SUM - Summerset Group

[hardt]

I am talking facts, you are talking about your "perception". Fact is immigration is continuing at over 70,000 per annum. RBNZ in their recent annual budget expects national house prices to increase ~ 7% over the coming year. SUM makes most of its money from its development margin which they just confirmed is tracking well. the rest they make from resales and as I have pointed out before the embedded value in existing units is extremely high. Meanwhile those operators who ostensibly make most of their money from care services face some very very serious cost pressures with wage relativity claims going forward.

I post enough about the quants on here, all I gather from your demeanour is an emotional attachment to your holding.

[King1212]

Oh no..people lose big money on SUM

[hardt]

I really do not understand what you are talking about.
In Christchurch baby boomers brought their house for between $11,000 and $20,000 with a mortgage.[1968 to 1974.]
Most would have paid off their mortgage years ago, and may have brought a better property, or a rental property.
The $11,000 house is most probably worth today between $350,000 and $450,000,while the $20,000 house would be worth between $700,000 and $800,000.Some may also have had a successful business and a holiday home.Some may have invested in shares.
There are a huge number of "modest" people who are worth between $2mil and $5mil,and "successful" people who are worth between $5mil and $10mil.Just go to a broker's evening.You will note the brokers only talk to those who are worth between $5mil and $10 mil.If you see them laughing at a joke, you can bet the person who told it is worth over $12mil.
My point is do you really think any of the above care about the property market.They will make a lifestyle decision,and will "meet the market" when it comes to selling their home.

I am not saying Summerset will suffer at all... I keep seeing the same comparison of SUM to the rest of the sector - followed by a volition towards the markets valuation.

	FY12A	FY13A	FY14A	FY15A	FY16A	FY17F
OPERATING EBITDA ($m)	21.5	28.5	34.3	49.4	69.1	87.5
ADJUSTED NPAT ($m)	15.6	24.6	25.1	39.3	56.4	73.5

Will continue growing at a rate the market will love to reward, but the sentiment is not favourable at this current point in time, things change.

SUM is a good pick moving forward - unfortunately it will not be allowed the multiples of AGED CARE providers as I have said before.

[King1212]

http://www.nzherald.co.nz/business/n...ectid=11886193

[allfromacell]

http://www.nzherald.co.nz/business/n...ectid=11886193

I notice he quotes the average but the medium is a much better measurement for house prices. Down $60,000 (6.66%) from its peak in March and now flat for the past 12 months.

This has been discussed to death but it's worth noting as I believe it's the main reason for the SP slump in this sector.

Long term holder.

[troyvdh]

Percy....Many many thanks for saying that.Like entry into a retirement entity is ..I believe..anywhere between (in ChCh) 175k and 400k....Despite what occurs in the property mkt folk will continue to move to a retirement home..Like ....They have no choice.Cheers.

[percy]

Percy....Many many thanks for saying that.Like entry into a retirement entity is ..I believe..anywhere between (in ChCh) 175k and 400k....Despite what occurs in the property mkt folk will continue to move to a retirement home..Like ....They have no choice.Cheers.

As per usual, you are exactly right.

[co0p]

Its certainly going to be an interesting couple of years for this sector.

I do feel the development and resale margins will be squeezed once this once-in-a-lifetime housing bubble bursts.

I also suspect many baby boomers will end up living with their children during their last years - more like Asian families.

Its going to be interesting and I'm glad I'm watching from the sidelines.

[hardt]

The past marginal expansion has been a huge tailwind behind Summersets revenue growth and that expansion was the result of the housing market boom...

Summerset are more than capable of succeeding at intensive development projects to continue growth... but over the forthcoming decade the AGR will not be maintained anywhere near the past years CAGR.

SUMMERSET GROUP HOLDINGS	FY13A	FY14A	FY15A	FY16A	FY17F	FY18F	FY19F
Average number of retirement properties	1751	1986	2268	2624	3053	3500	4000
* Average resale margin on new and existing properties ($)	50,052	54,124	66,580	82,640	90,250	95,500	100,000
* Average management and membership fees generated per retirement property ($)	8,154	8,323	9,604	10,686	11,000	11,300	11,500
Operating revenues generated ($m)	65.1	78.8	106.7	140.2	171.5	200.5	230.5

[couta1]

Its certainly going to be an interesting couple of years for this sector.

I do feel the development and resale margins will be squeezed once this once-in-a-lifetime housing bubble bursts.

I also suspect many baby boomers will end up living with their children during their last years - more like Asian families.

Its going to be interesting and I'm glad I'm watching from the sidelines.

Wrong, there has been a significant increase in the number of residents from Asian families entering these facilities over the last few years. Children don't have time or the inclination to have their parents living with them in the main, most of the elderly I talk to don't want to be a burden on their children, and understand they live busy modern lifestyles.