RYM - Ryman Healthcare

[MANDRAKE]

RYM steadily approaching all time high territory! All time high was $2.75, and highest closing price was $2.67 I believe (May 2007). Still, with RYMs growth prospects it has to be good buying at a PE of 13 odd, and surely there's a lot more value in the company than there was in 2007!

[Sauce]

In case it wasn't obvious the purpose of yesterday's "theoretical" excercise regarding prospective compounding returns was to illustrate how someone like me approaching 50 could be well on their way to having a secure retirement by investing approx $100,000 now.

Hi Roger
I enjoyed your theoretical exercise. It might just be me (or us!) but there is something emotionally satisfying about the idea of setting your self up for retirement by investing in retirement villages! Rationally it makes little difference what your vehicle is of course. But the premise to your exercise is absolutely right; The time to start compounding your wealth is always yesterday. The earlier you start the easier life will be later on. That is literally the definition of 'investment' in my view. Giving up consumption now for the expectation of the ability to consume more in the future. And odds are good that RYM will be the best 'compounding vehicle' on the NZX during my lifetime.
Cheers
Sauce

[Sauce]

Predictable result in-line with 15% underlying growth targets.

Agreed, but great result in that this one should finally put the naysayers crowing about RYMs demise due to falling property prices to rest.

Flat 2H. Probably was expecting little stronger.

All due to timing of village settlements. Result was always going to be loaded towards 1H. That's why management re-iterated FY 15% estimate at the half year even though H1 was way up on that. Represents a 29.63pc Return on contributed equity (shareholders funds excluding re-valuations).

Good to see healthy increase in average $ value of new units from $308k to $359k and slight increase in existing units from $306k to $314k. However new sales average price was mainly a result of 1H where the average sales prices in 1H was $370k. 1H the average sale price was $312k for re-sales.

This is much appreciated.. As always, enjoy your balanced and rational assessment Mamos.

[Sauce]

And Sauce - great insight, I wish I could add something useful to the discussion but am out of my league!

Thanks Buns. Your thoughts are always useful.

[Sauce]

RYM steadily approaching all time high territory! All time high was $2.75, and highest closing price was $2.67 I believe (May 2007). Still, with RYMs growth prospects it has to be good buying at a PE of 13 odd, and surely there's a lot more value in the company than there was in 2007!

Hi Mandrake
Be careful with the PE. It's actually about 18 - you have to use the cash profits that are announced i.e. 72.1m not the 100m that includes gains in valuation (i.e. non-cash profits). But PE is really is a terrible proxy for valuation of RYM anyway. I will post my (possibly misguided, misleading and easily misinterpreted) thoughts and rationalisation of RYMANs intrinsic value when I gather some energy.. . !
Cheers
Sauce

[Sauce]

I too am very pleased with the result.All that growth,from retained earnings,yet paying a dividend.

You hit the nail on the head Percy. a 15% growth rate and a 50% dividend payout implies a 30% return on the retained earnings and vice versa. Only exceptional businesses make those kind of returns consistently. And for anyone who wishes they would reinvest the other half at 30% rather than pay out the dividend: it's an ideal view, however the reality is that it would be very hard for RYM to grow any faster than it is and still execute well. The policy of the 50% dividend and 15% growth target is no accident. This is a carefully selected sustainable reinvestment rate that the company feels they can execute over the medium term without tripping themselves up in the process - in my opinion.
Regards,
Sauce

[Sauce]

Hoteliers used to be like this too. Ah, those were the days.

The difference is that the economics of the hotel business is terrible in comparison.

[buns]

Do you value these companies who have a moat/competitive advantage different to a company without it?

Because on the face of it, companies like RYM are usually overvalued on conventional metrics used by many personal investors and brokers. Most prospective investors never expect to come across a company who holds such advantages, so in many ways ignore the historicals (the historical YoY Roic increase which proves the moat) when doing valuations.

In RYM’s case, once knowing it holds these advantages, do you then add different criteria to the valuation test, or soften some of the requirements? Standard PE’s and EV ratios are forms of in direct valuation, or comparable valuation. As only one company in the industry can hold a moat/advantage is it right to compare?

I'm kind of answering my own question here, but I'm guessing that is why smart money i.e. The Buffets, have done so well out of these investments, as they can go un noticed to many prospective investors using techniques they don’t really understand or know the meaning of.

Anyhow, keen to understand if there is anything different you do with a RYM when investigating the investment decision/calculating their fair value.

Because, you can not fall in love with a stock, everything has a value! The NZX is a small market, RYM could really shine as a darling in years to come and become overvalued. In coming overvalued you are only going to love those excess returns and the company more, hence struggle to sell it.

[voltage]

i wish to top up my holding is this stock under valued or fully priced at its present PE 18.

[buns]

voltage - I will wait for Sauce's reply before I cast to much judgement on valuation, but a single PE won't value RYM or any stock.

It totally ignores RYM's strong BS, and abilty to grow from retained earnings. RYM could in a hole of debt and capt raisings and the PE would totally ignore that.

I'm not saying its a poor valuation method, I'm saying stand alone it's a poor valuation method.