RYM - Ryman Healthcare

[bull....]

aveo - aog had there annual meeting yesterday there comments about the resales market etc in aus was very bad so not a good sign for rymans aus operations

[Beagle]

Market sentiment will never cease to amaze me. The reason for RYM's high PE Ratio is its certainty and predictability. i.e. You can count on it.
I was surprised with 22%. It was more than I was expecting, but not by much, I was expecting 20% and that in my view is a very good result, and I would have also been surprised too if it was any less than 15%.

So HS, your question is an excellent one. Just what were people expecting?... or is this a coincidental big-holder sell-off for some reason? By selling now, one foregoes the dividend that would be paid in about 3 weeks from now, so you can effectively add another 5 cents to drop in share price.

Are there overseas entities for instance that do not want a dividend for some reason (ie to avoid scrutiny or tax)? or has a big seller just sparked a herd mentality for a while? Will still be very interesting to see what happens next week.

Whether its markets as a whole or just individual stocks buying at elevated multiples invariably leads to disappointing returns. Conversely buying at low multiples invariably leads to the good returns. Sort of buy cheap (low) sell expensive (high) approach.

In simple terms - high PE leads to low future returns / low PE leads to superior future returns.

Plenty of academia to show this works in so far as markets go but it seems to work out this way for even the best companies, even ones who have demonstrated decades of continuous growth

RYM has had enough history to do a meaningful analysis

Chart shows the 3 and 5 year annual returns for RYM from different starting PEs

Based on underlying earnings. Currently a PE of over 40 on this basis

History would indicate negative returns over the next 3 and 5 year periods - even though RYM will no doubt continue to grow earnings

That's why I watch the linear regression line on the RYM chart ......the squiggly line will one day head down

Each dot represents a PE and the subsequent 3 (or 5) year annual returns. share price only / no dividends

Vertical axis is % return pa and horizontal axis starting PE

Good to look back 4-5 years and see how things have played out and ask why ? Gives us possible insight into the future.
Vaygort1, Winner and I had some great debates and exchanges of point of view in late 2013 and early 2014, a small sample of which I've reproduced above.chart.jpg

As we can see from the chart I have just provided RYM's SP has significantly under performed the NZX50 since early 2014 despite very bullish real estate markets on both sides of the Tasman, (until recently).
A move from about $8 to around $11.75 up just on 47% plus modest dividends of about 2 % per annum, total return approx. 57% in five years has neither matched the market nor has it matched the implied medium term company goal of 15 % annual average earnings growth (15% underlying earnings growth for five years = almost exactly a doubling in earnings in five years which should theoretically all else being equal reflect a doubling of the share price).

It has materially underperformed the market and the sector as some of us predicted despite bullish real estate markets.
So where to from here now that there is material uncertainty with real estate prices in Auckland and in Australia. Their growth is below sector average yet their PE remains well above other retirement company's metrics.
I think the degree of uncertainty has moved up a couple of notches and RYM's fulsome metrics continue to look expensive compared to other sector participants and accordingly think this is one to continue to avoid.
5 more years of market under-performance ? You be the judge...
I think RYM is becoming more volatile because of two factors.
1. Increasing uncertainty over the direction of the real estate market and how this might affect underlying earnings over the years ahead.
2. Increasing overseas ownership and overseas market volatility.

I favour OCA as being more defensive and better prospects for growth and on far more compelling metrics and if one believes the Auckland market is still in a reasonably healthy state, (I am not sure I do), SUM.

[Onion]

Good to look back 4-5 years and see how things have played out and ask why ? Gives us possible insight into the future.
Vaygort1, Winner and I had some great debates and exchanges of point of view in late 2013 and early 2014, a small sample of which I've reproduced above.chart.jpg

As we can see from the chart I have just provided RYM's SP has significantly under performed the NZX50 since early 2014 despite very bullish real estate markets on both sides of the Tasman, (until recently).

I know we could play the "choose the period " game all day and find evidence every which way ... but choose a shorter duration and the results look better for RYM. Using Super Charts from ANZ (as I think you have used) choose 3yr, 2yr or 1yr periods and RYM outperforms the index.

I note that SUM betters RYM over those periods for 1, 2, 3 and 5 year periods.

[Beagle]

https://www.nzherald.co.nz/business/...ectid=12161226

No question in my mind this sucks some wind out of RYM's sails (and SUM if they expand over there) in the years ahead. RYM still a good company with sound growth prospects but so is OCA and its trading on half of RYM's PE, more than double RYM's dividend yield and OCA very close to NTA not three times NTA like RYM.
The "Australian risk factor" is also avoided with a stock like OCA.

[Vaygor1]

Good morning Beagle

Regarding your 15-Nov-2018 post here on this thread, I stand by my statement posted 5 years ago (almost to the day) regarding RYM's certainty and predictability. I also stated in that same post that market sentiment never ceased to amaze me.

It can only be market sentiment and rumours causing RYM's recent 'volatility' as there is no recent price-sensitive RYM announcements. I put 'volatility' in inverted commas because the volatility of RYM's SP I believe is not materially different to the volatility of most liquid-trading shares around the $12 mark.

Meanwhile, RYM's results and dividend growth have been as consistent and predictable as ever:

Attachment 10163

Over the years, many posters on this thread seem to think no one buys RYM for their dividends. I am in RYM solely for the dividends. Selling any RYM is simply not on my radar in the foreseeable future, so I am only interested in the share price for the purpose of buying more.

Up until very recently when I bought some parcels sub $12 my average RYM buy price was $2.67 and this average includes my until-now latest purchases at $8.15/share in Dec 2016 and $7.30/share in Oct 2015.

Dividends within the next 12 months (assuming no special dividends and no share-split forthcoming) will be approx H1 of $0.109 (record date 7-Dec-2018) + $0.128 (record date 7-June-2019) = $0.237
So my pretax return on investment for RYM by way of dividends over the next 12 months will be 8.9%
On the same basis, the next 12 month period will see this climb from 8.9% to 10.2%

RYM's shareprice in 5.5 years under normal market conditions will be over $30 (or equivalent in the event of a share split).

I believe RYM's H1 result this financial year will be mediocre but their full year result will be excellent. The SP may slip to under $11 following their H1 announcement in less than a week from now, but I have bought some largish volumes just recently because I like the price, I am relieved to have secured my recent position, and as with RYM's H1 result last year, the Directors may well publish guidance for the full year next week and if so, there's a fair chance such guidance will drive up the SP.

This is how RYM presented their full year guidance in last year's H1 presentation...

Attachment 10162

[winner69]

RYMAN won the best Annual Report in the Plaon English Awards the other night ....thats good

Maybe that helps global investors understand Ryman that much better and what makes it one of the highest TSR health sector companies globally (BCG)

[winner69]

No need to justify / defend your position / startegy Vaygor

I dont think many on here knock Ryman for its company performance - it's just that some think there are better future returns in this sector elsewhere at this point in time


that 'volatility' is just a sentiment measure anyway so no worries

Admire you passion

[Beagle]

Hi Vaygor1.

I appreciate your perspective and congrats on doing so well and having the patience and perseverance to hold for such a long time.
I understand your analysis and understand your reasons for continuing to hold and the yield it gives you on your average price.
That said, most people when considering the dividend yield run their analysis on the current SP and perhaps there's logical reasons for that seeing as you could easily sell and invest elsewhere if you choose to.

There is a lot of value in what you've posted for other investors to consider in terms of what their yield might be for example on OCA if they hold long term which already has a prospective yield about 2 1/2 times the yield of RYM.

I think the nub of our divergence in viewpoints is I don't believe we will have normal market conditions over the next 5 or so years. (See PM I sent you on why)
The chances of real estate stalling (long term charts I have seen indicate the price of housing in N.Z. seldom falls in dollar terms but can go into an extended sideways pattern), falling in real inflation adjusted terms for many years is quite high in my view. I think based on the extraordinary level housing has risen too in N.Z. on a per capita basis (second in the world only to Hong Kong), a new sideways pattern is a very real prospect in the years ahead. There is also the real chance we follow Australia down so I am fairly defensive with my thinking in this sector and I won't use leverage under any circumstances.

I favor OCA for its higher churn rate, cheaper entry costs, yield, PE relativity and defensive needs based attributes. When you've got to go into late stage care you really do have to go whereas with RYM a large percentage of new entrants are making discretionary lifestyle choices (if they can sell their homes for a satisfactory price).

I know you're not going to sell and the only reason for me posting this is to give food for thought to others. I expect OCA will materially outperform RYM over the next five years but like many things, time will tell. They'll probably both do very well....I am sure we can find common ground and agree on that

[winner69]

Repost of previous table

There have been times when buying RYM has resulted in below average terms - each time is when RYMs PE multiple was very high. Expected because generally fpr stocks and markets buy when valuations are stretched (above average) expectured future returns will be below average

There have been periods of poor returns from RYM over periods up to 5 years ...but as Vaygor will attest to to long term (>5 years) have been very good - but note sometimes trhat can be 15% pa nd sometimes 30% pa depending on the starting point and whether RYM's starting PE is low or high.

RYM's PE (underlying profit trailing) has averaged about 20 this century ranging from below 10 to the high 30s. Its that change in PE that drives the change in returns rather than that consistent earnings growth

[Beagle]

2013 to 2016 was a dud wasn't it mate, like a couple of blokes on here predicted I gave a nice big clear Beagle bark or two when it was $14 too but most chose to ignore that and thought I was a dumb dog.