MET - Metlifecare - one for the fundies?

[Beagle]

https://www.nzherald.co.nz/business/...ectid=12261839
Only $18m spent so far to 30 June 2019 on fixing past weathertightness issues of a total planned now to be $64m
Last time I looked at this the total remediation works were estimated in the mid $40m range. I would thus expect this to rise into the $80-90m range as time goes on.
Wood rot a horrible thing, the deeper you dig the more you find and lets face it, its impossible to accurately forecast remediation work costs for one house let alone a substantial number of different units spread across a number of different villages.
Head of development has left. Deep discount to NTA is not a new thing by any means. Underlying earnings $90.5m on 213.3m shares gives 42.42 cps which on $4.38 gives an underlying PE of just 10.3 so its cheap but I think its cheap for good reasons and with a massive drop in reported net profit after tax, a potender for reduced underlying profits in future years this is one free forward warning sign of a possible value trap...
I don't see where the catalyst is for a share price rerating, does anyone else ?

[Beagle]

http://www.sharechat.co.nz/article/3...-in-growthhtml

What am I missing ? They think they've just reported a strong result, what's strong about it ?
The CEO and directors think its better to invest in building new units and make say approx. 25% development gains going forward than buying shares at $4.36 and make a 50%+ gain if they can get the shares back to NTA. Buy-back means less shares on issue and is quite obviously more eps accretive than building new units, surely this is perfectly obvious to anyone capable of putting numbers into a calculator ?. I think the board are in denial about the seriousness of the discount to NTA issue.
Expenses have also grown at quite an alarming rate too. I think those two things mean this is a very good stock to avoid in this sector.

[macduffy]

Fair enough, Beagle. But the board's main concern isn't the shareprice, but building a sustainable, profitable business.

[forest]

http://www.sharechat.co.nz/article/3...-in-growthhtml

What am I missing ? They think they've just reported a strong result, what's strong about it ?
The CEO and directors think its better to invest in building new units and make say approx. 25% development gains going forward than buying shares at $4.36 and make a 50%+ gain if they can get the shares back to NTA. Buy-back means less shares on issue and is quite obviously more eps accretive than building new units, surely this is perfectly obvious to anyone capable of putting numbers into a calculator ?. I think the board are in denial about the seriousness of the discount to NTA issue.
Expenses have also grown at quite an alarming rate too. I think those two things mean this is a very good stock to avoid in this sector.

Agree with you Beagle, look at the impairments on page 20 of the annual report, MET seem to have a few problems with their core business model.

[Beagle]

Thanks for that forest and I agree that those construction cost overruns on page 20 are very serious and indicative of possible systemic problems within the companies development model. In addition their head of development is leaving and getting a replacement that's really good is by no means a simple process...no point in hiring any former Fletcher manager lol. Plenty of unsold stock on the books and a lot of it is in Auckland.

[Beagle]

Had a good read of the annual report yesterday and tried to like these because on a TA basis it looks like they might be building a base around the current level.
Discount to NTA, Its cheap for sure at around $4.40 and I tried to like it because on a forward PE basis they might be on only 10 which is dirt cheap on an earnings basis but until they can get their development model working properly and make a top hire for their head of development, I don't see the catalyst from the breakout of this malaise they're in.

SUM have a vastly superior track record and although priced at a premium to NTA and around 13 times 2019 earnings are well and truly worth the PE premium.
I really tried to like this one...but I can't bring myself to invest in something just because its cheap.

[dabsman]

I reckon a takeover target - like it better now Beagle?

[Beagle]

LOL... I think FCNZ tried to fly that kite a while back.

[dabsman]

Under NTA. Brilliant locations and plenty of brownfield potential. Redevelop sites to include continuum of care and sit back and watch the money roll

[Beagle]

Looking at the chart, it definitely looks like its built a fairly solid base over the last 3-4 months around the mid $4 level and has now broken up through the 100 day MA.
NTA is just on $7 so it is very cheap and I have a lot of SUM already so I have taken a small nursery position in this one as the forward PE is only ~ 10 and the discount to NTA is so big. Probably regret it, (stop loss set at $4.35), but its just a small punt, lets see how we go.

PS I bought some more SUM today as well