RYM-Ryman

[Waltzing]

Under 5?  Oh BOY!!!

what does Sir B think of that!!!

boy that bets KIP!!!

[Basil]

I've had more interesting things to do today than take a deep dive into this but I noticed underlying eps down a whopping ~ 30% thanks to the boards "infinite wisdom" of the USPP fiasco.   So many new shares issued to fix that cataclysmic stuff-up so from an earnings per share point of view, (anyone remember how Simon Challis liked to keep things at a nice round 500 million shares forever and a day?), that appalling legacy will be with them forever.
Now being forced to eat humble pie with certain developments on hold and others cancelled and land for sale is frankly, quite humiliating.

I've said it before and it's never been more pertinent, when Simon Challis left, the magic left with him.
While this is a large company, in a sense, the reputation it carries with investors is in my opinion a pale shadow of what it once was.

Clear downtrend on the charts...frankly who knows where the bottom is, but I am certainly not interested in acquiring any.

[Waltzing]

Ok then... its hit an iceberg.. sprung a leak... pops some riverts and is down by the bow and its screws are turning partially out of the water......

sounds like a big ship in trouble...

gosh you would not have liked to bought up at the HIGH HIGHS of this one......

[Basil]

Interesting to see that Takapuna site is on hold.  Fair bit of site works there already.  I have always maintained they were dreaming with their indicative asking price of $5m for the better units there.  Some really serious questions in my mind now about management's competence.  I think there's been some wildly over optimistic assumptions made about what the market could bear in terms of unit asking prices with some of their pending developments.  Not that they will ever eat humble pie and admit that.

[Waltzing]

Wonder how the big development just south of ST Peter school in waikato south is going.. big changes to the road leading from the site to sr peters school....

big site... dont think they can afford to stop that one.... maybe leave some streets at the back unfinished who knows....

[Basil]

A few more thoughts. I see future dividends, if any, from FY26 are going to be based on free cash flow so investors can assume they will be very modest indeed, when they eventually return.  My view as a semi-retired investor heading into retirement in the next few years is any company that can't afford to pay me a decent dividend, is not fit for purpose for my portfolio.

I think the days of expecting rampant capital gains from housing and by extension, retirement companies are long gone.   At best, housing will muddle along for the foreseeable future at its already extremely unaffordable level.  Maybe housing keeps pace with inflation, (no increase in real terms) or perhaps not.  Interest rates will need to fall a VERY long way for capital gains to be back on the radar.  RBNZ's statement yesterday suggests you'll need to be very, very patient.

Could this go down to join the 50% off NTA club like ARV and OCA?  Frankly, with their reputation in tatters, I think that's where it belongs.  Clearly my view is the former reputation of this company which used to be held in high regard, is meaningless.

I remember the days many on the other channel scoffed at me when SUM was half the price of RYM when I suggested one day SUM's share price would exceed RYM.  Well, I have well and truly proved them wrong so I have two new predictions.
There will come a day in the future where SUM is double the share price of RYM and fifteen times the price of OCA.  Mark my words.
 

[Waltzing]

Does this mean that house prices are in a bubble for the next n years and then there may well be an adjustment ... IE private house prices burst at some point down the road,,,,

[Greekwatchdog]

For bars Review..

OUTPERFORM


Ryman Healthcare (RYM) reported a strong 1H24 result and delivered on all key markers on its path to re-establishing itself as a cash generative, sustainably growing business after three difficult years. Specifically: (1) cash generation from existing operations swung from a negative in 1H23 to +NZ$50m in 1H24; (2) care EBITDA margins are on track to double from ~6% in FY23 to ~12% in FY24, re-tracing almost half of the drop since pre-COVID (~19% in FY20); and (3) RYM reiterated its target to be free cash flow positive in FY25 and onward. It gave substantial additional disclosure to support the credibility of that target. None of the four major listed aged care operators have delivered a single year of positive free cash flow over the last decade. We increase our target price and earnings estimates, and reduce our net debt estimates. Retain OUTPERFORM with an increased target price of NZ$8.60.

What's changed?
Earnings: Annuity EBITDA increased +3%/+6%/+13% due to increased care fees offsetting higher costs
Target price: Increased to NZ$8.60 (from NZ$8.00) due to increased annuity EBITDA and lower net debt estimates.
Focus on cash finally arrives to the aged care sector — new disclosure points to a meaningfully more favourable cash recovery
It took a pandemic, a meaningful housing market downturn, and interest rates rising faster than ever before for the aged care sector in general (and RYM in particular) to switch focus to cash flow. RYM now acknowledges the importance and separately discloses: (1) cash flow from existing operations, with a focus on growing this; (2) cash flow from development, with a focus on fully recovering development capex (including capitalised interest and land acquisitions) from new sales.


RYM currently has 14 villages under construction, the vast majority (likely all) commenced before the current enhanced cash focus came into play. RYM provided new disclosure implying that these 14 villages will recover a cumulative ~90% of development capex, this is above our estimates of ~75%. RYM also stated that these 14 villages will provide a net positive development cash flow of >+NZ$1bn from September 2023 onwards, indicating ~NZ$1.5bn of WIP in these villages, NZ$300m above our estimates. In combination, the new disclosure suggests a more favourable medium-term outlook for cash flow from developments than we had forecast, some of which we have incorporated in our revised forecasts.


What a difference a year makes
A lot has changed for RYM over the past 12 months: (1) due to its capital raise its gearing has fallen from the highest gearing in the sector to the sector's lowest at ~33.5%; (2) it had the worst cash collection of new sales (~66% versus ~90% for its peers) a year ago, it now has the highest; (3) cash conversions of annuity earnings has increased to a clear sector leading position; and (4) after four year years of flat annuity EBITDA, RYM has delivered its second year of solid growth, +14% �������YoY on a 12 month rolling basis.

Forecast changes
We increase our annuity EBITDA estimates over the forecast horizon due to higher care fees more than offsetting increased costs, our DMF and resale estimates are little changed. We reduce our new sales estimates, reflecting both a reduced build rate over the medium term and the cautious tone of management on the current property market. We reduce our interest costs in the income statement materially; however, total interest costs (including capitalised interest) are down only -0%/-6%/-11% over FY24/FY25/FY26 as RYM continues to capitalise >70% of its interest, above prior expectations. RYM indicated it will suspend dividend payments for FY24/FY25 and review its policy again in FY26. We reduce our net debt estimates over the medium term and now forecast a slight falling of net debt from FY24, with the lack of dividends no longer offsetting improved positive free cash flow.

[Waltzing]

Could be good for a Bounce at some point then....

they never paid much of a DIV anyway it was a growth stock.

But SUM other stock lapped them...

Its starting to remind one of FBU in its UP and DOWNS...

[Basil]

https://justthebusinessjennyruth.substack.com/p/aiming-for-transparency-from-listed

Something nobody is talking about but I think is the root cause of the problem with slow selling units by all in this sector, is we are oversupplied.

[Shareguy]

I have been going through FB, Craig's and Jardens latest on Ryman. Craig's and FB are very similar and have overweight target prices well above the current price. Jarden are underperform which means sell in my book at $5.43.

Ari Dekker I feel has got a very good handle on this sector and anyone who thinks they are a bargain needs to take note in my opinion.

Despite a $900m cap raise debt is stil at elevated levels and like others has plenty of unsold stock. As Basil points out we are oversupplied.

Ari states that if market conditions are not supportive,if significant accomodation bond receipts factored into recycling are lower or if RYM otherwise falters on closing out the developments then it is still possible RYM might be forced to bring down debt, rather than control the future growth and funding mix timing. Yep another cap raise.

I agree the NTA looks attractive compared to the share price but as a analyst said "you can't eat NTA"

Craig's say some bad decisions on sites have been made. Four of RYM's nine problem sites are located in West Auckland. West Auckland is under-penetrated with retirement villages but this in part reflects demographics, with lower socio-economic and multi-ethnic communities who have not traditionally flocked to retirement village offerings.

compounding the above issues is the intensive nature of RYM's sites. of the nine sites RYM has cited as problematic, eight are intensive apartment-heavy sites. Typically retirees are moving from 3-4 bedroom freestanding houses on full sites, and most operators report have a clear initial preference to move in to a townhouse/villa. RYM's apartment product - often with no or limited water views or special selling features - has struggled to gain traction with these residents.

[Basil]

Summerset's broad acre low rise village on the waterfront at Hobsonville, former Monetrey Park site is a stunning north facing setting. I've been in one of their luxury waterfront homes there with its lovely north facing deck looking out over the water and when the tide is in and its sunny, its simply divine.

Those who cannot afford a waterfront unit are still well catered for with many parts of the site including the huge apartment blocks being north facing and having sea views and there's a walking pathway around the village capturing all the best views. Its a full feature village with everything you could want. In terms of West Auckland's retirement villages, frankly anything else is at a MUCH lower level. 

Other than its proximity to supermarkets I cannot for the life of me see what the attraction is with RYM's Lincoln road village in Henderson.  The one in Lynnfield is nicer but its sloping and south facing.

Its interesting that RYM plan to ditch underlying earnings, very interesting as they are the ones that pioneered that reporting methodology.  Them doing this in such a forceful way, (not even reporting this in future as a comparison tool for historical comparative purposes) suggests to me an element of concealment and is somewhat contemptuous to Simon Challis that really pioneered this reporting methodology.  What's interesting is that they plan to do this at the very same time as they are about to dramatically wind back their development book in the years ahead.  Interesting timing.  Is this a coincidence or is it that measuring profit this way in FY25 and beyond will make their outlook look really gloomy?  Ditching a reporting methodology that's been in widespread use for more than two decades in this sector adds to my distrust of the present board and management of RYM.

[winner (n)]

Slide from half year preso..

Does this read as they don't recover the cash spent on developments when they sell them .......and that there is a $430m deficit?

You cannot view this attachment.

[Shareguy]

Well for my own curiosity I enquired about the new Takapuna village and can confirm that demand is so high I can't even go on the waitlist. Was told they have over 600 registered buyers so registration is closed. Prices have not been set as two years away from completion. Price indication is starting at $2m plus up to maybe $5m or higher for the top floor apartments. Will have own movie theatre, Restaurant  and Bar. Plus Hair and Beauty centre. 

For them to not even allow me to go on a waitlist shows that they are very confident in selling this out. The level of demand is what interests me.

The lovely nurture co-ordinator said

If  you are wanting your parents to join our friends of the village mailing list you will need to email me their full names, DOB, address and phone numbers.  This mailing list will keep them updated regarding the progress of the village, as advised we currently aren't taking any further waitlist enquiries but as I mentioned I am happy to add a note to their file that they are interested in being contacted if a vacancy  on the waitlist becomes available.
 

So after telling me that the demand was so high that there was no point on going on the waiting list, its now being put on hold.  Gosh what a change in fortunes.  I can now see why some of the directors have been selling.

Are we heading to $5 again.....surely not.

[Basil]

So after telling me that the demand was so high that there was no point on going on the waiting list, its now being put on hold.  Gosh what a change in fortunes.  I can now see why some of the directors have been selling.
Are we heading to $5 again.....surely not.

I'm sure you'll recall I was most surprised with their indicative asking prices and literally scoffed at them.  The way they treated you gives a valuable insight into how the sales processes have become disconnected from the current market reality.  They used to be able to command a huge premium price when they were the dominant market player.  Their approach towards you and with their pricing showed a level of arrogance that's extremely unhelpful to them in the current market.  Old ways of doing things don't work so well now.  There are many other alternatives now and not all of them listed by any means. For instance, Hoppers have a very nice retirement village at One Tree Point in Northland with canal from homes where a retiree could berth their boat.   A major point of difference being you only need to be 60 to move in.  I put up a lengthy post in the OCA thread on the weekend that might be worth your while reading if you haven;t already.  In a nutshell RYM's gains were all predicated off a former position of market dominance and built at a time when real estate was booming.  The real estate index is up 2.6 times more than the inflation rate since Rym listed in 1999.  What if we get a decade or more where house prices underperform inflation ?  I think it's absolutely disgraceful that this company has allowed itself to get into a position where it cannot even pay a single crumb in the way of a dividend to shareholders despite being listed for 24 years and won't be able to for years.
Simon Challis must be deeply ashamed of the board and current management.    This was $8.50 ten years ago mate.  This former market darling sure has fallen a very, very long way.