RYM-Ryman

[KW]

Fair enough - though, it is very easy to talk oneself into a doom mood just by looking at a small number of outrageous examples.

Does anybody know the average ratio between land value and improvements value in NZ? Until I get that I use our property as example for the average.

So - 45% of the total is land value ... and the dollar value for our land went up by factor 2.25 since the GV reassessment in 2012 (i.e. 9 years before the last one).

How much of that do you think will the value of the land go down again? Back a decade ago is unlikely - so lets assume it might lose half of the gains of the last decade, shall we?

You assume the GV splits are accurate, when most of them are not.  For instance, the 2019 land value on mine is $365k - I cant think of anywhere (outside of the ghetto areas) where you could pick up a section now for that price.  An empty section down the road sold in 2020 for $1M.  Its now got 7 townhouses on it.   How likely is it that land prices will drop  from $1M back to $400k?  I guess we shall find out.  A 5.5% OCR for at least a year will help LOL

[Basil]

Former blue chip RYM absolutely smashed in the last 2 days.
The market is right to be worried about their high debt level.
Past former glory as a blue chip means nothing if your balance sheet gets under pressure.
A lot of old money is still in RYM from its former glory days when early investors got rich from their first mover advantage much earlier this century.
Where's the bottom ?  $5 ?

[Crackity]

Market comment in the esteemed Herald today only tells part of the story

Herald -

Smith said interest rates heading higher than originally thought will have consequences on businesses with a lot of debt. Ryman's $3 billion debt is not far away from its market capitalisation of $3.17B

Accounts to 30 Sept 2022

MC correct - 3.17B
Int bearing loans and borrowings - 3.02B
Occupancy advances ( also debt....) - 4.6B

Hmmmm.....

[Basil]

Friend just pointed out this has now gone below the $6.65 March 2020 Covid plunge low and you have to go back nearly a full decade to when the share price was last at this level.  (March 2013)
With their very high gearing they look just as vulnerable as anything else in this sector so we could easily see $5 which is a 30% discount to NTA and potentially even lower if this gets really ugly.
Technically all chart supports look broken so who knows where the bottom is but the blue chip status Ryman held once upon a day is well and truly in the trash can now.

You're on to it Crackity 👍 Scary gearing when you combine those two forms of debt.  Market is starting to wake up to that.

[kiwi2007]

From Chris Lee's newsletter:

"...Currently I often hear market noise that Ryman has too much debt. That would be true if it had trouble selling its licences to occupy. It would then be asset-rich, cash-poor, and have cashflow problems.

It does not have trouble selling.

It is in my view a cash machine, one that chooses to keep growing, based on strong evidence of ongoing demand...."

[lorraina]

A legal Ponzi scheme....lol

[BlackPeter]

I think the definition of a Ponzi schema is that early investors receive dividends not out of earnings, but from later investments. The consequence of that is that the capital of the schema gets eroded and late investors lose out.

I don't see this with Ryman nor with any other of the big retirement operators ... they just go through the normal property cycle and investors need to learn that no cycle has only up-phases.

Obviously - anybody who bought in a the recent peak might need some patience before they can recover their capital in full.

Good thing about the current down phase is ... experienced investors know that after any down phase starts another up phase. Time to get positioned.

[Auto Rower]

Friend just pointed out this has now gone below the $6.65 March 2020 Covid plunge low and you have to go back nearly a full decade to when the share price was last at this level.  (March 2013)
With their very high gearing they look just as vulnerable as anything else in this sector so we could easily see $5 which is a 30% discount to NTA and potentially even lower if this gets really ugly.
Technically all chart supports look broken so who knows where the bottom is but the blue chip status Ryman held once upon a day is well and truly in the trash can now.

You're on to it Crackity 👍 Scary gearing when you combine those two forms of debt.  Market is starting to wake up to that.

Is today the day when it goes in to the 5 $ Bracket stuck on six bucks at the moment

[snapiti]

Is today the day when it goes in to the 5 $ Bracket stuck on six bucks at the moment

I would think there is much more pain to come given the head winds for the realestate market.
A lot of poeple focus too much on RYM being in the "retirement sector" and not the reality of them being housing developers who thrive when the goings good and go close to falling over when times go bad.......make no mistake times are getting bad for real estate

[Basil]

I really don't see what the catalyst is that's going to end the funk this sector is in ?  I think they're all going to get beaten up a lot more with the Reserve Bank interest rate sledgehammer.  All you are going to read about all next year is endless stories in the media about how grueling the housing sector has become with really high interest rates for vendor's, developers and buyers struggling to get approved for finance with bank's stress testing people at ~ 9% and with bank stress testing likely headed even higher in 2023, hardly anyone is qualifying for mortgage finance.
It's too hard swimming against a strong outgoing tide.

[Basil]

Market comment in the esteemed Herald today only tells part of the story

Herald -

Smith said interest rates heading higher than originally thought will have consequences on businesses with a lot of debt. Ryman's $3 billion debt is not far away from its market capitalisation of $3.17B

Accounts to 30 Sept 2022

MC correct - 3.17B
Int bearing loans and borrowings - 3.02B
Occupancy advances ( also debt....) - 4.6B
Hmmmm.....

Just want to highlight this excellent post of Crackity again becuase this is something we should be thinking about very carefully.
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/RYM/402597/383713.pdf
Page 2 - Total assets $12.03 Billion
Net Assets $3.63 Billion.
Figures as at 30 September 2022.

This week well respected fund manager Harbour Asset management claimed that to restore a normal level of housing affordability the housing market needs to fall another 30%. on top of falls this year already.  I posted a link yesterday.
Just got a PM from someone on here wondering if RYM is a buy, won't name them.
Another comment on the other forum from Balance caught my eye.  "Leverage is wonderful on the way up - nasty on the way down".
This got me pondering, how nasty could nasty really be ?

What if the market does fall another 30% from here over say the next year or two ?  Well a 30% reduction on assets of $12.03 Billion is $3.61 Billion and would wipe out their $3.6 Billion in net assets

Just as well a lot of those liabilities are not repayable to outgoing residents until new ones move in as otherwise, they'd be insolvent. 

No wonder the rumour mill is running hot with talk of a massive capital raise which if it happens will not be seeing any of this hounds cash.

The other thing that Mrs B and I discussed this morning is that the real estate market (apart from 2022) has had a tremendous run for decades.
With housing being so chronically unaffordable now relative to incomes and people's ability to afford mortgages even after this year's reductions, who's to say we might not see real estate fall not only in 2023 but also 2024 and maybe even 2025 as well ?  Maybe we do get another 30% fall from here spread out over two or three years ?  Interesting times for all those in this industry but especially those with higher gearing, (RYM and OCA)

I see what Balance means when he says leverage can be nasty on the way down. 

[winner (n)]

Rym a bit of worry eh Basil

What's the same sum do for Oceania ......they'd be pretty stretched too wouldnt they if you used your 30% fall stil come.

And debt levels for both will be higher than September ...always keeps on growing eh lol

[Basil]

OCA be hurt very badly too.  What I find intriguing is that SUM and ARV have about the same equal lowest gearing and they're both the ones openly talking about potentially dialing back the future build rate if they need to whereas RYM and OCA with the highest gearing are not talking about that prospect at all.  Go figure ?

[winner (n)]

Pretty sobering numbers there Basil but what's terrifying is that over the years you've been spot on when it's come to the Ryman share price ...even saying it was overvalued at $11 in 2017 when it was heading up to over $17 in early 2020.

I hope you are wrong this time because if RYM share price keeps trending down so will the others in the sector ...not one of them is immune.

Jeez RYM at $3 SUM $5 and OCA at 60 cents ..that'll be painful.

[winner (n)]

Question - what does Craig's do with the 5.7 million shares they got from underwriting the dividend

Cost them $6.14 and a bit