have doubled their interest payments within two years. So there is the possibility that if you purchase SUM shares today that within two years the current dividend yield of 1.59% (on the purchase price) will be doubled, increased risk notwithstanding. I think during the GFC RYM's underlying profitability continued to grow. DYOR.

[Beagle]

International Financial Reporting Standards (IFRS) require property companies to revalue their portfolio each year to current market value.
IFRS reported profit includes all property revaluations and does not represent the underlying cash earnings of the business. This measure underlying earnings, referred to by all the retirement village operators is the measure all professional analysts use to compare the earnings across the sector because this measure excludes the annual property revaluation but includes all cash earnings from license to occupy resales, new unit sales and the development margin thereon and any profit from the operations of the villages.

Underlying EPS was 25.6 cps for the year ended 31 December 2016. I am forecasting underlying EPS of 32 cps for 31/12/17 and the average analyst forecast is for underlying EPS of 31 cps. Based on average analyst forecast SUM currently trades on a current year PE of 15.6 which is less than the NZX50 average.

Their current dividend payout ratio is 30% of underlying earnings. Dividends are unimputed and as this company is growing strongly it is unlikely that they will increase this percentage higher anytime soon. People looking for a good dividend yield have a wide range of better fully imputed dividend yielding shares to chose from so might like to consider looking elsewhere.

Some people persist in using full IFRS earnings. I am not saying they are wrong per se, but this can and probably will give a disingenuous view of how earnings may be tracking / growing in the years ahead. As Bjauck has posted above, I can confirm RYM grew underlying earnings before, throughout and after the GFC.
I do not expect any moderate decline in house prices this year to affect SUM"s underlying cash earnings and am projecting 25% underlying earnings growth this year down from 50% last year and 55% the year before that.

[Snow Leopard]

International Financial Reporting Standards (IFRS) require property companies to revalue their portfolio each year to current market value.
IFRS reported profit includes all property revaluations and does not represent the underlying cash earnings of the business. This measure underlying earnings, referred to by all the retirement village operators is the measure all professional analysts use to compare the earnings across the sector because this measure excludes the annual property revaluation but includes all cash earnings from license to occupy resales, new unit sales and the development margin thereon and any profit from the operations of the villages....

Underlying earnings has 4 main components:
1 - The current assessed value of a new units sold - the cost of those units;
2 - The current assessed value of resold units - the previous assessed value of those units when last sold or resold, however many years ago that was;
3 - The profit/loss from operating the villages and providing services;
4 - Anything else.

To be continued, but I have an urgent interruption.

See you later
Paper Tiger

[Jantar]

International Financial Reporting Standards (IFRS) require property companies to revalue their portfolio each year to current market value.
IFRS reported profit includes all property revaluations and does not represent the underlying cash earnings of the business.......

Thanks folks, this is what I was missing. SUM will continue to be on my watch-list, but it is still not yet one for me. Meantime I have a small amount of both ARV and OCA as a bite into this sector, and happy with both so far.

[winner69]

I keep looking at SUM as a potential investment, and keep deciding "not yet, but let's watch a bit longer". What is off-putting as far as investing in SUM is concerned is the apparent eps of 66 cps against the total dividend for the year of 7.7 cps unimputed. I want to at least do better than simple bank rates, so on that basis SUM is only worth $2.20 to me. Over the past 12 months there has been a drop in SP of $0.70, so there isn't even the prospect of decent capital gain to make it a worthwhile investment.

Maybe the longer term investors in this company can explain what it is I am missing.

Here's why Jantar

As long as SUM keep building villages etc the line will continue to go upover time

I reckon now is a great time to buy - just like the other times when short term thinking 'investors' / punters have given up


Note - line is free drawn - not calculated or anything clever - just to show that as long SUM keep building things the line keeps going up