Retirement Sector Stocks

[BlackPeter]

The problem for the whole sector is what if the Govt mandates a, say, compulsory 6 month buy-back of units ?

Not quite sure it really would be a problem if they all need to do that. Lets look at the numbers ... normal units are  in average 7 years used before they need to be sold again.

From memory - all our listed retirement villages have more than 90% of their units sold, and a number of the remaining  free units are new. They don't need a refund. Some time that I did this exercise, but I think Ryman was around 95% and OCA around 91%. Take half of them as new (certainly true for OCA), this means that in average only 3.5% of all units are old units and for sell.

Given that in average 93% are sold (s. above) and average placement is 7 years, this means that 14% of all units are sold per year. 3.5% is one quarter of that - i.e it should not a problem to resell the unit within 6 months if its in a good condition.

No doubt as well, retirement villages will use their resources to better price and resell these overstayers. It's just that they have no real reason at the moment to push the resale.

I think a rule like that would help the residents and for the retirement villages it just means a better planning of the resales.

[Waltzing]

The small villages going up along the Auckland Karapiro motorway show that inventory ever increasing but really, 700 G for a Tiny Hut? what a terrible rip off. A country of thieves?

https://www.youtube.com/watch?v=XUwUp-D_VV0&list=RDXUwUp-D_VV0&start_radio=1

[winner (n)]

You might be interested in sector sales activity the six months April/September

Summerset 2025 sales include about 90 care conversion sales and Oceania breakdown a guess from the chart they recently showed with no numbers on it

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[Ferg]

Thanks winner.

You might want to change the subtotal description for RYM.

[Basil]

These results despite OCA bringing in high priced marketing experts and RYM giving many of their village units a serious haircut with price plus extensive marketing.

[winner (n)]

Interesting chart

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[ValueNZ]

Interesting chart

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SUM probably positioned quite well then eh?

[Waltzing]

that is a very big drop off a cliff chart.... huge.... RYM unit price in the WAKATOO country townships was at 700G a tiny unit last year... looked like HUGE profit margin ... maybe the public just kept driving past the signs...

[Basil]

Real (inflation adjusted) house prices down 31.3% since the peak.  Wow, that's pretty close to the average house in N.Z. losing a third of its value.
https://www.nzherald.co.nz/property/real-new-zealand-house-values-down-313-since-2021-peak-economists-cite-renewed-weakness/premium/XJTHQVLGQRFLRMYGTWITLOAJJY/

[Dolcile]

Real (inflation adjusted) house prices down 31.3% since the peak.  Wow, that's pretty close to the average house in N.Z. losing a third of its value.
https://www.nzherald.co.nz/property/real-new-zealand-house-values-down-313-since-2021-peak-economists-cite-renewed-weakness/premium/XJTHQVLGQRFLRMYGTWITLOAJJY/

I'm quite happy for this to continue.  The NZ obsession with housing and the resulting unaffordability must change.

[Greekwatchdog]

Note ex For Bar this morning

With Ryman Healthcare (RYM) providing new segmental disclosure in its 1H26 result, all three NZX50 aged care companies now split out village and care earnings. While disclosure varies somewhat, we now have a more accurate picture of the relative performance of the sector's retirement village and care assets. Our key takeaways are: (1) RYM's NZ care profitability appears broadly in line with Oceania Healthcare (OCA) on a like-for-like basis (EBITDA per bed of c.NZ$12k); (2) care profitability is stronger in Australia than in NZ (as expected) and should improve further as funding changes flow through; and (3) the deficit between village fees and village opex is a significant challenge for the sector. We remain positive on the sector overall, with a preference for Summerset Group (SUM: OUTPERFORM) and Oceania Healthcare (OCA: OUTPERFORM). Ryman Healthcare (RYM) is rated NEUTRAL.

Key takeaway #1: RYM's NZ care profitability appears broadly in line with Oceania Healthcare (OCA) on a like-for-like basis
RYM reported EBITDA per bed of NZ$15.3k in its inaugural segmental disclosure of care and village earnings. This includes: (1) a contribution from higher-margin Australian care centres; and (2) imputed interest, which has typically not been presented by other NZ care operators. We estimate a like-for-like NZ EBITDA per bed of ~NZ$12k for RYM, which is broadly in line with that achieved by OCA. Our like-for-like metric excludes resales gains and imputed interest but includes an allocation of support costs. We continue to expect NZ care profitability to improve, with the November reporting season highlighting positive trends in occupancy and moderating cost inflation.

Key takeaway #2: Care profitability is stronger in Australia than in NZ (as expected) and should improve further
RYM's management commentary that Australian care is more profitable than NZ care (on a per bed basis) corroborates the feedback from our industry meetings. We estimate RYM's care EBITDA per bed in Australia is +15% to +30% higher than aggregate profitability and should improve as care centres mature and funding changes flow through over the next 12 months. RYM's 1H26 result also highlighted robust pricing momentum for refundable accommodation deposits (RAD) in Australia. Higher RAD prices are supportive of earnings, with 2% RAD retentions being phased in for new residents from 1 November 2025.

Key takeaway #3: The deficit between village fees and opex is a significant sector problem
While it was widely understood that weekly fees were not covering village operating costs, RYM's 1H26 result revealed a deficit between village fees and village opex (c.NZ$110m annualised before support costs) that was wider than we anticipated. OCA and SUM also report operating deficits at the village level, before deferred management fees (DMF) and resales gains. Given the relative size of village cost bases, the sector will need to achieve strong growth in weekly fees just to maintain these deficits at current levels.

RYM's NZ care profitability in line with OCA on a like-for-like basis
RYM reported annualised EBITDA per bed of NZ$15.3k for 1H26 in its inaugural segmental disclosure. We understand this is on an occupied-bed basis and is an aggregate figure that includes both its New Zealand and Australian care operations. RYM's disclosure also makes an allocation of support costs and includes imputed interest on refundable accommodation deposits (RADs). As shown in Figure 2, disclosure of care earnings varies across the sector, with the treatment of support costs a key variable.

RYM's NZ EBITDA per bed is broadly in line with OCA on a like-for-like basis
To make reliable comparisons about the sector's care profitability, we calculate a like-for-like EBITDA per bed that: (1) includes an allocation for support costs; and (2) does not include any contribution from imputed interest or resales gains. This methodology aligns closely with current disclosure but still requires some level of estimation. We present our findings in Figure 3. RAD's profitability (pre-lease costs) is still sector leading, even assuming a conservative ~NZ$5m allocation of support costs to its care segment. RYM and OCA report similar levels of profitability (c.NZ$12k) on our metric, while SUM's EBITDA per bed is noticeably weak relative to the rest of the sector. We note SUM allocates some revenue and costs associated with delivering care into serviced apartments to the care segment, in contrast with other sector disclosure, which is likely distorting profitability.

Returns significantly below cost of capital for most listed operators, particularly considering support costs
Care earnings that include an allocation for support costs are representative of the true returns from operating care facilities in NZ. Expenses such as clinical management and workforce recruitment likely sit within these support costs and are pivotal to day-to-day operations. Factoring in depreciation and taxes, we estimate current levels of EBITDA per bed after support costs for RYM and OCA equate to ~NZ$5k of NOPAT per bed. This represents a return on invested capital (ROIC) of c.2%, assuming a new bed costs, on average, NZ$250k to build. While care profitability should improve from here, we expect returns for the listed sector (outside of RAD) to remain relatively poor.

Profitability is underpinned by costs, premium revenue streams
Looking at the sector's care disclosure in more detail, we note that profitability is driven by cost control and premium revenue streams. RAD's sector-leading profitability is underpinned by its significantly leaner cost base (~NZ$210 per occupied bed day versus peers at NZ$260 and above). RYM's cost per occupied bed is slightly higher than OCA's, but this is compensated by a higher level of premium revenue (particularly in premium accommodation charges), resulting in a similar level of profitability overall. At face value, SUM's revenue and costs per occupied bed stand out as high relative to the rest of the sector. However, we understand this is largely due to SUM allocating the revenue and costs associated with delivering care in serviced apartments to its retirement village segment.

Rising occupancy and moderating cost inflation are constructive for future profitability trends
The November reporting season reinforced our view that NZ care profitability is likely to improve in the near term. Our view is underpinned by constructive trends in: (1) occupancy; and (2) moderating cost inflation. Both RAD and OCA reported rising occupancy in 1H26, while RAD reported a flattening in aged care expenses per occupied bed day after several years of significant growth in this measure. While the latter partly reflects operating leverage from improved occupancy, it also indicates that cost pressures for care operators are beginning to subside.

Aus care more profitable than NZ, with further gains to come
RYM did not split out care earnings by geography in its 1H26 result, but commentary from management confirms that its Australian care operations are more profitable than NZ. This is unsurprising and corroborates feedback from industry participants in Australia, which indicated robust aggregate profitability levels relative to NZ. We estimate RYM's Australian EBITDA per bed at ~NZ$17.5k to NZ$20.0k per bed, ahead of aggregate profitability of ~NZ$15k on its reported metric. We continue to expect profitability in Australia to improve further from here, underpinned by: (1) the introduction of a 2% RAD retention from 1 November 2025; and (2) two sites yet to reach maturity.

Positive RAD pricing trends supportive for future earnings
RYM's 1H26 result also highlighted solid momentum in Australian RAD pricing trends, with the average RAD balance rising +5% to A$718k (NZ$818k). Strong RAD pricing momentum reflects robust demand for aged care in Victoria and underpins solid growth in Australian care earnings. While the introduction of RAD retentions from 1 November will alter the attractiveness of the RAD offering to incoming residents, RYM does not expect to see a material shift in the mix between residents paying for their accommodation with a RAD or DAP.

Village operating deficit a significant challenge for the sector
Theoretically, weekly fees received from residents are designed to cover the ongoing costs of running a village, including rates, electricity, and maintenance. In practice, however, listed operators are running material deficits between village fees and village opex. RYM's segmental disclosure revealed a c.NZ$110m annualised gap between village fees earned and the cost to operate its villages, before any support cost allocation. This means each of RYM's occupied units is currently losing ~NZ$12k per year on average before DMF and resales gains are considered. The deficit is even wider for OCA (c.NZ$20k per occupied unit), albeit this includes an allocation of support costs. SUM's deficit is the smallest in the sector, reflecting: (1) higher occupancy; and (2) nuances in disclosure (e.g. SUM allocates care services provided in serviced apartments to the care segment).

Composition of cost bases relatively homogenous between RYM and SUM
While OCA's disclosure around operating expenses is relatively limited, RYM and SUM provide granular detail on the composition of opex within segments (care, village, and corporate). As shown in Figures 15 and 16, cost allocation between segments is relatively homogeneous for RYM and SUM, with a few notable exceptions. One of the key differences is the allocation of sales and marketing costs. RYM allocates these costs to its villages, whereas SUM holds these costs centrally at head office

[Basil]

Key takeaway #3: The deficit between village fees and opex is a significant sector problem
While it was widely understood that weekly fees were not covering village operating costs, RYM's 1H26 result revealed a deficit between village fees and village opex (c.NZ$110m annualised before support costs) that was wider than we anticipated. OCA and SUM also report operating deficits at the village level, before deferred management fees (DMF) and resales gains. Given the relative size of village cost bases, the sector will need to achieve strong growth in weekly fees just to maintain these deficits at current levels.

Arguably the biggest challenge facing this sector which is deeply out of favour.
Just in the first quarter of 2026, OCA down 24%, SUM down 28% and RYM down 27%
ANZ economists who were originally predicting growth in house prices in 2026 of 5%, downgraded to 2% and just downgraded again to expecting further falls this year.  6 years on ongoing real estate losses...maybe 40% in real inflation adjusted terms by the end of 2026 as inflation ticks up.  The fall from grace by this sector has been spectacular to say the least.  No interest from me in catching a falling knife of any company in this sector.