Retirement village operators

[Maverick]

Thought it was about time to revisit basic PE`s on the village shares after all the share price changes of the last few months skyrocketing.(Except OCA aye Winner)

I know some very esteemed accountants here don't like PE`s for measuring every company's value but for me it's the cornerstone to weigh up whether a share is “ under”, “over” or “about right.” I apply it to every investment I make including rental houses. (disc; I don't have any rental houses with the crazy PEs they have these days - even in Wanganui)

The following figures are all based on underlying profits. I have made notes on the dates for the latest profits being used as ALL these villages grow so fast that the results get out of date fast.

RYM, PE30.2 Based on its very recent HY1 annual forecast for 5 months from now.
ARV, PE 18.9. From its HY1 report 1 month ago.
SUM,PE 15.2. Based on a forecast annual profit (by myself and others here of 116 million) in 2 weeks time.(I know this profit is not fact but basing it on last year's actual result is now out of date)
MET, PE 13.4. Based on annual results delivered 4 months ago. If it`s leaky building costs, which are finite, were not included then it would be PE-12.4
OCA.PE 13.3. Based on last annual actual underlying profit. This figure is now 7 months out of date. (My own figures point to a strong HY1 profit increase in January which would make the PE 9.7 but this is my own workings so one should do there own forecasting here.)

So for me;
RYM is way too dear
ARV is fair value. (sold out 100% today, sorry TJ, just better value out there.)
SUM is still cheap given its very strong growth history,
MET, well that's a double whammy right now with the takeover drama. Its seems to be a very good buy on fundamentals alone and then a marvelous punt with the takeover thing on top of that. Probably a screaming buy before the impending announcement.
OCA. Very cheap and it all depends on its upcoming HY1 result as to how cheap it is.

Merry Christmas everyone. See you next year.

[bull....]

Thought it was about time to revisit basic PE`s on the village shares after all the share price changes of the last few months skyrocketing.(Except OCA aye Winner)

I know some very esteemed accountants here don't like PE`s for measuring every company's value but for me it's the cornerstone to weigh up whether a share is “ under”, “over” or “about right.” I apply it to every investment I make including rental houses. (disc; I don't have any rental houses with the crazy PEs they have these days - even in Wanganui)

The following figures are all based on underlying profits. I have made notes on the dates for the latest profits being used as ALL these villages grow so fast that the results get out of date fast.

RYM, PE30.2 Based on its very recent HY1 annual forecast for 5 months from now.
ARV, PE 18.9. From its HY1 report 1 month ago.
SUM,PE 15.2. Based on a forecast annual profit (by myself and others here of 116 million) in 2 weeks time.(I know this profit is not fact but basing it on last year's actual result is now out of date)
MET, PE 13.4. Based on annual results delivered 4 months ago. If it`s leaky building costs, which are finite, were not included then it would be PE-12.4
OCA.PE 13.3. Based on last annual actual underlying profit. This figure is now 7 months out of date. (My own figures point to a strong HY1 profit increase in January which would make the PE 9.7 but this is my own workings so one should do there own forecasting here.)

So for me;
RYM is way too dear
ARV is fair value. (sold out 100% today, sorry TJ, just better value out there.)
SUM is still cheap given its very strong growth history,
MET, well that's a double whammy right now with the takeover drama. Its seems to be a very good buy on fundamentals alone and then a marvelous punt with the takeover thing on top of that. Probably a screaming buy before the impending announcement.
OCA. Very cheap and it all depends on its upcoming HY1 result as to how cheap it is.

Merry Christmas everyone. See you next year.

good points at the top of the 87 crash property developers were very expensive. ( not saying this is the top) but a good point by mav to watch

[Beagle]

Great post Maverick.
Very nice work on normalising MET's underlying earnings for finite remediation costs, something I had not thought to do and that's after gnawing away at that bone for quite a while, so very nicely done ! Wishing you a merry Christmas and a prosperous new year mate.

I think the prospects for this whole sector are very good for 2020 but in the rush of chasing investment gains lets all take a minute at 2.11 p.m. this afternoon to extend our thoughts and prayers for the victims of the White Island tragedy and pray for the recovery of over 20 people still in intensive care.

[penn]

Mr or Mrs Onion put an interesting list of Last years returns for the listed operators, hope its ok to re post it here as I don't read all the threads I nearly missed it.
ARV 38.47%
MET 16.42%
OCA 4.36%
RYM 44.61%
SUM 26.45%
(includes dividends)

[Beagle]

That's fine but my firm view is that you get a much better feel for how successful the relative merits of each business model are within the sector by taking a 5 year view which removes any untoward one-off factors affecting returns in any one year . (I'll leave the maths to someone else as I can't be bothered).

[Onion]

That's fine but my firm view is that you get a much better feel for how successful the relative merits of each business model are within the sector by taking a 5 year view which removes any untoward one-off factors affecting returns in any one year . (I'll leave the maths to someone else as I can't be bothered).

OK - just for fun - this is not a fair comparison as there are a few trades along the way and different entry point...

In the last 5 years (rough entry point noted), total return, not annualised:

ARV 30.28% (early/mid '18 onward plus more this year)
MET 11.85% (lateish '15 onward)
OCA 7.05% ('17 and '18)
RYM 31.61% (lateish '15 onward)
SUM 34.66% ('13 onward so 5y+)

My assessment:

RYM, SUM: nice, predictable. Despite contrary opinions regarding RYM valuation the SP stays up there.
ARV: nice spike in SP recently
MET: laggard for a long time, recent SP rise is flattering, was until recently around 0% return!
OCA: Held back by the significant shareholder's overhang? Similar model to ARV so when will the SP follow?


PS: Don't treat these as accurate comparisons, different time periods can produce misleading results!

[Beagle]

Looked up the share prices 5 years ago and compared to now, (have not adjusted returns for dividends paid or any rights issues)

MET, then $4.28, now $6.01 up 40%
ARV, then $0.92, now $1.70 up 85%
RYM, then $8.25, now $15.72 up 90.5%
SUM, then $2.81, now $7.71 up 274% (Excess return has not come about by PE expansion, in fact quite the opposite, PE has significantly contracted)

Anyone wondering which business model delivers superior returns over time, need wonder no longer.

[winner69]

Looked up the share prices 5 years ago and compared to now, (have not adjusted returns for dividends paid or any rights issues)

MET, then $4.28, now $6.01 up 40%
ARV, then $0.92, now $1.70 up 85%
RYM, then $8.25, now $15.72 up 90.5%
SUM, then $2.81, now $7.71 up 274% (Excess return has not come about by PE expansion, in fact quite the opposite, PE has significantly contracted)

Anyone wondering which business model delivers superior returns over time, need wonder no longer.

A bit misleading - you've used most favourable period possibe to allow SUM to win this 'race' - 5 years ago SUM share price was in a state of despair after falling about 30% that year

And it has been rerated big time - 5 years ago SUM share price only 32% of RYM share price


But nonetheless it was when SUM was the most undervalued and so a great time to buy.

[couta1]

A bit misleading - you've used most favourable period possibe to allow SUM to win this 'race' - 5 years ago SUM share price was in a state of despair after falling about 30% that year

And it has been rerated big time - 5 years ago SUM share price only 32% of RYM share price


But nonetheless it was when SUM was the most undervalued and so a great time to buy.

Yes exactly, go back a bit further and a different picture emerges and after all at the end of the day SUM will ever only be worth around 50% of RYM as proved by a long history.

[Beagle]

A bit misleading - you've used most favourable period possibe to allow SUM to win this 'race' - 5 years ago SUM share price was in a state of despair after falling about 30% that year

And it has been rerated big time - 5 years ago SUM share price only 32% of RYM share price


But nonetheless it was when SUM was the most undervalued and so a great time to buy.

Perhaps it was a bit lucky but I didn't hand pick the start date, I simply told the story of what has actually happened over the last 5 years. Quite possibly worth noting that RYM's forward PE wasn't always ~ double that of SUM's but I think you know that already

Anyway...I am bored...we must be getting close to a MET announcement / progress update any day now surely...