RYM - Ryman Healthcare

[muss1]

With sincere respect too Roger, we will have to agree to disagree I think.

I have received the most terrible advice from Craig's in the past… actually, all the brokers at different times. Their role in this game is by its nature a conflict of interest. They need to convince people (through fear and greed) to buy and sell otherwise they don't make any money.

Only today, RYM's new whizz bang director George Savvides just put his money where RYM's mouth is. Purchased over NZ$100 Grand and bought at $8.42/share. https://www.nzx.com/companies/RYM/announcements/250763 . I think George has a better idea about RYM's business than any broker out there.

The measure of cost-of-housing is subjective as there are many ways of measuring it. The graphs I have posted tell the story there. Not once, ever, has it been cheaper to buy a house than it was 7 years earlier, either here or across the ditch.

RYM doesn't sign up with customers under 70 year olds (Actually, I think 75 might be the number) except under special circumstances so there won't be an impact due to Aussies retirement age. Also in Oz, many retiree's have retirement bonds thus aiding affordability for them. Committed interest in Wheelers Hill was more than double the requirement in RYM's business model to enter Australia.

RYM's PE is higher than others because its EPS growth rate is far more predictable and it has the history to prove it. I bought in 2007 when PE was historically high (over 22 but don't have the exact figures on me). Dividends alone will give me a pre-tax cash payback in under 14 years. And with earnings more than double dividend payouts (I recall), that makes an actual PE of 7. ie. My shares have already earned me more than they cost me to buy. I think the same ratios will apply now... Buy at a PE of 35 today. Actual PE will be about 10 or 11.

Here is NZ's population growth. The trend is the same for Victoria, Australia. There will not be a shortage of tenants.

Attachment 5843

You will not find a sweeter graph in all of the NZX (and probably the ASX too) than this one:

Attachment 5842

All said and done. You may be right Roger. Market sentiment is the great unknown lurking at all times. As SparkyTheClown stated 'The market giveth, and the market taketh away'. Never a truer word said.

Im a bit confused about your argument vaygor. When you say "buy at a PE today of 35, actual PE will be about 10". Are you talking about 7 years in the future? Otherwise how do you come up with this number?

[Vaygor1]

Im a bit confused about your argument vaygor. When you say "buy at a PE today of 35, actual PE will be about 10". Are you talking about 7 years in the future? Otherwise how do you come up with this number?

PE of 35 assumes the companies earnings will be constant for the next 35 years from the purchase date.

eg
1 Share = $35. Earnings per Share at purchase time = $1/annum. PE = 35
Share earns $1/annum every year for 35 years. Share pays for itself in 35 years. So 35 years on, looking back the PE was in fact 35.

But if the Share's earnings grow by 20%/annum compounding, its earnings one year later will be $1.20 so earnings for the 11 years following purchase date are:
$1.2+$1.44+$1.73+$2.07+$2.49+$2.99+$3.58+$4.30+$5. 16+$6.19+$7.43 = $38.58
ie after 11 years since purchasing the share, it has earned itself more than the value you payed for it so the actual PE (with 11 years hindsight) you bought it for was less than 11. About 10.5 in fact.

Goes the other way too of course. Buy a $35 share with a PE of 35 and the company goes broke soon after. Final PE = infinity. ie The Share will never pay for itself.

[Snow Leopard]

Whilst not wishing to take sides in the RymaBear vs RymaBull (pretty neat names heh! ) debate I am a bit perplexed by this P/E of 35. This is the current(ish) share price divided by this 'Underlying Profit' (not a GAAP or IFRS measure).

So what about the P/E of 21.6 based on IFRS (True) Profit?

Or even the P/E of 17.6 using Operating Cashflow?

Anyway I have been through the FY financials and the numbers seem especially wild this year with some being lower than expected and others being higher but I think I have made some sense of it and they may live to build some more villages .

It looks, for instance, to me, suspiciously like there will be a bit of a rush of new units leased in the next HY.

So I reckon that Ryman will basically continue to grow much as they have done, but I still can not believe it trades at such a high price.
Whilst the SP is not going (properly) down I will continue to hold the RYM I have got.


Best Wishes
Paper Tiger

[winner69]

Whilst not wishing to take sides in the RymaBear vs RymaBull (pretty neat names heh! ) debate I am a bit perplexed by this P/E of 35. This is the current(ish) share price divided by this 'Underlying Profit' (not a GAAP or IFRS measure).

So what about the P/E of 21.6 based on IFRS (True) Profit?

Or even the P/E of 17.6 using Operating Cashflow?

Anyway I have been through the FY financials and the numbers seem especially wild this year with some being lower than expected and others being higher but I think I have made some sense of it and they may live to build some more villages .

It looks, for instance, to me, suspiciously like there will be a bit of a rush of new units leased in the next HY.

So I reckon that Ryman will basically continue to grow much as they have done, but I still can not believe it trades at such a high price.
Whilst the SP is not going (properly) down I will continue to hold the RYM I have got.


Best Wishes
Paper Tiger

Like you PT maybe price is too high but will continue to hold as long as price is going up

On multiples nobody ever mentions the Price Book Value one ......currently about 4.5 times Book Value.

This seems really high for a property company which RYM essentially is.

[winner69]

PE of 35 assumes the companies earnings will be constant for the next 35 years from the purchase date.

eg
1 Share = $35. Earnings per Share at purchase time = $1/annum. PE = 35
Share earns $1/annum every year for 35 years. Share pays for itself in 35 years. So 35 years on, looking back the PE was in fact 35.

But if the Share's earnings grow by 20%/annum compounding, its earnings one year later will be $1.20 so earnings for the 11 years following purchase date are:
$1.2+$1.44+$1.73+$2.07+$2.49+$2.99+$3.58+$4.30+$5. 16+$6.19+$7.43 = $38.58
ie after 11 years since purchasing the share, it has earned itself more than the value you payed for it so the actual PE (with 11 years hindsight) you bought it for was less than 11. About 10.5 in fact.

Goes the other way too of course. Buy a $35 share with a PE of 35 and the company goes broke soon after. Final PE = infinity. ie The Share will never pay for itself.

Suppose one way of looking at it

So if that stock you paid 35 for on earnings of 1 today growing at 20% pa is still 35 in 11 years time it would be on a PE of 7 ....seems fair enough

Another way of looking at it if the stocks PE is still 35 in 11years time you have made 20% pa. - but if PE drops to 20 in 11 years your return falls to 14% pa .....if PE falls to 15 then return is to 11% pa. Last cases still pretty god eh but not as good as you paint it

[winner69]

PE of 35 assumes the companies earnings will be constant for the next 35 years from the purchase date.

eg
1 Share = $35. Earnings per Share at purchase time = $1/annum. PE = 35
Share earns $1/annum every year for 35 years. Share pays for itself in 35 years. So 35 years on, looking back the PE was in fact 35.

But if the Share's earnings grow by 20%/annum compounding, its earnings one year later will be $1.20 so earnings for the 11 years following purchase date are:
$1.2+$1.44+$1.73+$2.07+$2.49+$2.99+$3.58+$4.30+$5. 16+$6.19+$7.43 = $38.58
ie after 11 years since purchasing the share, it has earned itself more than the value you payed for it so the actual PE (with 11 years hindsight) you bought it for was less than 11. About 10.5 in fact.

Goes the other way too of course. Buy a $35 share with a PE of 35 and the company goes broke soon after. Final PE = infinity. ie The Share will never pay for itself.

Suppose one way of looking at it

So if that stock you paid 35 for on earnings of 1 today growing at 20% pa is still 35 in 11 years time it would be on a PE of 7 ....seems fair enough

Another way of looking at it if the stocks PE is still 35 in 11years time you have made 20% pa. - but if PE is 20 in 11 years your return falls to 14% pa .....if PE is 15 in 11 years time then return is 11% pa. Last cases still pretty good eh but not as good as you paint it

[Vaygor1]

PE of 35 assumes the companies earnings will be constant for the next 35 years from the purchase date.

eg
1 Share = $35. Earnings per Share at purchase time = $1/annum. PE = 35
Share earns $1/annum every year for 35 years. Share pays for itself in 35 years. So 35 years on, looking back the PE was in fact 35.

But if the Share's earnings grow by 20%/annum compounding, its earnings one year later will be $1.20 so earnings for the 11 years following purchase date are:
$1.2+$1.44+$1.73+$2.07+$2.49+$2.99+$3.58+$4.30+$5. 16+$6.19+$7.43 = $38.58
ie after 11 years since purchasing the share, it has earned itself more than the value you payed for it so the actual PE (with 11 years hindsight) you bought it for was less than 11. About 10.5 in fact.

Goes the other way too of course. Buy a $35 share with a PE of 35 and the company goes broke soon after. Final PE = infinity. ie The Share will never pay for itself.

Winner69:
Suppose one way of looking at it

So if that stock you paid 35 for on earnings of 1 today growing at 20% pa is still 35 in 11 years time it would be on a PE of 7 ....seems fair enough

The way I see it is if PE is 35 and stock grows at 20%/annum compounding, actual PE for that particular purchase will be 10.5 irrespective of what the future PE of the share might be in the market.

Another way of looking at it if the stocks PE is still 35 in 11years time you have made 20% pa. - but if PE is 20 in 11 years your return falls to 14% pa .....if PE is 15 in 11 years time then return is 11% pa. Last cases still pretty good eh but not as good as you paint it.

For me the stocks future market PE is irrelevant as market sentiment will push the PE around almost randomly at times. What matters after the purchase date is the company's earnings (growth or decline). I think at the end of the day we are talking the same language Winner but in my mind I define the PE as the number of years the share purchased takes to pay for itself. The problem is that the PE as stated by the bourse at any given instant assumes constant earnings over a long time period by the said company, which is hardly ever the case.

[Vaygor1]

Whilst not wishing to take sides in the RymaBear vs RymaBull (pretty neat names heh! ) debate I am a bit perplexed by this P/E of 35. This is the current(ish) share price divided by this 'Underlying Profit' (not a GAAP or IFRS measure).

So what about the P/E of 21.6 based on IFRS (True) Profit?

Or even the P/E of 17.6 using Operating Cashflow?

Anyway I have been through the FY financials and the numbers seem especially wild this year with some being lower than expected and others being higher but I think I have made some sense of it and they may live to build some more villages .

It looks, for instance, to me, suspiciously like there will be a bit of a rush of new units leased in the next HY.

So I reckon that Ryman will basically continue to grow much as they have done, but I still can not believe it trades at such a high price.
Whilst the SP is not going (properly) down I will continue to hold the RYM I have got.


Best Wishes
Paper Tiger

RymaBull and RymaBear… nice names indeed. Better than two names already trademarked as RakaDonkey and RakaDog.

I agree though PT, whichever way you look at it, stating a current PE of 35 is the most pessimistic viewpoint one can take using the available data.

[muss1]

Winner69:
Suppose one way of looking at it

So if that stock you paid 35 for on earnings of 1 today growing at 20% pa is still 35 in 11 years time it would be on a PE of 7 ....seems fair enough

The way I see it is if PE is 35 and stock grows at 20%/annum compounding, actual PE for that particular purchase will be 10.5 irrespective of what the future PE of the share might be in the market.

Another way of looking at it if the stocks PE is still 35 in 11years time you have made 20% pa. - but if PE is 20 in 11 years your return falls to 14% pa .....if PE is 15 in 11 years time then return is 11% pa. Last cases still pretty good eh but not as good as you paint it.

For me the stocks future market PE is irrelevant as market sentiment will push the PE around almost randomly at times. What matters after the purchase date is the company's earnings (growth or decline). I think at the end of the day we are talking the same language Winner but in my mind I define the PE as the number of years the share purchased takes to pay for itself. The problem is that the PE as stated by the bourse at any given instant assumes constant earnings over a long time period by the said company, which is hardly ever the case.

I don't buy this view I'm afraid. As much as we would like them to be, earnings are not actually tied to te share price. You can't earn the amount you have stated because the company does not pay out 100% of earnings. Therefore you have to rely on the SP to grow at the same rate as the earnings to achieve your stated return. If the PE contracts as winner stated, your return reduces. Isn't it better to find a company that will grow at 20% that isn't as highly valued currently?

The PE is not a pessimistic way to look at things, it is a valuable measure in determining fair price. The PE is currently high compared with historical values. That raises a flag for me. Winner has discussed how this historically reduces mid term returns.

[Vaygor1]

I don't buy this view I'm afraid. As much as we would like them to be, earnings are not actually tied to te share price. You can't earn the amount you have stated because the company does not pay out 100% of earnings. Therefore you have to rely on the SP to grow at the same rate as the earnings to achieve your stated return. If the PE contracts as winner stated, your return reduces. Isn't it better to find a company that will grow at 20% that isn't as highly valued currently?

Yes, if you can find one. I can see where you are coming from here and I don't disagree per se. It is just the difference in the way we look at it. For me, earnings are earnings and the share price one requires when selling to get their return is something else that depends on recent earnings, other measures like cashflow & NTA etc, forecasts, board honesty, and market sentiment.

The PE is not a pessimistic way to look at things, it is a valuable measure in determining fair price. The PE is currently high compared with historical values. That raises a flag for me. Winner has discussed how this historically reduces mid term returns.

I didn't say using PE as a measure was pessimistic. I said using 35 was pessimistic. Given PT's comment a few posts ago, I would use a current PE of around 25 in my calcs. The IFRS profit will almost certainly be realised over time in my view so I see a current PE of 25 as reasonably conservative.