RYM - Ryman Healthcare

[Sauce]

Isn't it funny how all the brokerages that were dissing RYM during the housing decline have changed their tune..

I have now seen DCF valuations and target prices for RYM from three brokerages ranging from $2.90 - $3.10, which ironically are now higher than my own current valuations. When as recently as 08/09 and even 2010, those same brokerages had doubts about the viability of RYMs business model in a declining housing market, and had valuations far below my estimates.

Now we have comments like this coming from recent broker reports on RYM:

Ryman well positioned to leverage its pricing

With a potential scarcity of high quality product and large
well capitalised operators, RYM with its 20+ year track
record remains well positioned to enjoy very strong demand
for its product and to leverage its pricing accordingly.

And almost identical admissions from two other brokers that RYMs pricing is not entirely set by the residential housing market.

I find this incredibly ironic that they now profess RYM to have some pricing power even in a declining market... But now this is no insight right? its simply hindsight now that RYM have proven it. It seems the role of the broker is simply one of commentary rather than insightful thinking about the micro and macro economics when it was truly useful (i.e. when the stock was trading at a hefty discount !!)..

Of course there is some link between village pricing and the housing market (i.e. The old person buyers have to have enough equity in their homes to afford them to start with!) but the fact remains that RYM have considerable pricing power and will continue to do so for the foreseeable future, even if the residential market as a whole continues to decline.

I agree with the latest broker reports, but its the timing that makes me wary. It wasn't difficult to see this 1, 2 or even three years ago.

Don't trust broker reports and think independently is the lesson. That is a lesson that has been hammered home to me countless times now since 2007.

[percy]

well all of us RYM followers on sharetrader certainly have your independant research/advice to be thankful for.thank you.

[Beagle]

RYM still good buying at $2.59 ? Thoughts anyone. Hold 25,000 considering adding.

[percy]

RYM still good buying at $2.59 ? Thoughts anyone. Hold 25,000 considering adding.

I think RYM has speed up their game,building more, so growth be higher.The moat has got deeper,much harder to enter the game for a new player.So RYM prospects with an ageing population looks excellent.Now to answer your question.I do not think you should let RYM make up more than a third of your total share portfolio.

[CJ]

The moat has got deeper,much harder to enter the game for a new player.

Why? Anyone with enough land and money can build one.

Rymans advantage is in its systems I would have thought. It can build and run more efficently meaning it gets super returns for the same income compared to other competitors.

This isn't a moat argument, more an economies of scale argument.

Interested in your thoughts.

[robo]

Why? Anyone with enough land and money can build one.

Rymans advantage is in its systems I would have thought. It can build and run more efficently meaning it gets super returns for the same income compared to other competitors.

This isn't a moat argument, more an economies of scale argument.

Interested in your thoughts.

Barriers to entry in this market is only access to capital, their dominant position and track record would take time to beat though

[percy]

CJ and Robo.You are correct.I do feel you would need a mountain of money to even start.To ever get the reputation RYM have achieved would take years.
Each year their reputation grows.People trust them.The moat grows deeper and wider each year.Their model is excellent.Operations excellent.Buildings excellent.
They only need to put up a notice they are going to build a village on a piece of land to get firm commitments.What sauce is bringing to our notice is that brokers who thought the property market would affect RYM are wrong.RYM is a retirement village,home,care model.You enter a village and they look after you until you die.
The stand alone private village will find increasing difficulties staying in business,while RYM will grow.We can see from latest announcements that RYM are speeding up their growth.
The moat. the strength of the moat I feel is the amount of money and time it would take to beat RYM.or to equal them.

[POSSUM THE CAT]

Percy I think you are blinded by your own thought. not realistic research Where are all these (brainless) rich retirees that can afford their fees coming from. I am in this age group & would not dream of signing one of there contracts. I am not that stupid There are at least Seven Retirement Villages being spruiked on TV in Auckland Area at the moment

[percy]

Percy I think you are blinded by your own thought. not realistic research Where are all these (brainless) rich retirees that can afford their fees coming from. I am in this age group & would not dream of signing one of there contracts. I am not that stupid There are at least Seven Retirement Villages being spruiked on TV in Auckland Area at the moment

Possum The Cat. No surprises from your post.!!! Retirement villages everywhere.Only one really successful listed one though, and that is RYM.The others will spend heaps advertising,while RYM just need to put up a notice they are building a village here to get sales.I go past 4 fish and chip shops to get the fish and chips I like,and if they were listed I would buy shares in them.!!! RYM have also proved people will drive past other villages to get a RYM unit. Reputation. I have been waiting for your old prison argument..!!! lol
What has blinded me is the share price performance of RYM.All done without calling on shareholders to fund growth.

[buns]

The stand alone private village will find increasing difficulties staying in business,while RYM will grow.

I don’t agree with this statement entirely.

I agree that RYM plays this game better than the others, but that doesn’t mean any new entrants won’t survive. Their margins/profits may not be the same as RYM’s, but they could still hang around earning lower margins/profits whilst taking customers from Ryman.

Ryman in no way have a monopolistic product, it just seems that way because they dominate the market.

Someone could still enter this market and do well if they are sensible about it, but won’t do as well as RYM who have the systems, process etc etc in place to achieve the economies of scale.

As CJ points out, that is RYM’s point of difference. Over all these years they have found what works, what doesn’t and been able to create the most efficient operating model possible.

Ryman in many ways will be the incumbent when it starts building in Melbourne, a lot of their advantages they have in NZ won’t help them over there. Will be interesting to see how that works.