RYM-Ryman

[Shareguy]

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. 

Your points are valid. It comes down to different views. I personally don't compare RVs to REITS. REITS win hands down from a dividend comparison. I look at RVs as part of a balanced portfolio that over time will hopefully appreciate . And agree a lot depends on investment timeframes. As you no I have been buying Arv, Sum annd Rym over the last few months and certainly at this stage I'm glad I did as they are showing good gains.


Yes we have the com com and regulatory review coming up which has the potential to do some serious damage. The government needs the private sector to provide care so in my view it will be just like all the other reviews with limited downside for the big players.

[KW]

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

Customs used to publish a daily arrivals and departures update, but now they do monthly. But Stats NZ seems to have access to the numbers still so they publish it in their "Covid Data Portal".  All the rosy immigration news is from what happened last year, plus a big influx in February as all the RSE workers arrived for the apple/kiwifruit/grape harvests.  But since March its been one way traffic - something the Govt doesnt want to face up to.  Now they just have to maintain the illusion and media collusion until Oct ....

In terms of general traffic, we are also still well down from pre-Covid levels.  In January 2020 there were 740k arrivals, 700k departures.  Compared to 504k arrivals and 495k departures in January 2023. 

[Fiordland Moose]

Given the importance of net migration and the divergence in what's being reported vs. what you are seeing KW I'd be interested in your perspectives on the below.

https://www.stats.govt.nz/information-releases/international-migration-march-2023/

First download file: International Migration: March 2023 (excel)
Go to table 5 - monthly net migration (IE not rolling 12 month).

January 2023: +7,672
February 2023: +12,609
March 2023: +12,108

These are very strong numbers and annualised (as they are seasonally adjusted) implies a 130k pa run rate for the first quarter.  and yes, I'm aware of how NPLT migration figures get updated continuously for ~16 months until they are finalised.

Was curious where the trends you are seeing for post March are coming from (is it the Stat NZ Covid Data Portal - Daily Border Crossing Arrivals? Seems to be the only series for data beyond March) https://www.stats.govt.nz/experimental/covid-19-data-portal
Selected Economic > Travel > Daily Border Crossing Arrivals

If that's what you are referring to, I can see arrivals peaking in January and falling steadily & accelerating to fall into May. But that appears to be the normal seasonal pattern. Looking at all the pre covid data, they all peaked in January, fell thereafter with the fall accelerating into May.

The prof economists are likewise calling it a migration boom - ANZ below - hit control F to search for migration.
https://www.anz.co.nz/content/dam/anzconz/documents/economics-and-market-research/2023/ANZ-RBNZ-MPS-Preview-20230517.pdf

I'm just struggling to reconcile the stat nz migration data and economist commentary to your analysis.

Net migration a big driver to the economy and important to a number of listed companies so was keen to better understand.

[KW]

I'm just struggling to reconcile the stat nz migration data and economist commentary to your analysis.

Unless people are teleporting into the country, the number of extra people in NZ at any one time is a function of those who arrived minus those who left.  Tourists and Business Travellers cancel themselves out as they quickly return to/from whence they came/left.  So rolling over time provides the trend.  Covid border closures enabled a fixed baseline from which to measure, so its easy to read the numbers now. 
2020 36,829 people left
2021 29,592 people left
2022 101,212 people arrived
2023 to date 11,529 people have left

Stats NZ uses a "model" to predict current immigration numbers, which is probably about as accurate as the Covid modelling was.  (Still waiting for those 80,000 Covid deaths in NZ).  While inwards immigration is easy to predict (just count visas issued) where they might be underestimating is the number of permanent departures.  Estimates become Actuals only after 16 months (which is too long, 9 months would be better which is when a tourist visa expires).

And of those that have arrived, students/working holidaymakers/RSE workers/grandma on a 9 month tourist visa are only here temporarily. 

And as corroborrating evidence, we only need to look at the housing rental market.  If we had a migration boom, then NZ would look like Australia, with sky rocketing rents, vacancy rates sub 1%, and queues around the block for rental inspections.  But we don't. In fact, the NZ rental market would be even tighter than the Australian one as we don't allow temporary residents to buy houses while Australia does (which is why their house prices are going up again), so everyone has to rent.    So the rental market says I'm right, Stats NZ is wrong :-)

[winner (n)]

I note Ryman have $711m in Trade Receivables

These are principally amounts due for occupancy advances ......and the monthly fees

Seems a huge number of sale contracts (recorded as a sale) but people not paid or moved in yet.

Think Mr Boscowen trying to come with grips with this.

[KW]

Seems a huge number of sale contracts (recorded as a sale) but people not paid or moved in yet.

That would match what I saw at Summerset - there were quite a few empty places but only one for sale.  You only need to pay a $3k deposit (or $9500 if at Ryman) to secure your unit, then you have 6 months to sell your house and move in.  My Dad is currently in this position. 

[Basil]

Our portfolio of RV units and aged care
beds increased by 821 in FY23
Included in this movement are:
• 519 fully completed units and beds
• 302 units and beds that have been
included on a 'near-complete' basis,
as detailed in Appendix 23.
This was below previous guidance of
~1,000 due to severe weather events in
Auckland and the Hawke's Bay (in
particular impacting construction at
James Wattie

Found the above from page 8 of the presentation, pretty interesting.  Surely, they are not including development margins as profits without a unit actually being complete ?
The way I read this they were to "deliver", we all know that's a euphemistic term that doesn't mean deliver to a resident, simply construct as a complete unit ready to sell 1000 units.  Are they trying to say we nearly made our target of 1000 units ?  Surely they only really completed 519 ?

So they count a unit as sold when someone gives them $9,500 deposit, (anyone can walk away from that without untoward pain if they can't get what they want for their home),...and they count something as built when its not actually fully complete ?.  They also exclude over $150m in early repayment costs from underlying profit.    It seems a strange world we live in these days.

I fondly remember the days a sale was a sale when you were paid the whole amount, a unit was built when you got a code of compliance certificate from the council, and you took whatever costs incurred during the year like a man on the chin in the profit and loss statement.  Those were the days...

[Crackity]

Found the above from page 8 of the presentation, pretty interesting.  Surely, they are not including development margins as profits without a unit actually being complete ?
The way I read this they were to "deliver", we all know that's a euphemistic term that doesn't mean deliver to a resident, simply construct as a complete unit ready to sell 1000 units.  Are they trying to say we nearly made our target of 1000 units ?  Surely they only really completed 519 ?

So they count a unit as sold when someone gives them $9,500 deposit, (anyone can walk away from that without untoward pain if they can't get what they want for their home),...and they count something as built when its not actually fully complete ?.  They also exclude over $150m in early repayment costs from underlying profit.    It seems a strange world we live in these days.

I fondly remember the days a sale was a sale when you were paid the whole amount, a unit was built when you got a code of compliance certificate from the council, and you took whatever costs incurred during the year like a man on the chin in the profit and loss statement.  Those were the days...

I quite like this revenue recognition criteria from another NZX listed company - it's pretty conservative....




Revenue represents amounts derived from land and property sales, and is recognised when the customer obtains control of the property and is able to direct and obtain the benefits from the property. The customer gains control of the property when the Company receives full and final consideration for the property and the Company transfers over the Certificate of Title.
Rental income from investment properties under operating leases is recognised on a straight-line basis over the term of the lease to the extent that future rental increases are known with certainty.
The Group grants deferred settlement terms of up to 12 months on certain sections. The total value of these deferred settlements amounted to $17 million (2021: $14 million). In some instances the acquirers are permitted access to the residential sections for building activities prior to settlement. However, the acquirer does not obtain substantially all of the remaining benefits of the asset until final settlement of the land and the title has passed.

[Buzz]

Found the above from page 8 of the presentation, pretty interesting.  Surely, they are not including development margins as profits without a unit actually being complete ?
The way I read this they were to "deliver", we all know that's a euphemistic term that doesn't mean deliver to a resident, simply construct as a complete unit ready to sell 1000 units.  Are they trying to say we nearly made our target of 1000 units ?  Surely they only really completed 519 ?

So they count a unit as sold when someone gives them $9,500 deposit, (anyone can walk away from that without untoward pain if they can't get what they want for their home),...and they count something as built when its not actually fully complete ?.  They also exclude over $150m in early repayment costs from underlying profit.    It seems a strange world we live in these days.

I fondly remember the days a sale was a sale when you were paid the whole amount, a unit was built when you got a code of compliance certificate from the council, and you took whatever costs incurred during the year like a man on the chin in the profit and loss statement.  Those were the days...

I recall you've said this before, maybe a few times, on another site. And it's true. Like the one time they decided to fudge the delivery numbers, they're locked in forever fudging the numbers or having to admit deliveries was HALF projections. It's almost as though they think no one would notice.

This company has had a severe reckoning recently, and the increased scrutiny that comes from that, I think it's about time they got back to full honest disclosure and just got on with doing the business as the largest listed RV in the country. Bite the bullet, tell the truth.

[Shareguy]

FB latest today

Ryman Healthcare (RYM) reported a strong FY23 result, ahead of our and consensus expectations with annuity EBITDA up +27% versus FY22, driven by good cost control and continued high resale gains. For the first time since the onset of COVID-19, RYM surprised to the downside with regards to both costs and debt. It was also the first time since 2H20 that RYM has experienced six months of clear air; free from lockdowns and major COVID outbreaks. We think the two are related. It has been a difficult three operational years for aged care as well as property development; we believe we are seeing the first signs of normalisation. The result was far from perfect. New sales were even weaker than we had anticipated and deliveries were hampered by the poor weather in the North Island of NZ. Looking ahead, we are encouraged by; (1) RYM's strong progress in Australia, (2) its focus on becoming free cash flow positive by FY25, and (3) the continued land bank mix shift towards lower density villages. We reiterate our OUTPERFORM rating with a 12 month target price of NZ$8.20.

[Shareguy]

Craigs today

Target price $7.78 (+5%)
Our DCF-driven target price increases +5% to $7.78 in part driven by an upgrade to our medium term development margin estimates to 25% (from 22.5%), as Ryman's track record in Australia improves. We have also made various minor tweaks to our modelling following improved disclosure, including of RYM's RADs in NZ and Australia. Partly offsetting the above is we now also bake in a -5% cumulative nominal decline in RYM unit prices over FY24/FY25 (vs flat prior), flat in FY26 (no change), before growth of 3% long run (no change). Other key WACC assumptions remain unchanged (WACC 9.1%, TGR 2%).
Peer multiple analysis
RYM is priced at 0.9x NTA, a 63% discount to its five year average price/NTA of 2.5x. RYM's multiple has compressed the most of all its peers over the last five years. While we do not expect RYM to again attain the lofty peaks of over 2x NTA seen pre-raise, we do see it as conceivable the business will again trade on c.1.5x NTA depending on RYM's success in pivoting to a less intensive build model and the outlook for house price growth.

[KW]

So they count a unit as sold when someone gives them $9,500 deposit, (anyone can walk away from that without untoward pain if they can't get what they want for their home),...and they count something as built when its not actually fully complete ?.  They also exclude over $150m in early repayment costs from underlying profit.    It seems a strange world we live in these days.

Again, that was my experience with Ryman. They were selling a block of units that we couldnt even walk through or around, as they were still being constructed and the area was blocked off.  2 of the 7 were already sold.  We were expected to buy after walking through their show home in the village.  I suppose its similar to other developers who sell "off the plan" and count it as a sale. 

[KW]

Haven't got much more time for RYM at this stage but found this little snippet from page 5 of the presentation quite interesting
One of the foundation principles upon which RYM built their empire and reputation was fixed fees for life.
Its still in their marketing material...so that little snippet shocked me to be quite frank about it.
Talk about a complete about face.  Not just annual reviews of weekly fee pricing capped at the rate of increase in superannuation like SUM do, quarterly reviews of the weekly fee for new residents with no price cap, surely not 
Do they really imagine they can undo a foundational principle this company was built on and it won't affect their sales rate or reputation?
It's perfectly clear to me the C Suite are terribly inexperienced if they think they can maintain their super premium pricing without fixed weekly fees for life.

I imagine that is reviewing the weekly fee charged to incoming residents.  Its still fixed for life, but a new resident will pay more than one that moved in 3 months ago. 

[Basil]

I imagine that is reviewing the weekly fee charged to incoming residents.  Its still fixed for life, but a new resident will pay more than one that moved in 3 months ago.

Yeah I think you are right and worked that out by the time I made that post which is why I subsequently deleted it.  Was a bit shocked there for a few minutes lol

[KW]

Yeah I think you are right and worked that out by the time I made that post which is why I subsequently deleted it.  Was a bit shocked there for a few minutes lol

I wonder if Summerset with its CPI adjusted fee also sets incoming residents fees higher?  Fixed fees are unfair to incoming residents, as they will then be subsidising the provision of village facilities by paying higher weekly fees to compensate for all those residents still on low weekly fees.  In fairness, everyone should pay the same.