ARV - Arvida Retirement Villages

[trader_jackson]

some quick questions:
1: Why ARV is able to distribute such high cash dividend while other retirement companies can't?(even you reduce RYM/SUM to the same valuation) Is it because ARV's bed % is higher?

2: According to the latest presentation, ARV's portfolio is quite big already after some acquisitions. The total units/beds is about the same as SUM. However SUM has a significant higher build rate. Does that mean SUM will have higher growth rate. In this case, SUM deserves higher valuation. (so we can't expect ARV's valuation to increase to RYM/SUM's level)

1. ARV does have fairly good cash flows, but I believe the reason they distribute more is because they have a lower re-investment rate, as a result of a lower build rate, and therefore ARV is lower risk.

2. ARV portfolio is quite big... it wasn't always this great, it was often compared to a dog on this very thread. ARV does have a lower build rate, and therefore one would expect a lower growth than a company that would have a much higher build rate like SUM - and I'd like to therefore think they have a much higher growth rate - they are borrowing significant SUMs of money (the most leveraged listed retirement company I think?) to do it for starters, and paying peanuts, not a dividend.
Also remember ARV also hasn't begun its 3rd stage, as outlined in it's IPO booklet late 2014 when it listed at 95 cents: greenfield development - for now it is gathering expertise, increasing geographic presence, and when the time is right, proceed to greenfield development - this is where growth rates (already pretty solid) will increase for ARV... the re-rating, based purely on brownfield development pipeline, has already begun (as shown by ARV being the best performing retirement stock - by far - in 2016), with the stock going from stupidly cheap, to being priced more appropriately.

As always, this is just my view, and DYOR.

I'm looking forward to some sort of third quarter update, alongside a 1.1 cent dividend... next quarter will be another nice lift in the dividend no doubt... would also be great if they had a DRP, they are hopefully looking into it.

[stevevai1983]

very informative i will read the IPO booklet tmr

[trader_jackson]

very informative i will read the IPO booklet tmr

Yup, in: Investment Statement Initial Public Offering of Ordinary Shares in Arvida Group Limited (dated 17 November 2014)
page 14, section 3.5: Opportunities for Growth
1 Brownfield Development... (various bullet points)
2 Acquisitions... (various bullet points)
3 Greenfield Development:
- In-house greenfield development capabilities to be developed
- Greenfield development pipeline to be established over time

[JoeGrogan]

Dividend announced today, seems to be holding steady around the mid 1.30's. Eagerly awaiting the investor update next month

https://www.nzx.com/companies/ARV/announcements/297481

[trader_jackson]

Forsyth lifts target price dramatically, from NZ$1.42 to NZ$1.57 , over 16% higher than today's closing (over 20% target return in the next year when you consider the dividend - although not quite as high as the 57% ish 52 week return mentioned on NZX's website today)

Key points:
- Stepping up the build rate to around 120 units per annum
- No greenfield development sites yet: "expect that ARV is looking to add such a site to its land bank given its pick up in brownfield expertise" - I've been saying this for a while now
- FY18 is a key year: "first year of large scale new stock delivery... first chance to demonstrate it can build quickly, sell down quickly and recycle capital."
- This may come as a surprise to some, but according to Forsyth Analysis ((metrics re-weighted to reflect ARV's balance date - March) FY 17 and FY 18 estimate PE for SUM is a bit higher than ARV, while MET is a bit lower, and RYM is quite a bit higher. And I don't even need to talk about how much higher the dividend is

OUTPERFORM rating, while SUM and MET have Neutral ratings: ARV has an interesting combination of defensive qualities + low exposure to the Auckland housing market + growth opportunities associated with brownfield expansion of established villages + ultimately greenfield expansion

I am looking forward to some sort of update between now and May (being results month)

[King1212]

https://www.nbr.co.nz/article/govern...-says-b-200718


Mr Kiernan said the ageing population would lead to increased demand for aged care and residential home services and, while technological advances and automation may limit the additional number of extra workers needed, those gains are still likely to run ahead of the national average.

[King1212]

just received an update via email, investor news..everything is well on track and heaps of developments....

[trader_jackson]

just received an update via email, investor news..everything is well on track and heaps of developments....

Yeah, very happy with the dividend coming through today. The section on "Arvida’s growth isn’t only occurring through acquisition. Where else is it coming from?" was of particular interest... highlighting organic growth.

Can't seem to find the investor update we were emailed on the nzx? (the March investor news update number 4) unless I am missing something?
(would be great to share with you all )

[artemis]

Arvida is not included in the white paper from JLL New Zealand Retirement Village Database, though is to be included from the next report.

See the Herald article Risks in rampant retirement village growth


Some interesting stats on the sector.

Risks said to be -

• An oversupply in the Auckland region, in the short to medium term

• The holding costs of land banking and miscalculations in location and capital investment decisions

• Negative publicity regarding the ORA (occupation right agreement, also called the deferred management fee).

• Risks from the general housing market affecting potential village residents' equity holdings.

http://www.nzherald.co.nz/business/n...ectid=11823962

[trader_jackson]

Arvida is not included in the white paper from JLL New Zealand Retirement Village Database, though is to be included from the next report.

See the Herald article Risks in rampant retirement village growth


Some interesting stats on the sector.

Risks said to be -

• An oversupply in the Auckland region, in the short to medium term

• The holding costs of land banking and miscalculations in location and capital investment decisions

• Negative publicity regarding the ORA (occupation right agreement, also called the deferred management fee).

• Risks from the general housing market affecting potential village residents' equity holdings.

http://www.nzherald.co.nz/business/n...ectid=11823962

ARV is probably the least effected listed operator right now due to their (current) focus on brownfield development, their 'needs based' portfolio, and a portfolio which isn't very exposed to Auckland like SUM others . What I think could be a risk (although small) is rising interest rates and how this may negatively effect SUM of those villages with high debt... which is not ARV (who has one of the lowest gearing ratios).

Ironically, on the same day, there was an article which was totally opposite to the doom and gloom above:
http://www.stuff.co.nz/business/9076...ds-set-to-grow