RYM-Ryman

[KW]

One of the promised benefits of moving into a retirement home is the ability to provide continuity of care if you need it. So you don't have to move out if something happens to you.  Now that they are cutting back on high rise (the serviced apartments for impaired residents) and hospice level care beds (for those that can no longer look after themselves) can they make this promise any more?  
I'm not so keen on my father moving into one if he's going to be turfed out on his butt as soon as he needs a higher level of care, while losing 30% of his capital so he has no money to fund the purchase of a serviced apartment elsewhere.  They seem in danger of losing a major value proposition. 

[mistaTea]

That is probably still a lot cheaper than rolling it over onto higher interest rates for the rest of the term.

Let's assume they are not complete morons and RYM and their investment bankers have crunched the numbers.

[Untamed]

I assume you meant hospital level care?

Can't comment on RYM as I don't hold, but this is something OCA understands, and is committed to providing. Their Care Suites are for life - with the level of care provided, increasing as need increases, within that Care Suite. They provide single or couple's suites, where occupants can live until they die (excluding high level dementia care needs).

OCA has also made a commitment to always provide standard care beds, to ensure that every New Zealander has access to quality standard care should they need it, even if they cannot afford to pay for it themselves. Brent made that very clear in the November results presentation.

One of the promised benefits of moving into a retirement home is the ability to provide continuity of care if you need it. So you don't have to move out if something happens to you.  Now that they are cutting back on high rise (the serviced apartments for impaired residents) and hospice level care beds (for those that can no longer look after themselves) can they make this promise any more? 
I'm not so keen on my father moving into one if he's going to be turfed out on his butt as soon as he needs a higher level of care, while losing 30% of his capital so he has no money to fund the purchase of a serviced apartment elsewhere.  They seem in danger of losing a major value proposition.

[Basil]

Let's assume they are not complete morons and RYM and their investment bankers have crunched the numbers.

Pretty incredible to have mismanaged the business so imprudently to be in this mess in the first place in my opinion.

I suspect there is a lot they're not telling investors such as a serious slowdown in sales.

As for the forecast for FY24 of a 10 to 15% increase in underlying profit in a falling and very slow market and with a 20% reduction in build rate...I think there is a lot of sanguine assumptions built into that that are extremely vulnerable to the downside
Even if they somehow do that, that is still a material decline in eps with all the new shares on issue.

[Ferg]

Quick back of the fag packet calculation of NTA and EPS post capital raise (CR), assuming all rights are exercised at $5 and their forecast underlying profit is achieved for FY23 and FY24:

Raw NTA per share at 1H23 is $7.19c (being $3,628m divided by 504.67m shares).

After adding new shares equity of $902m less $30m CR costs less $134m USPP exit costs* gives post CR equity of $4,366m.

Divide this into the new number of shares of 685m gives post CR NTA of $6.37c before adding anything for NPAT for 2H23 (if any).

If RYM achieve underlying profit of $285m in FY23 that is EPS of $0.42c (based on underlying) and EPS of $0.47c in FY24 before any DRIP if the dividend is reinstated in the back half of FY24.

*USPP exit costs likely relate to unwinding the FX and interest rate swaps they entered into. Notice this from the last HY report:

"In April 2022, the Group entered into additional cross-currency interest rate swaps to hedge the foreign currency risk and interest rate risk in relation to the additional USPP notes issued. The CCIRS transform a series of known fixed interest rate USD cash flows to floating rate NZD cash flows."

Not so clever now is it?

[Waltzing]

 some interesting charts on scottish housing stock with policies on controlling rents. While not directly related to this stock it is interesting to see what happens to a market when there is large scale intervention in markets by government and the fact that policy does have implications for buy and sell signals.

https://www.telegraph.co.uk/property/buy-to-let/how-nicola-sturgeon-killed-scottish-buy-to-let-market/

[winner (n)]

AFR reports 'Mac, UBS mop up Ryman raising with $NZ138m shortfall auction'

That's some shortfall from insto's / wonder how keen mums and dads are on the cap raise?

Might be plenty of shares looking for a home after all this is over

[Basil]

Yeah, as expected underwriters got heaps.  Real lack of confidence in the current board and management.

What does the Ryman brand mean anymore if they're watering down their care services?

The rot started a few years back when they very quietly removed their 6 month buy back guarantee for those who passed on or otherwise chose to exit.

Recently reported the average price of a RYM ILU in Auckland is $1.4m.  Good luck selling them at that price in this market!

[winner (n)]

Book Value per share post cap raise is $6.40 ($7.19 prior) according to RTM presentation

So maybe 5 bucks a 'reasonable' share price - P/BV of .78

[Shareguy]

Thought this was interesting from Craig's latest

At the $5.00 offer price, RYM is priced at 0.79x NTA, a 69% discount to its five year average price/NTA of 2.6x. RYM's multiple has compressed the most of all its peers over the last five years, notwithstanding there has been severe multiple compression across the sector.
We expect that market focus will soon switch to which operator is next to raise capital. We think SUM and ARV are least likely given modest gearing and broad acre development books. OCA is more likely in our view given higher capex density sites, already high gearing, and negative FCF generation, and we note OCA's stated intent to dispose of assets at its November result (which has not yet been successful and we think will struggle to be so). Refer to our November note on OCA for further analysis

[winner (n)]

Sector been in a secular bear market for the last 7 years -- contracting P/B multiples over that period

One day thaose multiplies will impprove and we will experience a secular bull market - one dy I said but I don't think tomorrow is that day

[Hectorplains]

There were only two picks by Brokers for retirements stocks (Forbar - OCA, MSL - ARV) No love for Ryman then. 

Although, Alexander Prineas at Morningstar came out yesterday advising that, "We reduce our fair value estimate on Ryman Healthcare by 34% to NZD 10." Advising that, "Investors Should Subscribe to Ryman Healthcare's Rights Issue."  They're picking dividends to, "resume in fiscal 2024 at around NZD 0.13 per security, growing to NZD 0.27 by 2032." 

10 bucks?  Twice the value on the CR price, must be a bargain!  Mind you Morning Star is also another name for all three of: Lucifer, a potent strain of cannabis and a spiked medieval mace.  So their advice might better be seen as akin to selling your soul, blowing your mind or stoving your head in. Each to their own then.

[winner (n)]

RYM said they intend to be FCF positive in 2025 .... yeah right

The man from Forbar says '"Becoming FCF positive does not come without some painful decisions, including pausing/slowing six villages in Auckland and Christchurch, sharply pivoting away from high rise development and with it a relatively sharp slowdown in deliveries over FY24/FY25."

[KW]

Yeah, as expected underwriters got heaps.  Real lack of confidence in the current board and management.

What does the Ryman brand mean anymore if they're watering down their care services?

The rot started a few years back when they very quietly removed their 6 month buy back guarantee for those who passed on or otherwise chose to exit.

Recently reported the average price of a RYM ILU in Auckland is $1.4m.  Good luck selling them at that price in this market!

There's been a few more odd decisions - like wanting to build a high rise retirement village on Park Terrace in Christchurch, which is one of Chch's most expensive streets.  Popular with parents who send their kids to Christs, Rangi or St Margs across the road. Probably not so popular with elderly people, especially since there isn't much appetite in Christchurch to live in high rise dwellings after the earthquake.  I presume that is one of the projects that is going on hold.  Thats going to be an expensive land bank.

[BlackPeter]

Sector been in a secular bear market for the last 7 years -- contracting P/B multiples over that period

One day thaose multiplies will impprove and we will experience a secular bull market - one dy I said but I don't think tomorrow is that day

I think we can all agree on that. Tomorrow won't be that day.

The more interesting discussion would be - which day is it then?

I think the chances are good it will be aligned with the real estate market bottoming out.

So far in my view the odds for winter / spring 2023 look good:

Seasonal effects plus the impact of increased immigration might well do the trick to stabilise our real estate market.

Just hope that we don't immediately move into the next real estate bull market ...