RYM - Ryman Healthcare

[Vaygor1]

Lower hose price means lower NTA, which means lower SP. What I'm wondering is if it will effect revenue enough in the short term to cause risk to the business. 

Lower NTA possibly as reported by IFRS, but based on my last post, this will have negligible impact on RYM's revenue and underlying profit.

In the event of a housing crash, a lower SP will almost certainly occur, but it will be based purely on the markets (unfounded and typical) speculation and fear, fuelled by media scaremongering.

A much greater risk to RYM's share price is in them not making their target of 15% increase per annum in underlying profit (even a 14.9% result will cause the market to panic-sell I believe). There is a far greater chance of this occurring in this financial year than any other in RYM's recent history (in my opinion) because I can't see any growth in realised profits through opening new villages this financial year.

I know that some villages already opened will continue to expand somewhat, but the biggest gain in realised profits come from the initial opening of new villages. Can anyone tell me a single new village that has been opened or will be opening this financial year ending 31-Mar-2017?

[percy]

Dates I don't know,but from the latest issue of The Ryman Times,Spring 2016,Dr.David Kerr stated ;"Ryman is the busiest it has ever been with four large new villages set to open later this year."

[Vaygor1]

Dates I don't know,but from the latest issue of The Ryman Times,Spring 2016,Dr.David Kerr stated ;"Ryman is the busiest it has ever been with four large new villages set to open later this year."

Thanks Percy. I'll take a look and do a bit of subsequent digging.

[percy]

Thanks Percy. I'll take a look and do a bit of subsequent digging.

But wait,,,,there's more.!!!
"Ryman villages are now home to more than 10,000 residents and are set to grow to accommodate more than 17,500 residents over the next five years."
Just realised this is just recycled news, from their 27th July 2016 agm media release,which is on NZX site.
.

[Vaygor1]

Okay, so RYM state in the Spring edition of RYM Times (and elsewhere via the press) that 4 new villages will be opening later this year. Quote from David Kerr in the RYM Times "Ryman is the busiest it has ever been with four large new villages set to open later this year".

Here is a slide from RYM Build activity FY-2017 Source RYM Annual Presentation in May 2016

RYM Build activity FY-2017 Source RYM Annual Presentation 2016.jpg

So we have Birkenhead, Greenlane, Pukekohe, Petone, and Rangiora.

Then we have this construction update from the Ryman website dated 27-July-2016. https://www.rymanhealthcare.co.nz/th...te-in-auckland . Here is an excerpt:

Attachment 8362

So Pukekohe, Rangiora, and Petone already open (all before 1-April-2016 as I recall - happy to be corrected). Birkenhead looking good, and Greenlane in early stages. I read that as one and bit new villages opening this financial year, not four.

Birkenhead will eventually include 227 independent apartments, 83 serviced apartments, and care for up to 100 residents in its care centre (resthome, dementia and hospital care as well as assisted living for residents in its serviced apartments) so about 400 there upon full completion, maybe 300 by 31-Mar-2017?

Greenlane is a fairly small site at 1.7 Hectares so not such a huge construction effort there and when full will have about 215 units. so say 150 by 31-Mar-2017?

So circa 450 by end of FY17 at Birkenhead and Greenlane, with the remaining 350 from secondary opening stages at Rangiora, Petone, and Pukekohe (especially Petone) plus a few additions to the other 30 odd villages, RYM will likely attain their forecast of 800 units opening this year.

Attachment 8363

Will it be enough with the anticipated increase in resale prices to get to 15% increase in underlying profit this financial year? I think so. The definition of when a unit is completed is a bit grey. I would be surprised if RYM didn't have a bit up their sleeve from previous year(s).

With not many units being opened in the 1st 6 months of this financial year, the H1 result may disappoint leading to an even lower SP then today's, which is already a bargain imho based on the historical correlation of Share Price vs Underlying Profit.

[macduffy]

I continue to maintain that the actual opening of a village is only the beginning of the process. A case in point is the Bob Scott village in Petone which "opened" last December but where construction continues apace as more units become completed. A lot more growth there for some time yet.

Back to the Melbourne market, the 2016 Annual Report anticipated Brandon Park opening in 2018, Burwood in 2019 and "Sites" 4 and 5 in 2020.

[Hoop]

Nice summary Vaygor..
I thought I recognised the charts...From NZ Reserve Bank publication .. Analysis of the NZ property market January 2016 (PDF file)

With charting I tend to have a look at the overall picture..
also..
Due to extremes in inflation rate it is best to analyse in Real dollars (inflation adjusted)

The Property Market has a very wide oscillating cyclical cycle it seems to take about 40+ years to complete a cyclical wave, compared to an Equity Cyclical cycle of average 7 years ..Yes..I can hear all the property investors saying property has a 7 year cycle too, but for the case of property these 7 year movements have been bull market corrections (secondary cycles)..not cyclical reversals..

I can't be sure of the average length of time to complete a cyclical NZ property wave as the NZ data is terribly hard to find and does not go back far enough to create significances...We need many centuries to gain any significance to what could be happening with this present 45 year old Property bull market cycle**...Bull cycles (irrespective of how long they operate for) have a fairly consistent shape behaviour ..The Bull Cycle operates in stages from slow hesitant (wall of worry) rise after a cyclic reversal to the last stage of exuberant rapid rise..a shape similar to an exponential rise (half a bell curve)..

Taking a look at the NZRB publication those long term charts shows that the property market has been in a constant Bull Market cycle and now "could" be in its rapid rise exuberant stage...As life expectancy averages vary it could be years yet before a cyclical reversal to a very long period of Bear and at the reversal point when Bull does finally turn Bear it would be very difficult to define that point of change..it could either, take years to confirm or as History has told us it could sometimes come suddenly as a crash...Concerning RYM and their Investors my post and these long cyclical waves is academic...but nice to know as bear market cycles tend to display more bad news than normal which causes investor frustration and disappointment thereby creating an overall more negative than postive sentiment behaviour towards investing...



The Bradley Nuttall publication quote "...Looking at the chart, you’ll notice that, in real dollar terms, the price of housing declined from 1900 until roughly the end of World War II. Economists at the time felt that was perfectly normal...."

Today's sentiment towards Property Investment?...after these last 40 years we all believe that we should invest in the Property Market no matter the cost/hardship because in the end your house will be worth more in the future..

With Ryman I demonstrated in my previous post how cruel (RYM -57% fall) a small bull property market correction (7% fall) can be..It's not the figures you have to worry about Vaygor..its the sentiment....Imagine what a long term ingrained sentiment could do...we have that now [positive])

repeat that quote...eh "the price of housing declined from 1900 until roughly the end of World War II. Economists at the time felt that was perfectly normal...." ..[Negative]

I can remember decades ago when Property Investment stocks sector averaged a PE ratio of 7% and that was thought perfectly normal back then...The theoretical RYM share price with that "normal" would be $4.50

Can we use very long term global property charts to aid NZ property charts...It seems we can...secondary corrections don't correlate well, but overall it seems they might..


The very long term Herengracht chart illustrate what I have been saying about cycles...
Interesting authors perception seen by his comment..huh?..I could expect a comment during the height of a Cyclical Bull Market ..a quote " but on average the real price doubled" is expected..but we could imagine a very different comment if written at the end of the last Cyclical Bear Market (1980)..what about if written in 1808

Food for thought:...
RYM a good future investment.....everyone needs a place to live/ demographics demand during a long term good growth investment period......Investor myth?.....as seen by cycles....try explaining why some businesses struggle to up their share prices during high demand/rapid rising asset price periods..

Ref:
Shiller and Yale University publications

[Vaygor1]

I continue to maintain that the actual opening of a village is only the beginning of the process. A case in point is the Bob Scott village in Petone which "opened" last December but where construction continues apace as more units become completed. A lot more growth there for some time yet.

Back to the Melbourne market, the 2016 Annual Report anticipated Brandon Park opening in 2018, Burwood in 2019 and "Sites" 4 and 5 in 2020.

You have a valid point MacD. I visited the RYM Petone site in late May this year. I was surprised how little of the site was occupied so quite a lot of capacity there I think. But just from driving around it was pretty hard to tell (I didn't go in and enquire or anything).

My perception is that upon initially opening a new village, the value of the main infrastructure is realised. ie everything that goes behind achieving resource consent and building consent, detailed engineering and design, tendering out, contracts let, reception and entranceways, roading, underground carparks. main electrical supply & switchgear, water supply, stormwater, sewage, swimming pools, gyms, bowling greens, kitchens, emergency facilities, etc etc. A big leap from just the value of the land at the date it was purchased. I guess it comes down to to just where in the process a particular facility within a village is deemed to be 'realised'.

This is the grey area I refer to as providing RYM some leeway on its underlying profit announcements.

In support of your position, here is a basic timeline provided by RYM on their village development process.

Attachment 8365

[percy]

Just a few things and thoughts from this mornings RYM presentation put on by local broker Hamilton,hindin and Greene.
Presenter David King Ryman's Investor Relations.Placed his parents in Ryman care.Father dementia,mother alzheimers.Only thing his siblings have ever agreed on.!!!
Chairman Dr. David Kerr said at an agm held at Ryman village,"It is with a sense of pride I come here,as we put my mother into care here."
CFO,Gordon Macleod.I first became associated with Ryman when I put my mother into a Ryman Village.
Kevin Hickman.Joint founder of Ryman.I want to build retirement villages that would be suitable for my mother.
Floated in 1999 when they raised $25 mil.At the time it was their 2nd attempt to list.Market did not think much of them.Have never been back to shareholders for more capital since then,yet have paid out $500 mil in dividends.
Treat the staff well,make then happy and they will make the residents happy.
Everything done in house.On completion of each new village the design team make a critical inspection, to note where improvements can be made for their next village.
The level of occupancy for care was either 96%or 98%.The presenter's mother had to be moved from one Ryman village to another, for care.

[Joshuatree]

"Treat the staff well,make then happy and they will make the residents happy."
From what I've heard thats not necessarily the case.Its a shame they don't do what they say.Staff morale can be lousy with constant replacements needed is what I've heard in dementia and hospital care. The people that work in the front line are paid the least; barely enough to live on. Don't you think something is wrong here.Our parents are placed with overworked staff who are also underpaid and believe they aren't valued. Does that give you confidence in your parents being really cared for; i know some of these staff do incredibly well because its their calling , to care for the elderly for all sorts of reasons.Other staff don't have that calling and are undervalued, under paid and overworked. What do think will happen here quality of care wise.? Just my opinion from what I've heard.