RYM - Ryman Healthcare

[Sauce]

I think its safe to say this is THE definitive one.
Great stuff Sauce, I wish I had the time to spend on research like you have and wish I could add something more constructive than I totally agree with you. Its the only stock on the NZX I really like. From what I've seen with the Evelyn Page retirement village when it opened in Orewa Auckland there's evidence in the retirement industry that due to Ryman's reputation they are able to poach the really good management and staff in any area, snowball momentum effect as good staff as i'm sure you appreciate are the key element in Ryman's sucess. Shortage of really good management and staff in the retirement industry, yet another competitive advantage for Ryman ? P.S. Have I mentioned I love the stock
P.S. This article on Ryman just popped up in my inbox:
http://www.sharechat.co.nz/article/6...man-healthcare.

Hi Roger,
I appreciate the response and the insights into RYM obtaining the best staff in Orewa. It makes sense that their reputation would extend to staff treatment and conditions, and that people would want to work for the best in the industry.
I don't have any other investments on the NZX either Roger.
Cheers
Sauce

[percy]

sauce,
Don't worry too much about other NZ shares,You are doing a fine job on RYM.We are all learning from your research.Everything from Moats to customer captivity on the one thread.!!!!!!!

[voltage]

sauce you are doing a fine job, great research and reading, can you give an idea what companies on the asx have qualities like rym.

[COLIN]

Also have lots of gearing and 4th rate European airports that lose money not to mention the bus network, gosh I think it would be fair to say their track record is at best patchy, okay they've done reasonably well when the oil price is ballistic with their Australian resource interests, but recent years results during the GFC show them up to be far riskier than RYM which has very strong defensive qualities by any logical comparison and a proven history. Having a moat is useless if the castle has systemic flaws ?

Roger, its quite obvious that your appetite for risk is not great. Thats fair enough, but you must appreciate that maybe others are happier to go along with greater levels of risk to receive potentially greater rewards. Its all a matter of timing, too. I held IFT for many years and they served me very well, but I bailed out in 2007 when they were encountering some obvious headwinds. I believe that they have now turned the corner, under Mark Bosgioski (incorrect spelling), and are worthy of fresh interest. Thats all that I was trying to convey to Sauce, in his quest and using his criteria. Yes, the European airports are a disaster, but their share of the total investment portfolio is inconsequential.

For information, RYM is one of my core NZ holdings.

[Beagle]

Colin - Fair enough I guess all I was trying to articulate, (not especially well with the benifet of hindsight) is that Infratil's moat isn't as effective as essentially its a collection of quite a variety of different investment assets. Really any investment company can go out and buy a variety of assets, whereas clearly it would be extremly hard to replicate Ryman's enviable and now heavily established position.

Sauce - You only holding Ryman and nothing else on the NZX has really made my day Whilst FBU, MFT, KIP and SKC are satisfactory companies in my opinion I'm very cautious going forward and none of those companies have anything like the defensive qualities or captive market that Ryman have.

Apart from a good holding in RYM and looking to add more pending results tomorrow, and a small holding in KIP I'm currently very liquid so I'd be interested to know what you like on the Aus market.

[Sauce]

Sauce: Have you had a look at IFT, as coming broadly within your criteria? They have a portfolio of major strategic holdings. How often does an opportunity come up like their recent acquisition of all the Shell stations, etc? And their controlling interest in Trustpower? And their controlling interest in Wellington Airport? And their close association (through Morrisons) with the NZ Superannuation Fund, who are now their 50% partner in Shell (now "Z").

Their purchase of the Shell business seems to have been a bargain, judging by today's report of their annual results.

Hi Colin,
I actually owned IFT back in like 2001 or 2002 or something like that. But I had no idea what to look for in a business in those days (of course I still probably don't!)

Just took a quick look at the historical ratios from Morningstar on surface it appears that IFT haven't achieved the kind of (economic) returns I would want if I was to entrust them with my funds. I.e. returns to equity in single digits. Of course I think it depends on how the equity is accounted for, so more effort needed to really work it out. From memory they seem to like to leverage up also, which is a negative in my view.

Cheers
P.s. Good timing on your FGE sale Colin.

[Sauce]

Roger, Voltage

The ASX businesses that I know of with the most obvious economic Moat in my (very limited) opinion is actually JBHI Fi funnily enough...
And secondly Matrix Engineering. They make riser boyancy modules for the global offshore oil & gas industry. They operate in an oligopoly (A good sign in itself that barriers to entry exist) and generate exceptionally high returns on capital. They have highly complex production processes combined with scale and reputation for the highest quality product.

I own Matrix but not JB Hi-Fi.

Cheers

[Beagle]

Thanks for that Sauce.

I think last time I looked JB Hi Fi were trading on pretty demanding fundamental ratio's but I'll have another look and will look into Matrix too.

Due to its size, ability to attact the best staff and have the most resources to acquire the best assets, has BHP built itself something of a moat ?

[Sauce]

Hi Roger,
The biggest and most obvious moats are often the market darlings that sell on the highest multiples of course! Being patient and buying them when the market turns itself upside down and shakes its pockets out is the key.
In fact I believe JBHi-Fi is looking quite attractive as retail getting completely smashed in Australia - and there is some suggestion that the JBHi-fi business might be maturing somewhat (i.e. running out of growth opportunities). I think a thoughtful contrarian would be looking at them quite closely right now. THey have immensge profitibility and cashflow.

Anyway.. to stay on topic. Just one more sleep till the RYM result. I am very much looking forward to digesting that, I can see work might get shoved aside tomorrow. I suspect somewhere between 70m - 72m in cash profits.

Regards,

Regards,
Sauce

[Beagle]

To digress slightly from the moat discussion one of the key attractions, in my opinion with Ryman, is its ability to grow consistently as has been demonstrated in the past and almost without doubt into the future. Management are on record as targeting a 15% growth rate for the forseeable future which I think taking into account the higher demand for advanced care in rest home and dementia with a rapidly aging population should be realistically achievable over the long term.

Take a theoretical example, an investor approaching 50 thinks Ryman's facilities are first class and wants to retire at one of their fine establishments when he's 65.

Here's how the Ryman compounding machine appears to loo to me, $100,000 invested in Ryman now compunded at 15% growth per annum over 15 years = $813,000.
If a fine 2 bedroom independent apartment is currently $400,000 and increses at the rate of inflation, (lets assume 3%) compounded for 15 years = $635,000.

So such an investor by investing $100,000 now would, "in theory" have enough for a fine apartment and say a brand new Merceedes-Benz E class when he retires. Realistic planning ?
P.S. Looking forward to tomorrow.