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Originally Posted by _Michael
This is very odd. Surely trading at 50% of net tangible property assets cannot go on forever??!!
!! ??
Meanwhile Ryman trades at 200% net tangible property assets and humbly credits their performance due to good service and consistent and simple operating model.
Will be interesting to wee outcome of the strategic review. Hopefully some improvement in liquidity and possibly some value will start to be realised....
Hi Michael,
I'd be very careful with this one
You have to consider the relative economics. Metlifecare's assets have been creating significant losses for shareholders, therefore the market is discounting them. This is the correct response from the market. The "valuations" mean a whole heap of nothing unless Metlifecare decides to sell their villages, and in that case they would still need someone in the market for an entire village to stump up that amount, or the valuation still means nothing. So basically, the NTA valuation you mention is information that is not as useful as it seems.
If I had a bank account with $1,000,000 cash balance (that could never be withdrawn) that was losing -5% a year, and I told you I had a registered valuation on the bank account identical to its NTA of $1,000,000 but I would kindly sell it to you at a 50% discount (i.e. $500,000). Would you jump at the opportunity? I think you would have to be pretty damn sure that bank account would return to +5% or more in a hell of a hurry before you got interested in buying my bank account at this "discounted" price.
RYMAN on the other hand makes an economic return of about 30% on all the money it retains in the business. That's a formidable return and one that Mr Market will quite rightly pay a premium for. If I told you I had a bank account with $1,000,000 in it returning $300,000 a year compounding annually, what would you pay me for THAT bank account? I suspect you might part with a fair bit more than $1,000,000? Well so would the general market - hence the price offered for RYM shares.
Of course MET might turn its profitability around, in which case the current price might turn out to be a bargain. But there is a very good reason why MET is in the current situation its in. And that's because the business has performed very poorly. The opposite is true of RYM.
I think the time to get excited about a discount to net tangible assets is only when you have an insight into the business and its odds of achieving sound future economics i.e. profits and high, or at least adequate, returns on invested capital.
Cheers
Sauce
Last edited by Sauce; 30-10-2011 at 12:20 PM.
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Sauce,
thank you for your posts on MET and Summerset threads.Always well thought out and informative.
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Originally Posted by percy
Sauce,
thank you for your posts on MET and Summerset threads.Always well thought out and informative.
Thanks Percy,
Your posts are always on the money so to speak
Cheers
Sauce
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Interesting? Maybe
Proposed merger between Metlifecare, Vision Senior Living and Private Life Care to make a bigger listed company.
Also read the Herald article
best wishes
paper Tiger
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Originally Posted by SparkyTheClown
Will being bigger make MetLifeCare a better company?
Or is it simply going to grow the company's problems? I'm not sure marketshare alone will give MetLifeCare the fillip it needs to prosper.
I struggle to see why Metlife is an attractive proposition when Ryman is a proven, growing company with a great formula. Arguably Ryman is one of NZ's best run companies. Summerset looks like Ryman Jr, so is probably the second best option here.
MetLifeCare definitely need to change their formula as it has simply not worked thus far. I would assume from the other companies involved in the merger, that they are now trying to emulate Ryman's formula. Good luck to them, they'll definitely need it.
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Member
Further to Paper Tiger's link above is today's item http://www.stuff.co.nz/business/indu...or-Metlifecare
As Sparky says, is bigger going to be better in this case? Is there a chance that a combination of new management may improve the business model?
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I think the merger will be positive for the three companies involved,and for the retirement village sector as a whole,as we will have three strong companies in this sector;Metlife,Ryman and Sommerset.With the growth in this sector over the next decades there is plently of room for all companies.I am happy to be overweighted in RYM,whose business model is second to none.
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Wioll be interesting to see what the shareprice will do.
VSL shareholders gets shares for the purchase and given it is 68% owned by PE so you would expect them to be sellers.
PLC shareholders gets shares for the purchase. It is 100% owned by RVNZ who are on record as selling down following the purchase to below 50% (cant reduce belwo 35% within 12 months).
Sounds like there may be some selling pressure in the short term which maybe a good opportunity to buy in if management picks up their game.
On the watch list but a happy RYM holder.
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Member
Good to hear that Percy. I have been watching Sommerset and Met for some time now, and am wondering if Met is likely to remain in an acquisition/merger type mode for a while yet, and if it's possible they might reach further and look at Sommerset. If they can lift their game, and do acquire Sommerset, they would surely become a formiddable challenge to Ryman?
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Originally Posted by karen1
Good to hear that Percy. I have been watching Sommerset and Met for some time now, and am wondering if Met is likely to remain in an acquisition/merger type mode for a while yet, and if it's possible they might reach further and look at Sommerset. If they can lift their game, and do acquire Sommerset, they would surely become a formiddable challenge to Ryman?
."Formiddable challenge to Ryman?" only formiddable challenge is sorting themselves out.!!!!
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