RYM-Ryman

[Basil]

Still digesting the results but can clearly see why they needed a cap raise

Not surprised you're still digesting it, there's a heck of a lot in there and something for everyone
https://api.nzx.com/public/announcement/452468/attachment/444531/452468-444531.pdf

Matters that really jumped off the pages at me.
1. NTA down from $5.89 to only $4.18 as a result of a whopping $576m of impairments taken, (forecast to be around $300m at the time of the capital raise so investors were VERY badly mislead there).
2. Gearing despite approx $2 Billion raised in the last 2 years is still pretty high at 28.1% and the banks have an interest coverage ratio waiver until Sept 2026 so operationally the business is performing very poorly with circa $100m cash burn.
3. Massive reduction in the FY26 build rate, now forecast at just 266-330 units, down from 950.  (My comment, how is it after raising $2 Billion they can't continue their development program at historical rates ?...noting SUM are and that's without any capital raises).  Obviously there's a truck load of unsold stock, I haven't even looked at that yet.
4. More than a dozen accounting policy changes...gosh the new auditors have really put RYM's accounting system under the microscope and found it very badly wanting.
5. Sales units forecast for FY26 at 1100-1300, well down on last years ~ 1,500
Comment.
I get it that they have a very good brand and have made changes to DMF and weekly fees but with average ILU tenure being 9 years, that takes a very long time to flow through in any meaningful way.  Shareholders should start to see meaningfully better looking operating metrics by about 2030, is how I see it.
Prospects for future dividends look VERY bleak to me and when eventually reinstated will be at a VERY low level and unimputed.
Good place to retire too, a bad place to invest is how I see it.  I'm sorry, but I still think that all things considered, this deserves to trade at a ~50% discount to NTA of $4.18 = $2.09. 
Final thought...The cockroaches just keep coming at Ryman...and I for one am under no illusion that they have all come out of the woodwork yet.
Others will see it differently and that's fine.  Unless it goes under $2 and becomes a very deep value play, its not for me.

[Ferg]

1. NTA down from $5.89 to only $4.18 as a result of a whopping $576m of impairments taken, (forecast to be around $300m at the time of the capital raise so investors were VERY badly mislead there).

No disputes from me Basil....one thing I could see with the net asset reduction was there was a deferred tax asset of $259m last year that is nil this year.  Possibly part of the plethora of policy changes you mentioned.  DTA's are not real in my mind when looking at net assets.

Edit: "net assets" per my post  is an all in figure of which "net tangible assets" is a subset.  Writing off the deferred tax asset has zero impact on net tangible assets.

[Basil]

Anecdotally, they appear to have had quite a big reset in their unit asking prices.  Full page advertising in the Herald yesterday I noted for example 2 brm sunny 89 sq m apartment in their Lynfield Auckland village asking price of only $657K with 12 months free weekly fees and 1 brm Remuera apartment at their premier Edmund Hillary village 63 sq m, asking $795K.  Those prices seem pretty reasonable for those suburbs.
P.S. Not surprised Mr Market is not happy.  Down 5.4% to $2.28.  I think its highly likely that significant broker downgrades will come through tomorrow.  Only freeing up an estimated ~ $500m over the next 3-5 years is not very impressive with such a radically lower development program going forward. 
I think there is a chance of yet another capital raise in the future to "so called" reset the business.  28.1% gearing after 2 whopping capital raises totaling ~ $2 billion dollars is a really pathetic outcome and a very somber indictment on the board and management !

[BlackPeter]

No doubt - the financials don't look pretty, unless one likes the colour red. And yes, while they found a lot of skeletons, you never know ... though new CEO's tend to be rather good in digging - the worse the starting position, the better their contribution will look at the end.

Sort of wondering how Ryman would have performed without building the 950 new units last year (but obviously up keeping their remaining building substance)? It certainly would have ended the year with earnings instead of with a loss ...

Maybe this is the way to go for all retirement villages: maintain the building substance but drastically reduce the build rate. The market might well do the rest ...

[Basil]

RYM with all their previous creative accounting and practices would make a great case study at University accounting and investment analysis courses on how not to run a company.  Its breathtaking to think this once great company that could do no wrong under Simon Challis excellent leadership has fallen so far and so fast.  RYM was just over $15 at the start of this decade in January 2020 and now the prospect of it going under $2 despite raising a whopping ~ $2 Billion dollars is now very real.  How the mighty have fallen.  I still think Synlait is the poster child for all future University courses on the effects of gross ESG extremism though.  Many similarities exist between them though in terms of management arrogance and gross recklessness with their development, far ahead of market demand. 

Food for thought.  Where was the board and previous Auditors with all the prior highly creative practices for revenue recognition and asset valuations going on ?  Just as well this is not America as otherwise there would be a shareholders class action lawsuit as sure as night follows day.  Even recently, saying there was "up to" $300m in asset write-down's coming with the capital raise and its nearly double that....that would be actionable misrepresentation in many other markets around the world.   

[KW]

3. Massive reduction in the FY26 build rate, now forecast at just 266-330 units, down from 950.  (My comment, how is it after raising $2 Billion they can't continue their development program at historical rates ?...noting SUM are and that's without any capital raises).  Obviously there's a truck load of unsold stock, I haven't even looked at that yet.

5. Sales units forecast for FY26 at 1100-1300, well down on last years ~ 1,500

At some point the law of big numbers kick in, and the market demand is met through resales rather than new sales.  We may be at that point.

Eg.  Say there is yearly demand for 1300 new village residents.  In the old days, that may have been met by 100 resales, and 1200 new builds.  But over time, the number of second hand RV units increases, so now that demand may be met by 800 resales and 500 new builds.  Eventually the market will be saturated, and all new demand will be met by resales.  The development ponzi will be over. 

Now you can pull the demand lever - try increasing demand from 1300 to 1500 so you can build an extra 200 units, but the only way you can do that is by lowering the price and making it more affordable for people to be able to consider retirement village living as an option.  RYM and others had gotten so greedy in jacking up unit prices above the median house price in the area (instead of old 70% of the median price) that they had reduced the level of demand instead of increasing it.  People couldnt sell their existing houses and have enough money to buy a RV unit.  Falling house prices has exacerbated this problem.

So lower prices are a given.  Lower build rates are a given.  Greater competition between RV operators is a given.  The impact of everyone being able to build a granny flat on their section is also going to change the demand dynamic. 

In addition, RYM has substantially altered the nature of the product its selling.  Moving away from single storey, well spaced out villas that offered space, privacy and had a "house-like" feel - to offering mid-rise apartments and townhouses that are so close together you could probably hear the neighbours flushing their toilets, which have a much more "institutionalised" feel.  Do elderly people want to to move into something that feels more like a hospital, than a charming gated housing community?

At this point, start asking if a third cap raise is going to be required in two years time.  Quite possibly.

[snapiti]

well said KW, hard to put a value on the business, many head winds, no profit, no growth no divi for the foreseeable future, not investable for me

[KW]

Due to their greed, they have also substantially reduced the size of their target market.  This is really an own goal, and is one that is now impossible to undo.  They are stuck with it.  And I'm talking about how they have changed from being "retirement villages" to becoming "old folks homes".

The average age of entry now is mid to late 70's - its older than even the minimum age of 70.  Thats because nobody younger is moving there now due to (a) the imposition of a minimum age of 70 and (b) the old age feel of the places that has resulted from that.  Even my dad at 78 commented on it - "everyone is so old there".  My Aunt at 75 says she is one of the  youngest people in her village - she moved into one of the first villages built in Christchurch when she was 63 and her husband was 65.  That would be unheard of today.  My Dad's girlfriend who is now 80 also moved in when she was 78. 

So while the idea of selling units to really elderly people who wont live in it for very long (thus pocketing the DMF and turning them over quickly) probably seemed like a genius idea to those sitting in the boardroom - it also seriously reduces the size of the demand pool.  More than half of the boomer generation will have kicked the bucket long before they become old enough to consider moving in to a retirement village.  The average life expectancy of someone born in 1950 is around 72 years old - not 82 like today. 

[snapiti]

KW your last 2 posts sum up the RV sector extremely well, 1 point I want to reiterate is the boom in RV was because the ave house could be sold and you could move into a RV with some money left over, that pool of poeple has shrunk, now in most area's you cant afford a RV property if you sell an average house.
Also one things most kiwi's like is privacy in their home, the good old "I don't need to talk to or see my neighbor unless I want to and freedom to speak without being over heard when enjoying outdoor living. The design and spacing in todays retirement villages is quite different to the earlier models, very little is on offer that offers any privacy. 
Like you say the RV sector likes the age of entry high, for churn, but that combined with the cost factors and a distinct change in site design models (can of sardines comes to mind) is making the RV  not so attractive for many.
I do hear that the area's in a new RV that offer the smallest amount of privacy are the easiest to sell and sell for a premium, problem is these only make up 10% of stock
Obviously there in a bit of needs based for older poeple but there is no money to be made in the full care side of things as the Government funding to low.
Like RYM have done some land banking write downs for many others should come (if they are being honest to Shers but land bank values are often subjective so easily fudged on the books)

[snapiti]

KW your last 2 posts sum up the RV sector extremely well, 1 point I want to reiterate is the boom in RV was because the ave house could be sold and you could move into a RV with some money left over, that pool of poeple has shrunk, now in most area's you cant afford a RV property if you sell an average house.
Also one things most kiwi's like is privacy in their home and the ability to avoid a person/people, for many different reasons, and freedom to speak without being over heard when enjoying outdoor living. The design and spacing in todays retirement villages is quite different to the earlier models, very little is on offer that offers any privacy. 
Like you say the RV sector likes the age of entry high, for churn, but that combined with the cost factors and a distinct change in site design models (can of sardines comes to mind) is making the RV  not so attractive for many.
I do hear that the area's in a new RV that offer the smallest amount of privacy are the easiest to sell and sell for a premium, problem is these only make up 10% of stock
Obviously there in a bit of needs based for older poeple but there is no money to be made in the full care side of things as the Government funding to low.
Like RYM have done some land banking write downs for many others should come (if they are being honest to Shers but land bank values are often subjective so easily fudged on the books)

[winner (n)]

You might be interested how Ryman sales went relative to Oceania and Summerset over the last 12 months. Would have included Arvida and Metlife but they don't report sales numbers to bond holders.

Ryman pretty bad. Oceania and Summerset in line with overall property market. Oceania good on new sales but little growth in resales. Summerset good resales.

Seem Ryman losing share

Make what you will of these numbers

You cannot view this attachment.

[BlackPeter]

...

 The average life expectancy of someone born in 1950 is around 72 years old - not 82 like today.  [/font][/size][/color]

You might want to review above sentence. You are saying that the averge person born in 1950 is already dead (1850 + 72 = 2022) - which is inconsistent with the facts. The majority of people born in 1950 in any Western style country are still well alive and kicking ... and are now 75 or 76 years old ...

[Poet]

You might want to review above sentence. You are saying that the averge person born in 1950 is already dead (1850 + 72 = 2022) - which is inconsistent with the facts. The majority of people born in 1950 in any Western style country are still well alive and kicking ... and are now 75 or 76 years old ...

Interesting, the internet says that life expectancy for someone born in 1950 is (or maybe was) 72 years (maybe that was life expectancy when they were born in 1950 and didn't account for gains since then

The actual % of people (USA/UK) who were born in 1946 who were still alive in 2021 (75 years old) was 55.8%

And maybe the difference here is accounted for by the difference between the definition of median and average. So the average life expectancy could have been 72 years old but this could still be consistent with the majority still being alive at 75 years old. Infant mortality would account for this difference in the median and the average.


Go figure

[KW]

The actual % of people (USA/UK) who were born in 1946 who were still alive in 2021 (75 years old) was 55.8%

Which still illustrates my point - by the time they get old enough to want to move in to a RV (75-78 years old) half of them will be dead.  

[Basil]

At this point, start asking if a third cap raise is going to be required in two years time.  Quite possibly.

Interest cover ratio, (ICR) waiver only lasts until Sept 2026.  If banks don't see meaningful debt reduction over the course of the next year when RYM report in May 2026 and their profit and loss statement is not meaningfully improved from this years train wreck, you can expect them to question if the business model is capable of sustaining its current debt level and ask for another capital raise potentially as early as mid 2026.  The way RYM have dialed back their FY26 development plans to around 300 units from 950 gives a very good insight into how serious the situation is.  Same for OCA however in some key ways such as interest cover ratio, RYM is in worse shape than OCA and the latter is only trading at 41% of book.  41% x $4.18 RYM = $1.71 might be on the cards.

The problem even there, is how has the deep discount to NTA investment methodology worked out for OCA shareholders over the years and of course the answer is, not well at all.  The other issues you've alluded too in your post are a great synopsis of most of the challenges facing the company.