RYM-Ryman

[Stockgathering]

How much lower though?  Does anyone have the number of aged care beds for both Ryman and Summerset?

31 Dec 2023 Ryman        4339 care beds versus 9187 retirement units total 13.526 beds/units. app 32.1% care beds.
31 March 2024 Summerset  1284 care beds versus 6087 retirement units total 7.371 beds/units. app 17.4% care beds.

Source for both Rym and Sum most recent annual reports.

[BlackPeter]

Looks like consumers over in Australia start to notice the benefits of the NZ Continuum of Care model - and Ryman is over there at the forefront of delivering.

https://businessdesk.co.nz/article/property/continuum-of-care-ryman-is-shaking-up-the-australian-market
(probably paywalled)

Maybe the pendulum is swinging back - good times ahead for retirement villages with continuum of care already integrated in their offering?

[KW]

Jenny Ruth un-paywalled her article

https://justthebusinessjennyruth.substack.com/p/ryman-ditches-the-sugar-coating

[Gerald]

From Cooper Investors;



During the quarter, we increased our investment in Ryman Healthcare (RYM) reflecting increased conviction in its reversionary VoF attributes.

We have visited New Zealand 3 times in the last 5 months as we sensed opportunity from both a top-down perspective (NZ in recession) and a bottom-up opportunity with RYM specifically.

RYM develops, owns and operates retirement villages in NZ and Victoria and has experienced its own 'Hubris to Humility' cycle with the company generating an exceptional 23% compounded total shareholder return for 20 years to February 2020. Since then, the shares have declined more than 75% as the post covid era exposed fragilities within the business model accentuated by an extremely challenging housing backdrop and economic environment in NZ.

The Brunswick Fund owned RYM for much of the last 20 years. We sold out in early 2024 as we lost confidence in management.

The company has since made significant changes with a substantial Board refresh and a highly competent Acting Executive Chair taking advantage of the crisis to push through a difficult change agenda. This included a broad management overhaul (CEO, CFO, Aus CEO and others), increased conservatism in company accounting (extended DMF tenure, reduction in capitalized interest, revenue recognition changes, and others), a progressive wind-down of their large in-house development team, a planned material reduction in corporate overheads which have grown much more rapidly than their resident base, and a more sensible and economic pricing structure (aligned with peers).

RYM's new CEO, Naomi James, who started in November has a strong track record and has been tasked with executing on the revised strategy and transformation.

These changes will take time to become apparent, however the value latency embedded in the business is now significant.

The unique nature of the business model in NZ in which a resident pays RYM the "right" to occupy the unit (and gets this quantum back minus the DMF upon exit) acts as a form of near free financing for retirement operators. It has many parallels with Regis Healthcare and its Refundable Accommodation Deposits (RADs) where you can grow your business with "other people's money". In effect, this means that if you can get an adequate Return on Asset, the return to shareholders can be exceptional.

In our view, the recent operational changes greatly increase the probability of RYM earning a decent return on their assets and its previous flywheel being re-started over the next few years.

Furthermore, the operating and industry trends are also now positive with:

the NZ housing market beginning to transact again after turnover fell to 30 year lows! (important given residents need to sell their house to move into a Ryman village)


house prices have stabilised after falling by the largest amount in 30 years:



and the supply side ingredients are moving into place with approvals for new retirement units having fallen ~50% in the past 18 months.


Similar to our investment into Regis Healthcare, the demand equation for retirement villages is likely to be exceptionally strong over the next decade with RYM's average age of entry into an independent villa being 83 years old and serviced apartments 87 years old. Most importantly the target market has recently begun inflecting rapidly.

[winner (n)]

Thanks Gerald for that

Lots thought RYM shareprice would be over 500 by now

Every time it looks like doing that down she goes and even seems to find 450 a tough nut to break through

Maybe it was that press report the other RYM probably need to do another cap raise has caused current

But that Cooper outfit and others are patient they should do OK

[Mos]

This oil tanker is going to take a very long time to turn around - historical 20% DMF and fixed weekly fees will cause pain for years - but could well be reflected in share price.

[Basil]

https://www.rymanhealthcare.co.nz/travel?utm_campaign=rynz_national&utm_source=nz_herald&utm_medium=rynz_hot_incentive_billboard_display_feb25
approx 1.5% effective discount off their high asking prices at certain villages only.  Call me "underwhelmed"
Sure, some will fall for this but don't forget that the real estate market has been slow and that includes Ryman's units so don't be afraid to haggle on the price despite what they say about their prices being "fixed".  If they tell you their prices are fixed, tell them they need to fix them more attractively.  Back in the day, I haggled my parents' unit down in the Peninsula club from $360K to $340K a 5.6% reduction, a much more meaningful percentage reduction than this travel promotion.  RYM and OCA for that matter have truckloads of stock on hand.  Haggle hard.

Agree 100% Mos.  Some people are still occupying units sold to them with the promise of fixed fees for life at $99 per week and all up until recently at 20% DMF  Its going to be a very, very long process to reduce the cashflow bleeding at a village operational level.

Until we start to see genuine upward momentum in the real estate market it's hard to see how this sector can perform strongly again.  Sideways for the entire sector with minimal yield is how I see it and a good sector to avoid.

[Mos]

Knowing how dogged you can be, they probably thought they had got off lightly at 5.6% discount Basil.

[KW]

https://www.rymanhealthcare.co.nz/travel?utm_campaign=rynz_national&utm_source=nz_herald&utm_medium=rynz_hot_incentive_billboard_display_feb25
approx 1.5% effective discount off their high asking prices at certain villages only.  Call me "underwhelmed"
Sure, some will fall for this but don't forget that the real estate market has been slow and that includes Ryman's units so don't be afraid to haggle on the price despite what they say about their prices being "fixed".  If they tell you their prices are fixed, tell them they need to fix them more attractively.  Back in the day, I haggled my parents' unit down in the Peninsula club from $360K to $340K a 5.6% reduction, a much more meaningful percentage reduction than this travel promotion.  RYM and OCA for that matter have truckloads of stock on hand.  Haggle hard.

They fix the price, then they offer a $20k cashback.  This obviously enables some jiggery pokery accounting - increase revenue amount, but assign the cashback to "marketing expenses" or something.

[KW]

Are we not amused?  Same press release, same excuses, same bat channel.  Newsflash.  Its not "the market" its the fact RYM is an operational ponzi scheme, and without the development "profits" hiding the "operations" losses, this thing is one step from bankruptcy.  In a world where house prices are not going up 7% a year for the next 10 years, and where "property revaluations" are not going to make them "statutory profitable" any more, they are in deep doodoo.

Ryman Healthcare Limited (Ryman) (NZX: RYM) has announced today an approximately $1 billion equity raising (Offer) comprising a $313 million underwritten institutional placement (Placement) and an approximately $688 million underwritten pro-rata accelerated non-renounceable entitlement offer (Entitlement Offer).
The purpose of the Offer is to enhance Ryman's financial position in the current market and provide the platform to achieve improved performance and value for shareholders as market conditions recover.
Ryman Chair Dean Hamilton says that the equity raise will reset the balance sheet, reducing pro-forma gearing from 37.3% to 23.1% and providing Ryman with the foundations to deliver further transformation initiatives, with a renewed focus on its operational reset.

The Placement and Entitlement Offer will be conducted at an offer price of $3.05 per share (Offer Price), representing a:
- 21.9% discount to theoretical ex-rights price (TERP) of $3.90;
- 29.2% discount to Ryman's closing price of $4.31 on the NZX on Friday, 21 February 2025

[Ferg]

No we are not amused!  Why?  Where in that press release do they say they are using the funds to pay down debt?  Instead they use flowery deflective language such as "enhance Ryman's financial position", "provide the platform to achieve improved performance", "the equity raise will reset the balance sheet" and "a renewed focus on its operational reset".  Nowhere do they say the funds are being used to repay debt.  Just man up and say it.  The bankers want out and shareholders need to cough up.

In addition, this is turning into a cluster.  The arrogance thinking they get a second bite at the CR cherry and suck funds out of the market that have better homes for investors.  I predict a significant shortfall in the uptake which will overhang the market for some time.  Uninvestable IMHO (.....for now).

[KW]

No we are not amused!  Why?  Where in that press release do they say they are using the funds to pay down debt?  Instead they use flowery deflective language such as "enhance Ryman's financial position", "provide the platform to achieve improved performance", "the equity raise will reset the balance sheet" and "a renewed focus on its operational reset".  Nowhere do they say the funds are being used to repay debt.  Just man up and say it.  The bankers want out and shareholders need to cough up.

 Ryman Chair Dean Hamilton says that the equity raise will reset the balance sheet, reducing pro-forma gearing from 37.3% to 23.1%

They have to do this because their debt levels are back at the same level as it was 2 years ago, before they did the first raise. They raised, paid off the pension fund loan, and then promptly reborrowed the money from somewhere else.  So rinse, and repeat. 

[Ferg]

Ryman Chair Dean Hamilton says that the equity raise will reset the balance sheet, reducing pro-forma gearing from 37.3% to 23.1%

I hear you but taking in funds and not using those funds to pay down debt also mathematically reduces the gearing ratio (but probably not to that extent).  I genuinely don't think that is what they will do with the funds.....as you say I also expect the CR funds will be used to pay down debt.  But I couldn't see in the press release where they actually say that.  To me it is shrinking away from the fact shareholders need to cough up so bankers can get their money out.  Shareholders are expected to bear more of the risk without any tangible rewards.  Irrespective of the view on that, my message remains they shouldn't disguise with flowery language the fact they are asking shareholders to cough up so they can pay down debts.  IMO they shouldn't sugar coat the press release and omit the reality.

[Ferg]

Quick edit: I stand corrected.  The the fact funds are being used to repay debt is easily found on page 10 of the 4th document released called the "investor presentation".  There they say:

Reduces 30 September 2024 pro-forma:
- Net interest-bearing debt from $2.56 billion to $1.59 billion

There we also see the ICR covenant is being waived.

[Basil]

The halcyon days for this sector are over forever, never to return.  Vast amounts of unit supply coming from all and sundry, both listed and many unlisted companies chasing too few buyers.  Market is absolutely saturated with stock.  The legacy of the disgraceful USPP fiasco continues as the original capital raise did nothing other than eliminate that gross stupidity.
Wonder what Simon Challis would make of the disgraceful way this company has been run since he had to step down with health problems ?