RYM - Ryman Healthcare

[Vaygor1]

My policy is not too pay for growth that isn't there. Using a fair value long term PE of 8.5 for a zero growth company and adding in consistent growth at 18% per annum my simple model gives me a long term fair value PE of 26.5 times for Ryman.
26.5 times core EPS of 27.3 c.p.s. = $7.23 fair value. I wouldn't buy or own the stock above this level.
EPS growth is not 43%, this includes revaluations.

RYM have always been very clear of only using realised gains in their official financials
Last financial years earnings/share (basic and diluted) was 27.3 cents
This financial year just completed, earnings/share (basic and diluted) is 39.0
An increase of 43%

Where do you get your EPS of 27.3 cents for this financial year from Roger?
PS. It is 5:30am here in Bangkok so my mind is not entirely functioning at the minute.

[stoploss]

Thanks also stoploss for you very insightful quote, which I believe you've already posted several times before...

yes , not sure if the links came through ok. Anyway was a copy and paste .I believe you conceded then that bubble was the wrong word to use with a stock like RYM.
Since you seem pretty keen to bash it , just wondering do you have any disclosures you should be making re your employment or position in this stock ?

[Beagle]

RYM have always been very clear of only using realised gains in their official financials
Last financial years earnings/share (basic and diluted) was 27.3 cents
This financial year just completed, earnings/share (basic and diluted) is 39.0
An increase of 43%

Where do you get your EPS of 27.3 cents for this financial year from Roger?
PS. It is 5:30am here in Bangkok so my mind is not entirely functioning at the minute.

As an accountant I can tell you there's a lot of confusion surrounding EPS for these sort of companies.
In brief IFRS, (International Financial Reporting Standards), require inclusion of unrealised revaluations in the financial statements.
Here's the result release, I have highlighted the pertinent part.

Ryman Healthcare’s underlying profits rise 18 per cent
8:30am, 15 May 2014 | FLLYR
Media release – May 15 2014

Ryman Healthcare’s underlying profits rise 18 per cent

Strong retirement village earnings fund extra investment in care services

Ryman Healthcare today announced an underlying profit of $118 million thanks to a buoyant property market and strong demand for retirement village living. Valuation gains lifted the reported profit after tax to $195 million.

“It’s another standout result for us thanks to some strong earnings growth from our new villages,’’ Chairman Dr David Kerr said.

“It is a great way to mark our 30th birthday and to thank the investors who’ve backed us for all these years. We’re pleased to be able to increase our final dividend to investors by 18 per cent to match the rise in underlying profits.’’

Ryman has lifted its underlying profit for 12 years in a row and has again exceeded its medium term target of growing underlying profits by 15 per cent a year.

“There have been a number of highlights in the past year but welcoming the first residents into the Weary Dunlop Retirement Village in Melbourne this month stands out as a significant milestone for this company,’’ Dr Kerr said.

“We’re also pleased to have bought another site in the eastern suburbs of Melbourne. We’re still learning about Australia but our experience so far has exceeded our expectations and given us the confidence to expand.’’

Dr Kerr said the growth in retirement village earnings funded extra investment into care for residents. Ryman has increased wage rates for care staff, put in additional training resources and increased staff numbers.

“We put the care of our residents at the heart of everything we do – without them and the support of their families we simply wouldn’t be in business.’’

“Our residents and their relatives rate us highly but we want to raise the bar higher – we want them to be genuinely delighted with the village they live in and the care they receive.’’
Ryman shareholders will receive a final dividend of 6.2 cents per share which will be paid on June 20 2014, taking the total for the year to 11.8 cents per share. The record date for entitlements is June 6 2014.

Operating cashflows reached record levels at $238 million, up 7 per cent from the year before.

The company acquired six new sites in New Zealand during the year, which has extended its landbank out to just under 4000 beds and units.

As a result Ryman raised its build rate target, and aims to be building 850 beds and units a year in New Zealand by 2017.
Ryman’s Bruce McLaren Retirement Village is on target to open in Howick later this year, and work is due to start on a new village in Petone after it gained consent.

Planning consent has been lodged for a new village at Birkenhead and Ryman has also unveiled plans to build a new village on a prime site at Devonport on Auckland’s North Shore.

NOTE: Underlying profit excludes deferred taxation and unrealised gains on investment properties, because these items are non-cash and do not reflect the trading performance of the company. Underlying profit determines the dividend paid to shareholders, and is reconciled to reported profit in the key statistics attached to this release.

About Ryman: Ryman Healthcare was founded in Christchurch in 1984 and owns and operates 27 retirement villages in New Zealand and Australia. Ryman villages are home to 7500 residents, and the company employs 3500 staff.

Media advisory: For further information, photos, interviews or comment please contact Corporate Affairs Manager David King on 03 366 4069 or 021 499 602.

CONSOLIDATED OPERATING STATEMENT FOR THE YEAR ENDED 31 MARCH 2014

Audited.

Current Year NZ$; Up/(Down) %; Previous Corresponding Year NZ$

UNDERLYING PROFIT:
118,204,000; + 17.9%; 100,229,000

OPERATING REVENUE:

Trading Revenue:
202,491,000; + 11.9%; 181,001,000
Other Revenue
732,000; 169.1%; 272,000
Total Operating Revenue
203,223,000; + 12.1%; 181,273,000

Fair value movement of investment properties:
174,019,000; + 46.3%; 118,935,000

TOTAL INCOME:
377,242,000; + 25.7%; 300,208,000

NET PROFIT BEFORE TAXATION:
203,287,000; + 35.3%; 150,279,000

Less tax on operating profit:
8,482,000; (37.4)%; 13,549,000

NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS OF LISTED ISSUER:
194,805,000; + 42.5%; 136,730,000

Earnings per share:
39.0 cps; + 42.9%; 27.3 cps (basic and diluted)
Final Dividend
6.2 cps; + 14.8%; 5.4 cps
Record Date: 6 June 2014
Date Payable: 20 June 2014
Imputation Tax Credit: No Imputation Credit

But I must confess at this early stage I am still a bit confused as the company made it clear underlying profit is $118m and according to the Direct Broking website there's exactly 500m shares on issue so this gives underlying EPS of only 23.6 c.p.s. ? If I had some shares in this company I'd spend the time necessary to fully investigate this but I don't and even on the higher EPS diluted number disclosed by the company it's a stock that's too "fashionable" for my value tastes...but good luck to all holders

[stoploss]

I am not holding this stock, nor do I have anything to do with the company or any of its competitors. I just think its funny watching people buy it blindly assuming its always going to be a good deal.

I made excellent money on this last year, but sold out after making 78% in 12 months. Now consolidated in SUM.

Happy?

Congratulations on your trade last year . I am very happy .You u do not have anything to do with RYM or any of its competitors ....apart from the fact you are LONG stock in a competitor. So thanks for the disclosure adds a bit more balance to your posts on RYM.

[Vaygor1]

As an accountant I can tell you there's a lot of confusion surrounding EPS for these sort of companies.
In brief IFRS, (International Financial Reporting Standards), require inclusion of unrealised revaluations in the financial statements.
Here's the result release, I have highlighted the pertinent part.

I'll take your word for it on the IFRS rule on including unrealised revaluations for the EPS, but isn't 27.3 cents last years number?
i.e. 5.4 cents was last years final dividend.

Earnings per share:
39.0 cps; + 42.9%; 27.3 cps (basic and diluted)
Final Dividend
6.2 cps; + 14.8%; 5.4 cps

[muss1]

NewGuy is raising some good points that should be considered. If you own Ryman and don't need to worry about fluctuations until you might want to sell in 20 years, then holding is a great option. If you actively manage your portfolio then it can be argued that Ryman is near the top of one of its surges and may or may not be quite flat over the next few years.

I am in the second camp, and sold out a couple of weeks ago. I believe i can get better mid-term SP appreciation elsewhere (next 1-3 years). I love the company and will definitely own it again in the future.

It all depends on your investment philosophy. As long as you understand what you want out of Ryman for the next year or 20 years then your desired position in the stock should be obvious.

If you expect another huge growth year I would hope you have thought very carefully about it

[stoploss]

Roger - surely you only care about underlying earnings? Why even bother with the other numbers?

Stop loss - how does being long in SUM have any bearing on my RYM-related posts? Obviously I prefer SUM to RYM, but so what? that doesn't invalidate my comments about RYM in any way. further, I have nothing to gain from my SUM shareholding by berating RYM, do I? I mean, really!

I did not say it invalidates your comments it just puts them more in perspective. RYM has outperformed SUM over the past 6 months so maybe you feel if you bash them a bit , put emotive words in your posts like bubble people will sell out & switch their holding to SUM , then maybe you offload your SUM.

[Beagle]

I'll take your word for it on the IFRS rule on including unrealised revaluations for the EPS, but isn't 23.7 cents last years number?
i.e. 5.4 cents was last years final dividend.

Earnings per share:
39.0 cps; + 42.9%; 27.3 cps (basic and diluted)
Final Dividend
6.2 cps; + 14.8%; 5.4 cps

Apoligies, my mistake. Its clear the 39 cents per share this year is calculated on the full revaluation profit, .39 x 500m = $195M which is inclusive of all revaluations, realised and unrealised i.e. IFRS and 27.3 c.p.s. is last years figure inclusive of all revaluations.

Underlying earnings were $100m last year on 500m shares = 20 c.p.s. and this year are $118m on 500m shares = 23.6 c.p.s.
$8.70 /23.6 cps = a PE of 37 times last years earnings or assumming another 18% profit growth for 2015 a forward PE of 31 times earnings. Much too "flavour of the "month" or should that be flavour of the decade ?, for my tastes.
That said I am sure the brokers will work their "fancy" DCF models to find a way to keep recommending the stock so they can keep the brokerage tills ticking over...

Roger - surely you only care about underlying earnings? Why even bother with the other numbers?

Mostly right but I look at the other numbers to get a guide on how I think this stock will travel going forward. i've got this sussed now. I see fair value on my corrected underlying EPS in the low to mid $6 range. I don't care that my intrinsic valuation is at a wide variation to the market's assessment of this stock. There's better prospects for SP appreciation elsewhere in my opinion.

[winner69]

This is my favourite measure of RYM performance - underlying profit per portfolio unit. I made it up and might be a bit crude but at the end of the day we don't really have too many numbers to play with me

What it does say is as even as more and more units are being created they are making more and more money out of each unit- probably a crude way of saying margin expansion (operating and development)

Whatever I like it

Yes a solid result as expected with underlying profit up about the normal 20% ... but one day that PE will contract and likely 3-5 years returns from todays price are likely to be negative (and that person who called me a cynical old coot in a reputation comment I still stand by this comment)

[Vaygor1]

Roger - surely you only care about underlying earnings? Why even bother with the other numbers?

All the numbers are important as they each put the others into context and is the reason the rules IFRS and GAAP require them to be reported. There are hundreds of different measures of performance, and each one tells a different story. On top of that there are other non-numberical measures like 'Does the company in question always meet its forecasts?'.

Stop loss - how does being long in SUM have any bearing on my RYM-related posts? Obviously I prefer SUM to RYM, but so what? that doesn't invalidate my comments about RYM in any way. further, I have nothing to gain from my SUM shareholding by berating RYM, do I? I mean, really!

A while ago I was accused of favouring RYM over SUM over on the SUM thread even though I support both. Both RYM and SUM are in my ShareTrader Stock Picks 2014 competition so I want them both to do well. I must admit though, I do find in general that those who hold shares in either RYM or SUM (but not both) tend to be more negative in their outlook and financial interpretation of the company they do not hold and more positive in the outlook and financial interpretation of the company they do. Perhaps it is an unintentional method of self-reinforcement that one has made the right decision. No specific names here, just a general feeling on an issue that I may have been guilty of myself.