RYM - Ryman Healthcare

[Lawt]

This announcement is good for another $1.50 by teatime eh?

I feel the exchange should issue a please explain notice to Ryman - to find out why the price has only gone up 7c so far today.

[Beagle]

I feel the exchange should issue a please explain notice to Ryman - to find out why the price has only gone up 7c so far today.

Gotta give you some rep for that good humour

[percy]

From the mouth of local retirement village manager;"It is care and future care that motivates people to move into a retirement village."
Does the property market affect their decission I asked."No,it is their concern of care and future care."

[percy]

Sounds like a reply you would expect from a retirement village manager though right?
I mean clearly the property market has to come into play when people are making decisions to go into villages. For most people in NZ, property is where the majority of their $ are tied up in, so if the poperty market is bad, not only does a wealth effect come into play, but also for many there is hightened budget constraint too.

I have only two experiences to form an opinion from.
My mother who lived in Maroochydore could no longer properly look after herself.My brother,who lives in Hobart,while visiting our mother rang me and told me the situation, and he moved quickly to get her into a retirement village.Our concern was her safety and care.NO consideration was giving to the property market.
The other experience is with my mother in law who needed to get care as she was suffering dementia.Again NO consideration was given to the property market.
The retirement village manager just happens to be a friend of my wifes who had called in for a cup of tea.
Confirms to me what I felt was the case.

[percy]

turmeric;
The village property manager was telling me about a couple who want to purchase a unit in her village.Main consideration is, should one of them die the other will be safe and receive care.She does not have a unit avaliable at present,so they will have to look elsewhere.
So no need for care at present.
They have sold their house with a long settlement date,to give them plenty of time to acquire a retirement unit.
So in this case I would think it is the property market playing a major/big part in their decission.
Whether that is more important to them than their peace of mind I don't know.

[Beagle]

There is undoubtably some linkage between the real estate market and the ability of elderly people to move into retirement villages but in my opinion nine times out of ten the potential resident is selling a bigger house to move into a smaller retirement unit in a village that they perceive will look after their needs well.

Becuase the transition almost invariably involves moving into a smaller unit that's more manageable, there's effectivly a trading down in size and value, hence from the vast majority of retirement village uinits I've seen there was a high level of affordability for the average potential resident in that area.

I visited all the retirement villages in the Hibiscus Coast before helping my parents to make the decision that best suited their needs. In their case they sold a very, very modest 2 bedroom home in Red Beach Whangaparaoa and ended up with a lovely sunny 100sq metre unit, money for a new car and $100,000 left over as well. My mum really enjoys living there and is extremly well supported now that Dad has passed on. Ryman in Orewa did a reasonable job of looking after my Dad during his advanced dementia stages.

Discussing the state of the Auckland housing market yesterday with the N.Z. general manager of one of the major Aussie owned franchise chains, he told me that Auckland homes that are watertight and in reasonable condition are in exceptionally strong demand. No doubt these sort of boyant conditions makes selling retirement village units incredibly easy, hence why I'm expecting a bumper result of the annual result next month.

I personally believe the stockmarket in ramping up Ryman's price in such a manner is saying that these boyant conditions will continue for the forseeable future and effectivly means that revaluations are perhaps baked into normal operating earnings too. I also believe as posted recently that money in the bank is no longer viewed as a guilt edge security it once was due to the new banking regulations and there's a rush to find high quality high growth and very safe stocks.

[glasszon]

The share price seems to have went down instead today on high turnover while SUM is going up, did I miss something or just a small correction due to its recent rise?

[Beagle]

Bail on SUM as RYM will takeover tomorrow up another 4% lol. They trade places, day-on, day-off (gets me slightly suspicious)...

Nice prediction on Ryman
The new Australian director has very strong credentials. Nice addition to the board.

[winner69]

The number of people over 75 has increased by 2.3% pa over the last 10 years. Projected growth rate is 3.5% pa over the next 20 years. Similar rates apply to over 65 year olds

Everybody talks 30% pa plus growth for the likes of RYM and SUM

Obviously got to come from more than the increase in the number of potential customers (old people) because that is going to be only 3.5% pa

Maybe the %age of old people going into homes is going to increase (so we get population growth PLUS a greater % of potential punters) - they call this increased PENETRATION in the trade. What are the drivers of having more people wanting to move into homes? There is a multiplier effect here - if the % says the same customer growth remains at 3.5% but each 1% point increase adds more than 1% point to the growth rate. (say 10% in homes now and that goes to 11% demand (number of units needed) increases by 10% for instance)

Suppose another drive of growth is market share - are RYM and SUM for instance expecting to grow share of punters going to their villages?

Outside of the demand side is a lot of the profit then coming from the fianancial impacts of valuations, customer churn (poor sods dying) and other factors

Looks like all are important - because if nothing changes demand (ie number of customers) is only 3.5% pa (in spite of the headlines like doubling the numbers of old people etc)

Interesting. Maybe financial engineering in some form or another is the real profit growth engine?

Sparks - have you found out for me yet the number of people living in retirement villages at the moment (even better if you had a number for 5 or 10 years ago as well). Might build a model to see how many units are needed in the future under different scenarios to see what a likely 'demand' growth rate might be

[Beagle]

Everybody talks 30% pa plus growth for the likes of RYM and SUM

Obviously got to come from more than the increase in the number of potential customers (old people) because that is going to be only 3.5% pa

The number of New Zealanders living in retirement villages continues to increase rapidly. Among over 75 year olds, the number of people who call a retirement unit 'home' has grown from 5% in 1998 to 9% in 2011. If that growth rate continues New Zealand will need more than 21,000 extra retirement units and 20,000 aged care beds by 2031.

Extract from Summerset CEO's AGM presentation on 30 April.

Ryman's stated objective is to achieve 15% growth per annum. I believe Summerset's profit growth will be higher than that for the next few years as it seems to me they've only recently hit the critical mass necessary for rapid profit growth. I'd be surprised if it wasn't quite a bit more than 30% for the next few of years in particular as they've only recently brought building development in-house and have stated they're looking to achieve substaintially higher development margins, (Ryman's development has been handled in-house for quuite a considerable time now).

In the States I understand retirement villages account for 15% of the aged population, sorry can't post a link as I can't remember where I read that. In my view the treand will continue based on a growing recognition of the quality of life a high quality retirement village can bring to one's retirement years.

I don't think a 15% penetration of the aged population within 15 years is unreasonable, feel free to extrapolate that trend into your models