RYM - Ryman Healthcare

[Snow Leopard]

Plenty of people buying Summerset on a historic PE of over 40 believing that the company will continue to grow quickly, on the other hand as you can see from the link I provided late last week, Ryman have plans to grow their operation in Australia quickly and have recently taken on board a highly talented new Australian director. When you consider that Ryman has grown the company significantly both before and throughout all the years of the GFC they command the respect to deserve a premium rating based on proven performance and a thoroughly proven growth stratagy.

Anyone looking for a material correction in the share price shouldn't hold their breath, in my opinion. This stock is best of breed by a substaintial margin compared to its other unproven competitors, yet one of which trades on nearly twice the multiple, go figure ?

I respectfully disagree with you Sparky, this company is growing its cash flow at a remarkable rate circa 30% for the last two years and its this cash flow that will drive the profit and build rate going forward.
Fact is cash returns almost nothing so if you're not investing in a blue chip proven growth stock like this, where do you put your money to get better proven results, surely not Summerset with its incredible PE ratio and unproven record ??? or are you in the "I'm waiting for a significant pull-back camp" ?

If Ryman can grow their Australian operation and build momentum and brand credibility over there... the stock could easily be double its current price in 5-6years in fact if they can maintain 15% compound growth and the PE stays the same that's exactly where they'll be.

Operational Cash Flow is a lumpy thing and the 5 to 1 year average annual growth rates are:
12.0%, 18.1%, 14.1%, 29.2%, 31.3%
the last two years have benefited from the last step up in build rate to 700 pa. It is the great chicken and egg thing (or perhaps a virtuous circle) the cash flow funds the new building which produces a lot of the operational cash flow.

Now if we accept that at $6.38 Ryman is priced correctly given it future, then we can could quickly price Summerset on the assumption that it has achieved the same capability. Depending upon which particular metrics you want to use out pops a price range from $4.07 to $4.90.
Given that the market thinks it only worth $3.07 then despite the high historical PE you mention it is obviously not regarded as another Ryman yet.
But on the other paw if you believe SUM will get there in a few years then perhaps it's bargain, or maybe not.

Of course if the new improved Metlifecare every gets it act together then there's some serious share price appreciation, so wait and see how that if looks come Full Year.

But at the end of the day markets are irrational swinging between deep gloom and high exuberance and on the way between the two occasionally hits sensibility:

Over the last four years the Ryman share priced has averaged about 30% growth per year, over the last 3 months it has increased by 38%, where was the point of sensibility?

Best Wishes
Paper Tiger

I hope that all makes sense to someone

[Queenstfarmer]

My point made right there!

[Beagle]

Some intersting erspectives and a good healthy debate.

Is Ryman as THE BLUE CHIP growth stock with a proven track record expensive ?... here's some perspective relative to other stocks:-
1. Ryman Reported EPS 27.35 cps At $6.38 PE is 23
2. Summerset Reported EPS 6.9 cps At $3.08 PE is 45
No point talking about Metlifecare, they're losing money so here's some other Blue Chip Comparitives, not that either of them have an established consistent record of growth.
3. Sky City Reported EPS 21.9 At $4.41 PE is 20
4. Fletchers Reported EPS 27.39 At $8.30 PE is 30

Fletchers is a cylical stock and SKC has anything but a consistent proven record of growth.

Ryman in my opinion, is the best value of those four by a comfortable margin....then there's the fact that you can sleep well at night knowing they have a proven 15 year history of excellent management and strong growth.
Can anyone dirrect me to another N.Z. stock that has such a proven business model ?

My point is that the market has finally woken up over the last two years to the merits of Ryman as a company.
Sure the major re-rating cannot continue at such pace but if one is investing for the next five years then of these four i'd back Ryman to provide the best return even from its current share price.

Brokers cash flow models don't mean much to me, I look at the history of proven growth Ryman has and the other companies that just make excuses why they arn't growing.

Apoligies if the rose tinted glasses are too shiny

[CJ]

Have you adjusted Fletchers for its annual 'one off' restructuring expenses.

I note CEN and TPW who have stead cashflows like Ryman have a PE between 17 - 19 (MRP is 27)

A PE of around 20 sounds right and would be a buy below this unless there were factors that caused it to drop below this level.

[ENP]

Buying Ryman shares just because they are better value compared to Mighty River, Contact Energy, Telecom makes no sense.

What if all 4 are overvalued?

It would be like going to the grocery store and bananas are $5/kg, oranges are $7/kg apples are $6/kg. They are all a rip off, so why not wait until something comes in season when you know you can buy them all for $2-3/kg

[Beagle]

There could be a correction coming Sparky and I certainly value your comments and perspective but my point is if you want to be invested in the N.Z. market now as opposed to owning bonds, cash Gold or something else, show me a better company with compelling funadamentals...there's your challange my friend.

Note Summersets PE of 45 is based on earnings that included their realsied revaluation gains, without which they would have struggled to make a profit at all. Yeap its twice as expensive as the proven performer Ryman on a relative PE basis and Summerset is more dependant on revaluation gains, a good model that commands a PE of 45....I'm not convinced.

We have long term bonds at 4%...is a PE of a strongly growing company at 23 on a historical basis expensive, no not really in my view.

And no I havn't adjusted Fletchers for their "one-off" restucturing those a simple reported EPS numbers. Whether people buy into the Chch rebuild story or whether these are truly one-off restructuring costs, you decide but its another that leaves me unimpressed as far as I'm concerned.

[Beagle]

Fair enough Sparky and you are very fortunate to have been investing when it was $2.50 AND have had the patience to hold all this time. I have to work on my skills in terms of patience. I'll have a look at Chorus, that's slipped under my radar, thanks.

Regarding the buying shares like fruit when its in season comment posted above, well Gold stocks are dirt cheap, for example RSG Resolute Mining in Australia is on a PE of only 3, help yourself if that's not in season i don't know what is.... but then again I can't help but wonder if Gold keeps going down whether the fruit ends up being spoiled.

I hear on CNBC this morning that many of the leading private wealth fund managers are sitting with circa 30% cash holdings at present...food for thought indeed.

[ENP]

Now is the time to be taking profits off the top, in my opinion, rather than deploying more capital.

I have been taking small amounts off some of my shares.

Hi Sparky,

When you sell your shares are you just keeping in cash (savings account, term deposits) or are you investing elsewhere?

[Beagle]

Fair enough..the latter part of my last post, just for the sake of clarity was in response to ENP's comment #1295 above, sorry I should have used the multiquote button to make my post more transparent.
For what its worth RSG does seem to have issues and quite specific risks, quite apart from the collapsing gold price and they're 100% un-hedged....anyway sorry to digress.

Back to Retirement villages, yes SUM does seem to have some great locations, an excellent land bank in Auckland, amoung other areas, a growing development margin that they're forecasting to grow to 18% but I think all of that is already in the price. I think all of Ryman's recent result is built into the price too but I've got a five year minimum investment view and think they're a great one to stick in the bottom drawer, so to speak.

[Beagle]

Leaving cash with the broker on call, after retiring all debt.

I now have an increasing war chest, plus fully available revolving credit facility primed for when I need it. No margin facilities in place, but wouldn't rule out temporary use of margin for buying opportunities.

I see there's a new model Mercedes-benz S Class that's just been released, you can't take it with you