RYM-Ryman

[Left Field]

Results out........ crikey no final divi for holders!

https://www.nzx.com/announcements/411681


• Audited underlying profit of $301.9 million, up 18.4%, driven by strong resale margins and a growing contribution from the Australian business
• Audited reported (IFRS) profit of $257.8 million, down 62.8% due to lower revaluation gains of investment property and costs associated with the early USPP repayment
• Free cash outflow of $389.0 million, reflecting a period of significant investment
• Completion of $902.4 million equity raise in March 2023
• Net interest-bearing debt of $2.30 billion, down from $3.00 billion at September 2022
• Gearing of 33.1%, down from 45.3% at September 2022 and in line with medium-term target of 30-35%
• 1,519 booked sales of occupation rights remained steady (1,543 in FY22)
• Aged care occupancy improved to over 96% at March 2023 for mature villages
• No final dividend for FY23

Underlying profit is expected to be in the range of $310-$330 million for FY24.....

[winner (n)]

RYM result pretty solid

Great selling prices and margins

Result backs the recent renewed confidence in the sector as a whole

Share prices should continue their rises

Oceania next cab of rank

[Shareguy]

Great result against low expectations. Margins and sales saved the day. Underlying profit beats expectations.

A lot to like.

[Basil]

Underlying profit will have excluded the massive cost of their USPP fiasco and I think it shouldn't. Its simply window dressing to exclude such a vast expense incurred during the year and means their underlying profit is misleading. 

"Fixed", if you can call it that, by issuing truck loads of new shares diluting all future years EPS and almost certainly guaranteeing a decline in underlying eps in FY24. The legacy of that tremendously costly fiasco stays with the company forever and a day going forward and dilutes all future years earnings per share. 

Not sure how you can respect a board who allowed that to happen by letting debt blow out so badly and where is the remorse or contrition for this massive destruction of shareholder value ?  Not for me, especially noting the C Suite has very limited experience in the industry.

Market liked the result so obviously most are prepared to accept its onward and upward from here. 

[Shareguy]

Yes Basil don't remind me about that please. I agree but hopefully they have learnt a painful lesson, not to be repeated.

The company is also expecting to announce a boardroom refresh.

NTA increase since CR to $6.58. Australia contributing 25 percent of group underlying profit which I think is a standout. Still regarded by many as the premium of the four listed.

[Buzz]

Yes Basil don't remind me about that please. I agree but hopefully they have learnt a painful lesson, not to be repeated.

The company is also expecting to announce a boardroom refresh.

NTA increase since CR to $6.58. Australia contributing 25 percent of group underlying profit which I think is a standout. Still regarded by many as the premium of the four listed.

There's no way the forward customer demographic is going away anytime soon, or that any of the listed RV's are going out of business. It would be a shame to look back, say in 5-10 years time and rue having missed out on a discounted sector buy of a generation. Same for all the RV's, and they've started moving.

[Shareguy]

There's no way the forward customer demographic is going away anytime soon, or that any of the listed RV's are going out of business. It would be a shame to look back, say in 5-10 years time and rue having missed out on a discounted sector buy of a generation. Same for all the RV's, and they've started moving.

Agree and have a good holding of all 4.

[Basil]

Lot of water to flow under the bridge before anyone can reliably say the housing market correction is over.

[Shareguy]

Lot of water to flow under the bridge before anyone can reliably say the housing market correction is over.

Agreed. Our own treasury can't even get that right. I think though that when you look at

Immigration
Increased activity at open homes.
End in sight of interest rates increases.
Still very low unemployment.
50/50 chance of change in government
Inflation heading down.

That one could say that the signs are positive.

We also need to remember that for a number of people that the move into a village is a needs based decision. Also House prices not so much of a factor if you are fortunate to be mortgage free with investments as a lot of older people are. Ryman still regarded by many as best in class.

I agree with Buzz that in years to come we will look back at the beaten down prices as a huge missed opportunity.

[winner (n)]

Hey shareguy ....bit of a worry when both you and buzz are predicting the future.

I'm told no one can predict the future ....but then I suppose it's possible the power of two (powerful forces)actually can

[Basil]

Agreed. Our own treasury can't even get that right. I think though that when you look at

Immigration  Yes
Increased activity at open homes. Purely anecdotal, facts are April 2023 sales activity was the lowest in decades
End in sight of interest rates increases. Hopefully although Labour are playing fast and loose with debt and the RBNZ may have to go several more times with 25 bps increases, some economists talking about an OCR at 6% !
Still very low unemployment. Agreed but not sure what this has to do with RV companies ?
50/50 chance of change in government 50% chance of an unholy trinity wrecking major havoc on the economy in their third term and continuing to crush the sector even further with egregiously bad underfunding of care
Inflation heading down. Too early to call

That one could say that the signs are positive. Too early I reckon.

We also need to remember that for a number of people that the move into a village is a needs based decision. Also House prices not so much of a factor if you are fortunate to be mortgage free with investments as a lot of older people are. Ryman still regarded by many as best in class. I lot is lifestyle based.

I agree with Buzz that in years to come we will look back at the beaten down prices as a huge missed opportunity.

A few thoughts above.  After yesterday's bounce and obviously the market liked the result, we have RYM trading on just an 8% discount to NTA.
Mid point of forecast for FY24 $320m on expanded number of shares on issue now of 687.64m = eps of 46.5 cps.  606 / 46.5 = forward PE of 13.03.
Yield if they pay 30% of underlying profit is 46.5 x 0.3 = 13.95 / 606 = 2.3% taxable = 1.54% net after tax at 33%.  I.5% net yield is vastly lower than anyone can get on term deposit.  At the end of the day we all know there's no money in running the villages, so the real money is in the property, so this is a property company, (subject to intense regulatory review), that provides care and facilities for residents.

Is this really the once in a lifetime opportunity some tout?
How does this compare with a couple of the REITS out there, ARG and KPG that are not the subject of intense regulatory scrutiny ?
These REITS are trading at ~ 30% discount to current valuation and generating 6-6.3% net yields, worth 9 - 9.4% before tax to a 33% taxpayer.

I understand some people think Ryman et al are cheap, but the numbers don't stack up as far as I am concerned by comparison to REIT's.  I guess a lot depends on your investment timeframe.  I want to have maximum cash flow now when I can still enjoy it in my 60's.  Younger investors looking several decades out may find the growth potential in the long run with this sector attractive, I get that.  Horses for courses, each to their own, best wishes with it. 

[Stoploss]

Agreed. Our own treasury can't even get that right. I think though that when you look at

Immigration
Increased activity at open homes.
End in sight of interest rates increases.
Still very low unemployment.
50/50 chance of change in government
Inflation heading down.

That one could say that the signs are positive.

We also need to remember that for a number of people that the move into a village is a needs based decision. Also House prices not so much of a factor if you are fortunate to be mortgage free with investments as a lot of older people are. Ryman still regarded by many as best in class.

I agree with Buzz that in years to come we will look back at the beaten down prices as a huge missed opportunity.

End in sight of interest rate increases  ? depends what your vision is like . The 2 Year swap rate is up 50 basis points this week after Robbo's spend up. Sure to hit mortgage holders next week with more increases in retail lending rates. "Transitory" inflation is a little more entrenched than they thought as well. Not an easy course for the RBNZ to navigate.

[KW]

Agreed. Our own treasury can't even get that right. I think though that when you look at

Immigration
Increased activity at open homes.
End in sight of interest rates increases.
Still very low unemployment.
50/50 chance of change in government
Inflation heading down.

That one could say that the signs are positive.

Immigration is not happening, at least not on a net basis.  Sure, there was an inflow of 100,000 people in 2022 when the borders reopened, but that was to be expected after locking everyone out for 3 years.  Lots of visa holders returning, family members coming to stay, retirees returning home etc.  BUT if you look at the numbers for 2023 its now a net negative for the year, so reducing that 100k that arrived last year.  Why?  Because there are more people now leaving than arriving - and those leaving (going by all the real estate ads touting "vendor relocating overseas") are home sellers while those coming in on temporary work, student, or tourist visas are not home buyers.  A net 24,000 people left NZ in March, 34,000 left in April, and as of Thursday a net 21,000 people have left in May.  Just wait until the mainstream media catch hold of that information!

The good news is that unemployment isnt likely to rise much but that then means inflation won't subside either.  So the market is now pricing in an OCR of 6%.  It may  go higher when the rest of the world cottons on to the fact that immigration is negative.  If Labour get back in, I would expect that outflow of people to get even worse. All the elderly are stuck here, because they are dependent on the pension, but if there is nobody to buy their overpriced houses, how will they afford their retirement village?

[Basil]

Had a bit of free time today so had a look at their presentation.
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/RYM/411681/394660.pdf
Being somewhat charitable about it...It all depends how you want to interpret the data I suppose....
Underlying profit, if you accept Ryman's way of doing this is up nicely but IFRS profit including all factors, not the least of which is the $151m cost to exit the USPP fiasco is down a whopping 62% !

But we've discussed this fiasco at length already so all that's really left to do and say that hasn;t been said about this already is to actually quantify the likely legacy impact of this enormous destruction of shareholder value on future earnings per share.  Yes, RYM are forecasting underlying earnings growth of just on 6% in FY24, (well down on the good old days where Simon Challis aimed for 15% per annum and consistently achieved that), BUT, (sticking with RYM's methodology of underlying eps seeing as this seems to be their preferred yardstick), last year underlying eps were 58.5 cps, (page 15) based on the weighted average number of shares on issue.

At the midpoint of their FY24 forecast, $320m, its forecast to be just 46.5 cps on the vastly expanded number of shares on issue,  (See post #235 above for the number crunching on this).    WOW a whopping 20.5% reduction in underlying eps in FY24.

What a legacy the Muppets that signed off on that deal have burdened shareholders with forever and a day going forward !  Who has said sorry or lost their job for this ?  Yeap, you guessed it, no one !    No assurance given of any dividend in FY24, no new dividend policy announced and no final dividend for FY23. 
In other words, shareholders pay the price for management and directors' gross mismanagement and breach of their fiduciary duties to put shareholders best interest first at all times.    Effectively when it comes to future distributions they have said, "Trust us, we know what we are doing"  LOL

[Shareguy]

Immigration is not happening, at least not on a net basis.  Sure, there was an inflow of 100,000 people in 2022 when the borders reopened, but that was to be expected after locking everyone out for 3 years.  Lots of visa holders returning, family members coming to stay, retirees returning home etc.  BUT if you look at the numbers for 2023 its now a net negative for the year, so reducing that 100k that arrived last year.  Why?  Because there are more people now leaving than arriving - and those leaving (going by all the real estate ads touting "vendor relocating overseas") are home sellers while those coming in on temporary work, student, or tourist visas are not home buyers.  A net 24,000 people left NZ in March, 34,000 left in April, and as of Thursday a net 21,000 people have left in May.  Just wait until the mainstream media catch hold of that information!

The good news is that unemployment isnt likely to rise much but that then means inflation won't subside either.  So the market is now pricing in an OCR of 6%.  It may  go higher when the rest of the world cottons on to the fact that immigration is negative.  If Labour get back in, I would expect that outflow of people to get even worse. All the elderly are stuck here, because they are dependent on the pension, but if there is nobody to buy their overpriced houses, how will they afford their retirement village?

KW thanks for that. That's very interesting re the immigration loss. What site do you use for such up to date immigration figures?