RYM - Ryman Healthcare

[Beagle]

I think the market must be a bit skeptical Roger, even with RYM up 15c yesterday. With 40 days before announcing, and such a clear signal 5 months ago re attaining FY lift of 15%, I am feeling positive.

Sounds like winner and possibly yourself believe such a result is already priced in. I think it has a bit of room to move yet.

Winner makes a good point though. In my view, if RYM fall short of the 15% by even a smidgeon, the market will be very unsympathetic (as always) and theoretically provide some excellent buying opportunities.

Not sure if they've ever been this far behind the eight ball in recent years (first half growth at 6% so far under annual target) so it will be interesting that's for sure.

From Couta1's post #3386 SUM thread.
Simon Challies from the latest Ryman times;
"We've got a busy year ahead and we are off to a flying start.I can't remember a busier period in the history of the company.etc.Hang on to your hats folks because it's going to be a great year."
Does not seem he shares posters concerns?

Simon is talking about the year ahead, the one they're reporting on next month is already done and dusted.

On a positive note it was great to see real estate prices across much of New Zealand continue their upward momentum last month.
What intrigue's me a little is we've seen them absolutely boom in Auckland over the last two years in particular and yet the SP's of RYM in particular and SUM to a lesser extent haven't shown a similar momentum. I'd suggest this augers very well for embedded value and future realisation of same.

[percy]

Not sure if they've ever been this far behind the eight ball in recent years (first half growth at 6% so far under annual target) so it will be interesting that's for sure.



Simon is talking about the year ahead, the one they're reporting on next month is already done and dusted.

On a positive note it was great to see real estate prices across much of New Zealand continue their upward momentum last month.
What intrigue's me a little is we've seen them absolutely boom in Auckland over the last two years in particular and yet the SP's of RYM in particular and SUM to a lesser extent haven't shown a similar momentum. I'd suggest this augers very well for embedded value and future realisation of same.

Markets are forward looking.

[Beagle]

Markets are forward looking.

That's a given Percy but the discussion we were having centred on whether they would achieve their target for the year ended 31 March 2016 of 15% underlying profit growth in the context of first half growth of only 6%, so Couta1's comment although very much appreciated in terms of outlook doesn't shed any light on the debate we were having.

[freddagg]

I have started to look at RYM and SUM in the last few weeks and it looks to me that they rely heavily on property appreciation to generate profits.
I am very interested in peoples thoughts on how RYM and SUM would fare if residential property had several years of reducing values.

[Bjauck]

I have started to look at RYM and SUM in the last few weeks and it looks to me that they rely heavily on property appreciation to generate profits.
I am very interested in peoples thoughts on how RYM and SUM would fare if residential property had several years of reducing values.

I think that turnover in licences to occupy would still continue and that the companies would still make money from licences even in a market where licence values were declining (they would still make money from the deferred fess charge of up to about 1/3 of the licence cost). Plus they still would be charging the annual maintenance fees. However I think the market reaction and sentiment with dropping real estate prices would be more exaggerated despite this.

[OldGuy]

I have started to look at RYM and SUM in the last few weeks and it looks to me that they rely heavily on property appreciation to generate profits.
I am very interested in peoples thoughts on how RYM and SUM would fare if residential property had several years of reducing values.

Yes, a significant proportion of profit is derived from property price increases. The company at greatest risk from a downward correction in said prices is MET (and ARV), both of whom derive the majority of profits from resales (rather than the initial sale of newly-developed units). SUM and RYM, conversely, also derive significant profits from sales of new units, which are more insulated from the effects of correction.

If I was entering the market RIGHT NOW, I would buy SUM, followed by RYM. Wouldn't touch MET or ARV.
HTH

[couta1]

That's a given Percy but the discussion we were having centred on whether they would achieve their target for the year ended 31 March 2016 of 15% underlying profit growth in the context of first half growth of only 6%, so Couta1's comment although very much appreciated in terms of outlook doesn't shed any light on the debate we were having.

I have been giving this some more thought and it is possible they may not make the 15% plus underlying profit growth based solely on the new villages coming on tap (As at the end of March balance date only a small number of sales from these will be included in the result) However what we don't know is how many resales they have had over the last 6 months(Could have been a bumper period) so the 15% may be acheived. Whatever the result I know for sure that the following year going forward is going to be a stunner and so i am extremely positive, if the irrational market sends the price lower it will be short lived as im certain the forward guidance will be very bullish. Look at Sums very lacklustre Q1 sales metrics and the market wasn't too harsh on the share price(I'm sure in times past that result would have sent the price below $4) but because of the bullish forward guidance the market has been lenient, how much more so should that be the case with the best operator in the sector with the most consistent long term results and management that can be trusted on what they say.

[percy]

I have been giving this some more thought and it is possible they may not make the 15% plus underlying profit growth based solely on the new villages coming on tap (As at the end of March balance date only a small number of sales from these will be included in the result) However what we don't know is how many resales they have had over the last 6 months(Could have been a bumper period) so the 15% may be acheived. Whatever the result I know for sure that the following year going forward is going to be a stunner and so i am extremely positive, if the irrational market sends the price lower it will be short lived as im certain the forward guidance will be very bullish. Look at Sums very lacklustre Q1 sales metrics and the market wasn't too harsh on the share price(I'm sure in times past that result would have sent the price below $4) but because of the bullish forward guidance the market has been lenient, how much more so should that be the case with the best operator in the sector with the most consistent long term results and management that can be trusted on what they say.

Getting a bit of a habit,but I totally agree with you.!..lol.

[freddagg]

Oldguy and Bjauck. thanks for your comments.

[Beagle]

I have been giving this some more thought and it is possible they may not make the 15% plus underlying profit growth based solely on the new villages coming on tap (As at the end of March balance date only a small number of sales from these will be included in the result) However what we don't know is how many resales they have had over the last 6 months(Could have been a bumper period) so the 15% may be acheived. Whatever the result I know for sure that the following year going forward is going to be a stunner and so i am extremely positive, if the irrational market sends the price lower it will be short lived as im certain the forward guidance will be very bullish. Look at Sums very lacklustre Q1 sales metrics and the market wasn't too harsh on the share price(I'm sure in times past that result would have sent the price below $4) but because of the bullish forward guidance the market has been lenient, how much more so should that be the case with the best operator in the sector with the most consistent long term results and management that can be trusted on what they say.

Thanks mate, appreciate you sharing your thoughts. SUM got some treatment for one quarter of perceived under-performance ($4.45 marked down to $4.22 at one stage, circa 5%) so for a well respected company to miss on one of its crucial all time ANNUAL lynchpins, that being the coveted 15% annual growth I don't think its beyond the realms of possibility the market could treat this more harshly, (after all if it happens this would amount to a crucial earnings guidance miss, guidance they put too the market as being confident of achieving) and its guidance that the market has always seen as one of the fundamental pillars upon which this company's reputation has been built. I agree that forward guidance is always the most important thing but failure to meet previous forward guidance would be a new thing for RYM and a big blemish on their otherwise almost perfect record.

I don't necessarily disagree with you mate but just want to highlight that SUM made no specific guidance regarding individual quarters sales performance, indeed they reiterated forward build rate guidance at the same time), whereas the RYM situation is different and potentially more serious.

I think a correction of possibly somewhat more than 5% might eventuate..but if we're being charitable we should say the stock in theory should find support at around $8 with an earnings miss but who can be sure, whereas on the other hand we are locked in a multi year trading range with a ceiling of $9. To me, it seems at $8.50 RYM is presently in some sort of no man's land equidistant from either possibility which looks like 50-50 to me. Anyone got a spare coin I could toss On reflection I think the chance of a short term sustained bounce above $9 is slightly outweighed by the possibility of a short term correction slightly below $8 so I shall keep my powder dry for now.