RYM - Ryman Healthcare

[Merc]

I bought 190 shares in RYM in Dec 2006 for $10.20 each. A total outlay of $1,938.

In January 2007 they announced a 5 for one share split (reason being smaller value shares are easier to trade than higher value ones) so I ended up with 950 shares worth around $2 each.

Then, of course, the recession hit and they showed a slight loss for a few years.
Today I still have the 950 shares and the portfolio shows they are now worth 288.88% more than I paid for them.

My mother bought RYM in Nov 2011 and currently shows an increase of 282.76%.

Just goes to show that timing is everything - and a further share split may well be on the cards.

[Beagle]

Ryman is indeed a great company that I feel the market has finally valued correctly and fully. If people continue to hold they should continue to enjoy SP appreciation in line with the company's growth in earnings per share and they will be well rewarded over time.
Their EPS growth rate is however considerably slower than SUM and this is as much about the problem of growing a large company as anything else and not without risk in terms of their Australian expansion.
SUM have a superior profile in the lucrative Auckland market (5 good sites) and when you consider RYM has ~5.25 times the market capitalisation for RYM to have a similar profile in the Auckland market they'd need 26 sites, which is clearly not the case. Why is Auckland so lucrative you might ask ? Well the average house price is now well north of $500,000 and the average entry price to a retirement unit is circa $350,000 so affordability is not usually the barrier to retirement home entry it can possibly be in other parts of the country.

There are other reasons why I have decided to focus my investment in SUM which are detailed in that thread with more to come in due course. If I had unlimited capital and in a perfect world I'd continue to hold my Ryman shares... I wish you all well but consider it perhaps timely to comment that Ryman share price has tripled in the last 2 1/2 years, whereas of course thier EPS growth has been nothing like that. PE expansion cannot go on forever, especially in a higher interest rate environment that's widely expected in the forseeable future.
Simply put, I think they're fully priced now. In due course I expect the market to fully recognise SUM's attractions.

[Bjauck]

... the average entry price to a retirement unit is circa $350,000 so affordability is not usually the barrier to retirement home entry it can possibly be in other parts of the country.

I would be interested to find out more about the average entry price and on-going costs for a retirement unit.

When I last checked on the eldernet site a few months ago even small one bedroom flats in Ryman and Summerset Auckland villages were between 350-400k. In addition, $6500+ pa village fees are required. My guess is that at these levels perhaps up to 50% of Aucks retirees may not be able to afford Ryman and Summerset entry. If they want more than a one-bedroom flat the capital outlay goes up. As time goes by, with falling home ownership rates, my guess is that a greater percent of retirees will not be able to afford the capital outlay.
Disc. Shareholdings in Rym, Sum, Met

[Vaygor1]

Some odd price movements on RYM huh. Someone briefly sent it up 20c on a single trade... a novice maybe? back down now though....

... and now up to $7.95 on comparatively steady trading.

[CJ]

... and now up to $7.95 on comparatively steady trading.

Catch up by RYM and MET after SUM performed well yesterday?

[Bjauck]

Some big trades at $8 - looks like some insto is keen to buy at a high price before the half-year results - maybe expecting a bumper result?

[JayRiggs]

Blasted through $8 with pretty big volume.
Who can be buying?

[percy]

Blasted through $8 with pretty big volume.
Who can be buying?

I wonder if it is Morningstar?! lol.

[Beagle]

I would be interested to find out more about the average entry price and on-going costs for a retirement unit.

When I last checked on the eldernet site a few months ago even small one bedroom flats in Ryman and Summerset Auckland villages were between 350-400k. In addition, $6500+ pa village fees are required. My guess is that at these levels perhaps up to 50% of Aucks retirees may not be able to afford Ryman and Summerset entry. If they want more than a one-bedroom flat the capital outlay goes up. As time goes by, with falling home ownership rates, my guess is that a greater percent of retirees will not be able to afford the capital outlay.
Disc. Shareholdings in Rym, Sum, Met

Must admitt I mistakenly quoted $350K as the average cost of a retirement unit in Ryman calculated from their most recent annual report, which is the average cost across their entire portfolio, not just Auckland.
That said when i looked entensivly at retirement options for my parents 3 years ago a large circa 120 sq metre independent toenhouse with good views at Orewa was $430K, I guess its gone up in line with inflation since then.
Regarding the annual fees they're paying just on $500 a month but you have to keep in mind that includes rates and building insurance and maintenance as well as the use of all the village's amenities. I'm paying around that on my Auckland home just for rates and insurance, (circa $1m value in Titirangi)...and that's before maintenance.
You also have to keep in mind that people put a value on the community that these villages provide as well as a value on the communal facilities. Some of the better villages offer a very wide range of facilities and activities and arguably residents get plenty of bang for their buck, especially if they need the back up and support of panic button's in their units and on call nursing e.t.c. e.t.c.

I wonder if it is Morningstar?! lol.

That's priceless

[Snow Leopard]

Firstly: I congratulate you on giving it a go and posting your thoughts for all to see.
A couple of things that I feel need addressing and re-working.

Now:
1. Calculating Free Cash Flow.

For Y2014 you have $36M340
so for Y2013 you picked $31M878 which I assume you arrived at by subtracting Net Investing Cash Flows of $190M340 from Net operating cash flows of $222M218

Now that same sum for Y2012 will give you -$13M005
and for Y2011 you get $19M957.

So is that $36M a good starting point? It may be an extreme value.

2. Continuing Free Cash Flow

Consider this:
If half of your incoming operating cash flow comes from selling new units then if you suddenly stop selling new units your incoming operating cash flow suddenly halves as well.
This may well cancel out the equally sudden reduction in investing cash flow and your free cash flow is unchanged.

I would suggest that your assumptions here are seriously flawed and that you need to do a more detailed analysis of cash flows, particularly in a no growth situation.


This will hopefully give you a lower current value for your scenario.
I am sure that the market is assuming that Ryman will continue to grow beyond six years and thus should have a higher value than you.

Once you have cracked that you can have more fun splitting out the aged care from the retirement units for an even better understanding.

Best Wishes
Paper Tiger