Retirement village operators

[King1212]

Uncle Trump purposely let it happens so they don't have pay pensions....

[bull....]

Uncle Trump purposely let it happens so they don't have pay pensions....

lol thats what my 80 yr old dad said , solve the trillions of pension liabilities by ridding the planet of old people

[King1212]

Yup.....sad n pathetic but true story happens on most developed countries

[Beagle]

Thanks heaps Sylvester.
Couple of very interesting highlights from those graphs.
1. The size of SUM's landbank relative to its existing number of units. (About 17 years of development at the revised projected 2020 build rate) which some might say was looking very excessive before Covid 19 and is not looking almost recklessness given the likely move down in real estate prices.
2. The fact that MET are mostly independent living units.

Discount or premium to NTA is another story.

[trader_jackson]

very interesting, yet not surprising, thing to me was that is makes ARV look very good really - well balanced on all fronts.
Not surprising the market has (finally) realised this and it has fallen significantly less than the average.

[Beagle]

very interesting, yet not surprising, thing to me was that is makes ARV look very good really - well balanced on all fronts.
Not surprising the market has (finally) realised this and it has fallen significantly less than the average.

Granted it was good buying at 88 cents as was OCA at 40 cents, not any more. Only one company left in this sector at present that's meets my expectations of a screaming bargain (because of very recent events), MET.

In this market with the prospects of a severe and deep global recession I am very happy to sit on my paws with the only exception being where something is a screaming bargain. Just being somewhere around fair value, (like ARV probably is at present), isn't anywhere near good enough as far as I am concerned.

[Cyclical]

2. The fact that MET are mostly independent living units.

This bit would have to be the more desirable option when it comes to isolation, right?

[Oliver Mander]

Agree with Beagle and Traderjackson on both fronts - yes, Arvida (and possibly Ryman) look the most 'balanced' to me between different sources of income...in this environment, that's "safe" - catering for all outcomes in the short and medium term. So for the longer term - I would be picking between these two shares, depending on their relative value (ARV wins). And yes, MET looks heavily underpriced right now. The caveat being that it is solely dependent on resales, and since capital values will take a hit, it will be over exposed to that.

Good to see that ARV has just re-negotiated its debt also, gives them a good level of headroom and deals with the immediate maturity they were facing. I haven't looked at RYM's debt in detail, but will take Beagle's word for it. Given recent heavy emphasis on development and expansion, would not surprise me. ARV's expansion has primarily been funded by acquisition, with increased equity raised through right's issues.

Cyclical, I've long been an advocate of a balanced exposure to "care" for the operators - not just as a providing a bit of stability to underlying earnings, but exactly because of situations like this. Care will be in BIG demand in the short-term, and is likely to be well-supported by Government, who can't afford the reputation cost of poor care services. Heard the tail-end of an interview on RNZ this morning with OCA's CEO, who was expecting better support for care services to be implemented shortly (admittedly, with such a large proportion in care, OCA are probably banking on it).

I do think the listed sector has behaved very responsibly. Early implementation of travel restrictions, staff management, visitation and self-isolation is a credit to all 6 of the big operators (including BUPA). And good to see the industry taking a proactive front on testing all new entrants to retirement villages. May yet be proved wrong on that front, but the signs are good.

My 2 cents only of course. And I do hold ARV, and used to hold RYM and MET.

[Oliver Mander]

couldn't help myself. Comparison of debt ratios, NTA's and Share Price gap attached.
As Beagle suggests, MET is well below NTA, and will ride out a drop in property value well in the long term (if they an keep on being profitable in the short-term - they really look like a one-trick pony focused on resales). ARV and OCA are 'about right' with RYM and SUM well over the odds from an NTA perspective.
In terms of debt though, its probably not such an issue for the sector, especially if you strip out the occupancy advances. RYM, however, does have slightly more %age debt than the others.
Attachment 11279

[Beagle]

This bit would have to be the more desirable option when it comes to isolation, right?

I think so. A lot of MET villages are older and the more traditional single level stand alone units. I see this as a real strength in this new environment in which we all find ourselves. With the village heavily screening visitors, providing shopping and medication delivery services, they're arguably a lot safer in there than old folks staying in their own home. More room around each unit and people can go for a walk around the village. I don't have any qualms about resale with these type of stand alone or duplex units.

On the other hand high rise apartment blocks were people are jammed in close together, like some other operators have a lot in their portfolio, are not somewhere I would want to be right now and I think these present a very real resale risk.