RYM-Ryman

[lorraina]

A good number of people are in the same situation.
There are a number of services available to people who decide to stay in their own home.Wife's uncle stayed in his well into his 90s.
In our situation we bought a new over 60s unit.Whether we stay here, or move to a retirement village, or a care unit only time will tell.Not much difference in pricing between a unit in the very nice local village and our unit.Moving up to nobs' hill would be costly,however who wants to be with them.?..lol
I work flat out for 15 minutes a fortnight keeping on top of our small section.Power bills are low.Permanant materials save maintance costs. 
OCA's studios appear reasonably priced.

[Basil]

I think that's become a real issue now KW.  Very little headroom, (at a record ever low), between average real estate prices of properties and RYM's independent living units, almost no margin left for all of New Zealand expect Auckland and not much margin in Auckland either, see page 16
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/RYM/402597/383713.pdf
Not only that but remember there's real estate agents commission, legal and moving fees as well.

What RYM are not saying is the gap used to be FAR bigger, like the difference that exists in Melbourne to the left in that image on page 16.

The issue you describes is not a new one either, it's been building up over the last decade.
Way back 12 years ago if my parents had of chosen a nice north facing 2 bedroom stand alone townhouse in RYM's Orewa village they would have had nothing to come and go on in their retirement except national superannuation and although you can survive on that, its not really a good position to be in.

Summerset are known for their pricing being the next level down from RYM and yet still offering the full land-based cruise ship experience so I'd be checking out their villages if I were you KW.  I visited about 8 different villages with my parents to help them decide what was best for them...your Dad is very fortunate to have someone as bright as you to help him choose something more affordable but still really nice.

[KW]

The issue you describes is not a new one either, it's been building up over the last decade.
Way back 12 years ago if my parents had of chosen a nice north facing 2 bedroom stand alone townhouse in RYM's Orewa village they would have had nothing to come and go on in their retirement except national superannuation and although you can survive on that, its not really a good position to be in.

You wouldnt even have your super because half your pension would go on paying the weekly service fees.  

[Shareguy]

Craig's  today

Can RYM rediscover its self-sustaining growth model?

Investors ignored RYM's solid trading result and sent the shares down nearly 5% on Friday, largely due to concerns about the 18% HoH step up in RYM's net debt to $3.0bn. We had anticipated a weak operating cashflow result, given the 22% increase in days to sell in the NZ housing market from March to September and resulting significant drag on working capital, and we expect sector peers will also reveal some pain here when they report later this month (OCA/ARV) and in Feb (SUM). Investing cash outflows were however higher than we expected, and only partly due to the elevated levels of land purchase settlements in 1H23. While RYM still has c.$500m of untapped credit, by the end of the year we expect this to have reduced to c.$300m, and with gearing already over 45% it clearly cannot continue to run up cash deficits at this pace. The key question is how long it will take for RYM to return to a "self sustaining" growth model. At its recent investor day, RYM signalled it would cut its care build rate and develop more broad acre sites, which will reduce the amount of working capital needed to support growth, but the benefits of this pivot will take 2-3 years to become apparent as RYM first completes its existing projects. More immediately RYM has announced a discounted DRP. In addition, we think RYM will not be able to lift its build rate as previously signalled and instead will keep its build rate flat at FY23 levels (c.750 RV units) over the next 3-4 years, cut land purchases, pause commencement of high density developments, and defer main building construction, while it gets its gearing back down below 40%. Mngmt estimate the cumulative impact of these initiatives could return RYM to cash breakeven in 1-2 years.
Despite near term challenges, we retain Overweight
While pulling the levers above will reduce medium term growth, RYM is no longer priced for much growth at 1.07x NTA. Absent a severe housing crash we think RYM can "trade through", and retain Overweight with PT -5% to $10.

[Basil]

Interesting comments from Craigs, thanks for sharing.
Looks like RYM have snookered themselves with their high debt.

[winner (n)]

Interesting comments from Craigs, thanks for sharing.
Looks like RYM have snookered themselves with their high debt.

.... and others in sector all increasing debt as well

[Shareguy]

Yes a great company that has been historically "best in class." Unfortunately for several years has been overtaken by SUM in my opinion. As Basil correctly points out that debt is way to large, especially when you consider the increase in finance costs.

DRP is not going to cut it.  Needs a large CR to get debt down under 30 NOW.

[Whacc]

DRP is not going to cut it. 

Why would anyone take the DRP at a 2.5% discount when the share price is in free fall?

[Basil]

Magic was over when Simon Challis left many, many years ago.  Never been the same since.
Can't help myself wondering what he would make of the invidious position RYM finds itself in now ?
Others in this sector have far lower debt and much more reasonably priced units and look far better positioned to whether this downturn.

I am increasingly sure there is now a glut of retirement units now on the market and I expect some serious discounting to come in 2023 as those really motivated to reduce debt bite the bullet and get real with their pricing.  $1.9m for a south facing two bedroom unit in their Devonport village, for goodness sake what a joke.

Won't be long before RYM trades at a discount to their NTA...mark my words.

[Whacc]

Magic was over when Simon Challis left many, many years ago.  Never been the same since.
Can't help myself wondering what he would make of the invidious position RYM finds itself in now ?
Others in this sector have far lower debt and much more reasonably priced units and look far better positioned to whether this downturn.

Ryman's biggest issue has been the sacred cows put in place since its inception.

Why be so proud about not raising follow on capital when you're a growth company?
That irrational point-of-pride stopped them raising when they should have when their stock was trading higher - and that's not hindsight bias, people were telling them to do exactly that.

Also being too proud/egotistical to adopt the care suite model on care to recycle capital faster and realise DMF.

Won't be long before RYM trades at a discount to their NTA...mark my words.

I wonder when the industry valuer (CBRE) will get the reality memo.

[Basil]

I wonder when the industry valuer (CBRE) will get the reality memo.

Next year and combined with much higher interest rates reflected in higher discount rates for their DCF valuation in tandem with RYM's very high gearing...oh dear...it's not going to be pretty.  The truth is the wonderful first mover advantage they enjoyed for many years, evaporated many years ago.
RYM set to extend their lengthy period of underperformance (that I called out in early 2014 under my old handle, Beagle, in the other forum), until at least 2024 in my opinion.  Agreed, a capital raise when the share price was in the early - mid $teens and trading at a substantial premium to NTA would have been a very good move.  Too late now.

[winner (n)]

September last year Ryman appointed a grocer / retailer as CEO ....one Richard Umbers

Some had a few choice words about the appointment. Some even mentioned that he was 'asked to leave' when CEO of Meyer (a transformation that didn't work out that well and three profit downgrades). Apparently his time at Progressive in NZ wasn't that bad.

Share price when Umbers started was about $15 .......now half tha..market cap down more than $3 billion ...wow

Not all poor Umbers doing ....maybe it's just Umbers is one of those unlucky leaders .....always dogged by ill fortune ...like his past careers.

Unlucky leaders are not good .....their fortunes rarely change ....always dogged by bad luck.

And it seems Ryman have many challenges ahead of them .....that's when you need 'lucky' leaders

Could call this a bit of fundamental analysis

[Basil]

Now within 10 cents of NTA....hard to imagine what would stop the downwards momentum.  Frankly I can't think of anything.
So that sort of begs the question of how low could the share price potentially go ?  ARV a good guide, have 72% independent living units and only 28% care and they want to reduce care further. Currently $1.19 on a $1.84 NTA. 
If RYM followed ARV down to that discount level, (keep in mind ARV have one of the lowest gearing levels in the sector, about 25%, so are probably better equipped to whether this downturn), that would place RYM at $4.61 !  I am not forecasting they will go that low but I do believe the general direction is a continuation of relative underperformance against this sector and the market for the foreseeable future.

SUM coming in for treatment today too.  All boats fall on an outgoing tide.

[BlackPeter]

Its fine selling units for $1M when their customers are selling houses for $1M+.  What happens when customers are selling houses for $750k?  Bridging that gap is difficult for elderly people - my father is in that situation now.  He has decided that he does now want to live in a retirement village, but he cant afford to buy in because his house is worth less than the village unit.

Ah ... but your father has a well-off daughter, hasn't he?

Did he look at alternatives? OCA seems to be generally cheaper than e.g. RYM ...

But anyway ... you are right, it will be harder for retirement villages to rise prices when houses don't pay anymore for the units.

Question is just - why do we assume that the property market will keep going down while the building costs keep going up? Sure, there might be ripples, but this does not makes sense in the long term given that it just would mean people stop building new houses and buy instead from existing stock, which means that the existing stock will get more demand, which will push up prices up for existing stock until it reaches the prices for building new again.

I expect that property market will quite quickly re-synchronise with the prices for building new houses. 

[winner (n)]

RYM share price now below Book Value of $7.26