ARV - Arvida Retirement Villages

[Beagle]

Every dog needs to be given a bit of stick from time to time.

You all cocky because you've had a good day eh
Most dog's bite if you keep prodding them

[value_investor]

My thoughts/observations

- Impressive growth numbers but a large transaction during the year purchased perhaps contributed too. The new villages purchased for shares and debt is expected to net $15.8m (page 15 of acquisitons slide) in underlying earnings for the year (PY: Total Underlying Earnings at $38.6). Yes this hits the bottom line but acquisitions like this are done at a premium to organic growth (What I'm getting at is nobody sells you cheap growth especially in the current climate).

- Most of the developments are outside of Auckland where we've seen large price increases according to the latest REINZ reports, areas such as Wellington, Queenstown and Tauranga are very buoyant at the moment which indicates future strong resale growth. Total gains in sales were reported at 53% higher than HY last year. Strong organic growth story that's gathering momentum, good opportunity to ramp in future if demand is there in regions.

- As said before, large transactions come at a cost and the business is very cash skinny. Mostly funded by debt/share issue as per the cashflow statement. Net inflows from operating cashflow were only 15% higher than last year, which is swallowed up by the dividend increases which they perhaps shouldn't be paying altogether. Not a biggie in a low interest environment but interesting if rates move higher.

- Last years underlying profit $38m + organic growth of 15% = $43.7m + 15.8m from acquisition = Projected underlying profit of $59.5m. On total shares issued, that's 10.9c EPS giving a future PE of 14.4. On a balance I would say this is fairly valued, not a screaming buy but a good growth share to have in your portfolio. Might have to dabble if prices come down a bit..

Disc: Not a holder

[Maverick]

Excellent post Value-Investor, thank you putting in the work and sharing your workings, especially as you are not a current holder. I understand that to produce these numbers actually takes a lot of time and effort.

It is interesting to me that someone can buy the likes of a manufacturer like SKL who grow much slower and yet have a similar PE. Then there are the big boys like ATM,FPH etc with global potential and then awarded a crazy PE.

As a value investor myself I don't see how you can go wrong with anything offering reliable growth of ~15% pa (it seems all the retirement villages can at least manage this) for a PE of around 15.

All the while , you get dividends, tax free capital gains and being population/property based, is inflation proof.

[Beagle]

Great post Value Investor and nicely said Mav. 15% growth on a PE of 15 is a PEG ratio of just 1.0 which is great value. A lot of people on here think the only use for PEG's is to hang washing out lol

[winner69]

t_j - hope your mate Jeremy and other Forbar mates weren’t involved in this

https://thespinoff.co.nz/business/21...meme-election/

[trader_jackson]

another boring day, only up 5%
Into $1.70's now winner, way above that $1.40 mentioned just afew months ago.

[trader_jackson]

I remember, years ago, sum laughed at the prospect that the ol' dog Arvida would have the same (or even close to the) share price as heartland... suddenly not that far fetched anymore.

Less than 3 months ago I posted this, I think there was still a feeling HGH and ARV would never quite be the same share price... and here we are today: both $1.70.

Almost exactly 5 years after the ol' dog ARV listed on the NZX at 95 cents and HBL was trading around $1.10 (I think)... and ARV (since listing) has performed nearly as well as the famed SUM... there is no longer any doubt that ARV certainly building a very nice track record, in both underlying performance and share price.
(anyone who wants to have a great laugh - go back to the first few pages, hilarious to read!)

Congratulations to all holders - it was a bumpy start, but has turned out pretty well so far.

PS: Forsyth have Arvida as one of their 5 picks for 2020... although their target share price only a bit higher than today $1.78

[Arbroath]

I've been long ARV for the last 4-5 years and have never sold a share, bought all rights issues.
Surprised at the speed of the recent move higher in ARV but also having a laugh at the naysayers as Tj suggested from reading the 2015-16 posts of doom. It's always easy to be negative on a stock, or anything, and you rarely hear from people after they've been proved comprehensively wrong by subsequent events.

Writing this from my champagne bath...

[dobby41]

Writing this from my champagne bath...

Be careful you don't get a yeast infection.

[Onion]

... and ARV (since listing) has performed nearly as well as the famed SUM...

Comparing the last year returns (my holdings) -- including dividends and SP movement from Sharesight:

ARV 38.47%
MET 16.42%
OCA 4.36%
RYM 44.61%
SUM 26.45%

The big old fella RYM has not been too bad either!

If only OCA could break free then I would be REALLY happy.

PS: Treat comparisons like this with great skepticism, you could pick different timeframes and any one of them could be the standout.