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  1. #5631
    always learning ... BlackPeter's Avatar
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    Quote Originally Posted by Beagle View Post
    http://www.sharechat.co.nz/article/6...are-mergerhtml

    My view.
    Summerset is N.Z.'s fastest growing retirement company with a five year track record of CAGR of 48% in underlying EPS a track record that is soon to extend to six years and I expect the current years growth to be very similar to its historical average.

    The current discount to RYM in terms of underlying PE is completely unwarranted given their vastly higher growth rate and proven in-house development capabilities.

    SUM has an outstanding land bank of over 6 years of developments, quite considerable financial reserves and banking facilities are extremely well positioned to continue their outstanding record of high growth

    MET by comparison is in its infancy with its developement activities and has serious legacy issues with the weather tightness of some of its older villages.
    Its track record of EPS growth has been far less spectacular that SUM's.

    I would be fundamentally opposed to a merger. If I wanted to invest in MET I would. The fact that I don't hold any shares in MET speaks for itself in terms of what I think of their business model and prospects for profit growth. The fact that Infratil who had representation on the board recently sold down speaks for itself in terms of what they think of MET's medium term prospects.
    Sort of in the same position (holding SUM but not MET), and yes, there must be a reason for that. On the other hand could I see that a well performed merger between these companies could benefit both of them ... MET could benefit immensely from SUM's internal development capabilities and overall (I think) better management - and a larger size would be good for both.

    The important questions are: How would we make sure that the merged organisation inherits SUMs development capabilities and good management instead of METs tardiness and reluctance to deal with its legacy issues? As well - what would be a fair value of both for the merger if we assume that SUM is currently undervalued by the markets and MET closer to fair price. So yes, there are risks ... and I am not sure either, whether it is for SUM shareholders worthwhile to take them.
    ----
    "Prediction is very difficult, especially about the future" (Niels Bohr)

  2. #5632
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    I'm not sure the efficiencies of scale would outweigh the consequences of taking on MET's relatively inefficient processes and their much older building assets. We'd need to see some very detailed plans on how a merger would be beneficial before I'd vote for a merger to proceed.

    Colour me sceptical on that merger proposal concept.

  3. #5633
    Speedy Az winner69's Avatar
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    Quote Originally Posted by Beagle View Post


    P.P.S. You know that share price relativity thing with RYM that Couta1 used to reefer too, well we are pushing the outer limits of that with RYM SP 1.85 times SUM SP.
    Expecting that to tighten into 1.5 next year. SUM $7 sometime in FY18.
    Couts keep saying his rule of thumb was SUM share price be 50% of RYM

    Getting close to that again as the dotted line on the chart approaches the 50% line - spooky eh

    So SUM might be fairly valued now .......not fair eh but you can't fight market perceptions no matter how good the SUM story is

    If SUM was cheapon this basis a few years ago its been expensive the last few years
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    Last edited by winner69; 06-10-2017 at 01:07 PM.
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  4. #5634
    ShareTrader Legend Beagle's Avatar
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    Quote Originally Posted by winner69 View Post
    Couts keep saying his rule of thumb was SUM share price be 50% of RYM

    Getting close to that again as the dotted line on the chart approaches the 50% line - spooky eh

    So SUM might be fairly valued now .......not fair eh but you can't fight market perceptions no matter how good the SUM story is

    If SUM was cheapon this basis a few years ago its been expensive the last few years
    My calculations show underlying EPS for both companies at ~ 40 cps for the current financial year. If people want to pay close to two times the fundamental value for RYM I can't stop them BUT I won't be one of them and it opens up an interesting long - short risk mitigation investment strategy in my opinion. P.S. I was just talking with Coutta1 and he reckoned a normal range is about 60-70% and agreed the current price difference is right at the extreme end of normal parameters.
    SUM is growing much quicker than RYM but even if we assume they both grow at the same rate going forward there is no logic to RYM trading at close to 1.9 times SUM's SP. SUMming up, SUM a young fast growing company that's learning fast and growing strongly whereas RYM a mature company who's systems were well refined years ago and has less potential to grow as strongly in the future. If SUM keep learning and growing fast their underlying EPS will exceed RYM's next financial year and then...
    Last edited by Beagle; 06-10-2017 at 02:33 PM.
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  5. #5635
    Speedy Az winner69's Avatar
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    That chart a few posts ago shows that SUM share price over many years has averaged about 50% of the RYM share price.(the red dotted line)

    For a short period earlier this year the ratio went over 60% .....but has been reverting to that long time average again.

    What's happening might be stupid and some would say it's crazy and others might say it just doesn't make sense .......but at the end of the day the 'market' only sees SUM share price worth half of RYMs share price. Totally illogical but is spooky eh possums.

    It was Couts' hypothesis that 50% was the ratio between the day. I showed him that that hypothesis had some credence (the red dotted line).

    Not saying it's right or wrong - just interested in updating something that's fascinating ...and spooky.


    maybe just as illogical as AIR's PE ratio is generally about half the market PE
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  6. #5636
    ShareTrader Legend Beagle's Avatar
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    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  7. #5637
    Speedy Az winner69's Avatar
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    Share price only 5% off all time high

    No worries
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  8. #5638
    ShareTrader Legend Beagle's Avatar
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    Default House prices in decline ? Actually Not !

    http://www.nzherald.co.nz/business/n...ectid=11932091

    SUM's business model is robust and underpinned by very strong needs based demographics. I'm expecting long term enduring growth. Forward PE of 13.5 compared to a market average of just over 20. Opportunity knocks while the political uncertainty remains ?
    Last edited by Beagle; 12-10-2017 at 09:39 AM.
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  9. #5639
    Guru Xerof's Avatar
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    should be $6 by xmas and still only on PE~16, if I'm to believe your 38cps, which of course I do

  10. #5640
    ShareTrader Legend Beagle's Avatar
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    Default Growth at a real value price.

    Cheers mate. REINZ medium price data the most accurate and appropriate yardstick in my opinion because it encapsulates all sales data from all agencies transacted through REINZ agents and of course the medium price is the most accurate measure by which the average customer is enabled to transact into their priced retirement unit. Considering the shockingly wet winter, political uncertainty and lending restrictions the underlying strength of the property market gives strong cause for encouragement in the ongoing profitability of companies in the retirement sector especially the one growing at the fastest pace. Do pockets of real value remain in the NZX despite it trading at all time high's ? Is the Pope a Catholic !
    Last edited by Beagle; 12-10-2017 at 12:38 PM.
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

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