RYM-Ryman

[Basil]

Hmm - not quite sure I understand the problem?

If you offer customers the cruise experience of their life for the rest of their life, than what difference would it make to these customers whether their heirs get 80% back of their ORA or just 75%? While I am at this stage not sure, whether a retirement home will be at some stage the right place for us, I can assure you that the size of the DMF which would go out of our estate would be the least important decision criterium of all.

Important would be for us the location, the quality of the service, safety, good company, the ability to rely on the company, flexibility when some of the inevitabilities of life occur (like care), within reason the size of the ORA (it doesn't need to be cheap, but it should be sensible) and the predictability of all other costs (i.e. no surprises, though I would not mind some inflation indexing).

Whether they take at the end however 20, 25 or 30% DMF out of the ORA would be clearly the least significant decision criterium for us. I guess its one of these things, it might matter to some, but not to anybody of significance ;

I just hope Ryman does not make the mistake to cut their income in an area where it hardly matters to their client base.

Very good post BP and I agree 100% about the size of the DMF.
There are however some very powerful psychological factors at play when you offer retired folk a fixed weekly fee for life and locking in their biggest weekly cost for them for the rest of their life, is for many, a huge part of the attraction of the R.V. deal.  Wrap that up with the full continuum of care like RYM does and its no surprise that RYM's model of higher end villages with high prices, low DMF and low weekly fees fixed for life has worked well....up until it hasn't worked so well with a falling real estate market and many of their competitors offering more modestly priced units.

Where too from here with more sluggish sales for RYM, while SUM have been trucking along comparatively at a better rate is probably the question occupying the agenda of a lot of their board meetings and I imagine they are conducting studies and survey's which is most likely the reason for the delay in implementing changes

It could be a very smart move to offer a variety of alternative options which I understand is what they are looking at.  I understand anecdotally for instance that SUM have been experimenting with lower serviced apartment prices with higher, 40% DMF charges and like you suggested, for some people, they won't care about the higher DMF, it's all about the asking price, weekly fees and whether other aspects of village life are all good.

If I was on the board I would be suggesting the following options:
1. 25% DMF and weekly fees of $X adjusted each year in line with the CPI inflation (This works very well for SUM so there's no need to reinvent the wheel)
2. 25% DMF and fixed fees for life at $X + 30%  (30% gives a good buffer for average inflation over the average term of residency)
3. 35% DMF and fixed fees for life at $X

$X per week will vary from one village to another based on the facilities on offer and each village's unique operational costs.

[BlackPeter]

Very good post BP and I agree 100% about the size of the DMF.
There are however some very powerful psychological factors at play when you offer retired folk a fixed weekly fee for life and locking in their biggest weekly cost for them for the rest of their life, is for many, a huge part of the attraction of the R.V. deal.  Wrap that up with the full continuum of care like RYM does and its no surprise that RYM's model of higher end villages with high prices, low DMF and low weekly fees fixed for life has worked well....up until it hasn't worked so well with a falling real estate market and many of their competitors offering more modestly priced units.

Where too from here with more sluggish sales for RYM, while SUM have been trucking along comparatively at a better rate is probably the question occupying the agenda of a lot of their board meetings and I imagine they are conducting studies and survey's which is most likely the reason for the delay in implementing changes

It could be a very smart move to offer a variety of alternative options which I understand is what they are looking at.  I understand anecdotally for instance that SUM have been experimenting with lower serviced apartment prices with higher, 40% DMF charges and like you suggested, for some people, they won't care about the higher DMF, it's all about the asking price, weekly fees and whether other aspects of village life are all good.

If I was on the board I would be suggesting the following options:
1. 25% DMF and weekly fees of X adjusted each year in line with the CPI
2. 25% DMF and fixed fees for life at X + 30%
3. 30$ DMF and fixed fees for life at X

Well, as potential client I could live with your suggestion - and I like it as shareholder (of several RV's) as well, assuming they get the X right and run the numbers along a statistician ; Flexibility is always good!

Now we sorted this problem, retirement villages just need to adopt your suggestion and we can move on to more difficult questions to solve!

[Shareguy]

Very good post BP and I agree 100% about the size of the DMF.
There are however some very powerful psychological factors at play when you offer retired folk a fixed weekly fee for life and locking in their biggest weekly cost for them for the rest of their life, is for many, a huge part of the attraction of the R.V. deal.  Wrap that up with the full continuum of care like RYM does and its no surprise that RYM's model of higher end villages with high prices, low DMF and low weekly fees fixed for life has worked well....up until it hasn't worked so well with a falling real estate market and many of their competitors offering more modestly priced units.

Where too from here with more sluggish sales for RYM, while SUM have been trucking along comparatively at a better rate is probably the question occupying the agenda of a lot of their board meetings and I imagine they are conducting studies and survey's which is most likely the reason for the delay in implementing changes

It could be a very smart move to offer a variety of alternative options which I understand is what they are looking at.  I understand anecdotally for instance that SUM have been experimenting with lower serviced apartment prices with higher, 40% DMF charges and like you suggested, for some people, they won't care about the higher DMF, it's all about the asking price, weekly fees and whether other aspects of village life are all good.

If I was on the board I would be suggesting the following options:
1. 25% DMF and weekly fees of $X adjusted each year in line with the CPI inflation (This works very well for SUM so there's no need to reinvent the wheel)
2. 25% DMF and fixed fees for life at $X + 30%  (30% gives a good buffer for average inflation over the average term of residency)
3. 35% DMF and fixed fees for life at $X

$X per week will vary from one village to another based on the facilities on offer and each village's unique operational costs.

Agree and that is the beauty of Ryman. They are the market leader and just by matching Summersets DMF and increasing fees will give shareholders a decent increase in EPS. This is why it's so under valued in my opinion.

Forbar say will add 25 percent

Pricing: increasing DMF to in line with Summerset (SUM) and adjusting village fees will add ~+25% to earnings long term (4, 5, 6)
We expect RYM to increase DMF to 25% and add step through pricing of ~12.5% (in-line with SUM) without any material impact on its sales. This would increase steady state annuity earnings by +20% at maturity, around five to seven years away. Weekly village fees increases could add a further +10% to 15% to annuity earnings. Long term higher care fees increase our earnings further....

[Shareguy]

The upward trend continues and another good week for Ryman. This is not just retail investors spending their Arvida proceeds.

[BlackPeter]

The upward trend continues and another good week for Ryman. This is not just retail investors spending their Arvida proceeds.

Well, yes - already more than a month above MA 100 and SP reaching higher highs. MA 200 later this week?

And fundamentals not bad either, though some other retirement stocks (like OCA) still looking better priced (looking at NTA as well as forward PE).

But I guess its up to everybody's best guess whether they expect the imminent crash of our markets (in this case better burry the gold in the garden) or whether they expect interest rates to slowly drop from here.

Im an optimist and holding some RYM as well ;

[Basil]

Good discussion I had with Matt Peek investment manager at Kingfish at the ASM last week about RYM.
He's fully across all the issues I've articulated previously and not impressed at all.
Not selling any more after reducing several times in recent years but definitely not adding any either!
Sees SUM as MUCH better managed and the new Blue Chip in this sector and its notable that their holding in SUM is much higher than RYM.

RYM starting to look quite stretched here on earnings multiples in my opinion given their appalling track record in recent years.  It's going to take until the early 2030's to see fulsome effects from changes to their DMF rate and weekly fees.   In the meantime, SUM will keep growing underlying earnings and the trend of the last decade of SUM outperforming RYM will continue, in my view.   OCA could be a short-term value play, (long term I also think it will continue to underperform SUM), but it seems to have hit a wall at 80 cents so where too from here is anyone's guess?

I think the whole sector is a slow burn from here until we see genuine upward momentum in the real estate market.   I think that's going to be painfully slow to eventuate, so I have further reduced my position in OCA.

[Untamed]

deleted

[Shareguy]

$5.00 already. $6 here we come. Go you good thing.

[BlackPeter]

$5.00 already. $6 here we come. Go you good thing.

Well, yes - TA looks friendly (confirmed above MA200) and fundamentals are still cheap.

They can only gain with interest rates dropping.

I added some over the recent days.

[winner (n)]

Ryman co-founder Kevin Hickman passed away recently

Did wonders in his years with Ryman and he was an influential figure in the NZ racing industry

Great person who will missed by many

[Mos]

Ryman co-founder Kevin Hickman passed away recently

Did wonders in his years with Ryman and he was an influential figure in the NZ racing industry

Great person who will missed by many

Indeed Winner. Hickman and then Challis were the magic makers at Ryman.

[Basil]

Indeed Winner. Hickman and then Challis were the magic makers at Ryman.

Sadly, the magic is gone. 

[Shareguy]

This is positive. Improved disclosure. Separating care costs will make it a lot more transparent and easier to make a case
For the government to accept. And finally addressing pricing. Great move.

[Basil]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/RYM/437275/426288.pdf

A LOT of changes in there and a pretty downbeat outlook.
Externalizing future new village construction and undoing all the work Simon Challis did internalizing this and building efficiencies.  Interesting.  Choice in DMF and fixed fees for life or indexation a good move.  Something in there for everyone, bull or bear.

[KW]

I'd be pretty worried about this ..... Is there another cap raise coming to pay off the banks now?

"Given the continued uncertainty around market conditions in the near term,
we believe a prudent step is to seek amendments to some of our financial
covenant levels for upcoming testing periods. We are in positive discussions
with our lenders who remain very supportive of the business. We expect to
update the market on the outcome of this in the coming weeks."