RYM-Ryman

[Greekwatchdog]

At least they caught it before it got really out of hand. Article paywalled

https://www.nzherald.co.nz/property/ryman-healthcare-one-of-many-companies-snagged-by-237m-holiday-pay-problem/premium/QGMNER6KSVAAHGRALAVBM3ZBK4/

[Basil]

Well we got to $3 briefly and finished the year well up from its lows.

The investor day on Feb 3 I'm picking will be positive and will hopefully push it over the $3.

Craigs reckons they will announce a land bank reduction from 4421 units to 2965 which is huge (33%). Future focus to be on completing villages and less capital intensive greenfield sites.

Quite extraordinary that after two ~ $1 Billion capital raises they have dialed back their future development plans so radically.  Meanwhile over at Summerset who have always followed the development pathway RYM are now finally pursuing, their build rate remains unabated despite no capital raisings.  Chalk and cheese those two companies.  Discount to NTA is a red herring in my opinion. 
Can't even get holiday pay calculations right and have to use external consultants.  My goodness... 

[Shareguy]

Latest update is not bad news and will improve confidence that the worst is behind them. Market should like it.

https://www.nzx.com/announcements/465910

[winner (n)]

Latest update is not bad news and will improve confidence that the worst is behind them. Market should like it.

https://www.nzx.com/announcements/465910

Update seems to have down like a lead balloon eh Guy

Thinkmit says that whatever they intend doing it's going to be a long hard struggle to show aby tangible improvement in performance   

[Shareguy]

I don't think so Winner, just a down day on the market. There was no real bad news which is the second release without bad surprises.  We need the housing market to start to improve, but I am confident that patience will be rewarded.

Summary from Craigs

Improve recurring cashflows by $150m by FY29, at the top end of its prior $100-150m target range. RYM aims to double (1) EBITDA per care bed from $15k to $25-30k by FY29, and improve yield on Retirement NTA to 5% over the next decade, through a combination of reducing vacancy (with Serviced Apartments a focus), price increases and cost reduction (partly enabled by regulatory reform). RYM's 5% target yield on NTA at Group-level looks consistent with SUM's yield on mature villages.

(2) Recommence paying dividends from FY28, with a payout ratio of 20-50% of CFEO. We agree RYM should pay dividends out of cashflows, but argue CFEO will be too volatile on its own (given working capital movements). RYM's target implies a dividend yield of 1.0-2.5% of NTA.
   

(3) Reduce gearing from 28% as of September balance date to 20-25% by FY29, but then may potentially increase to 20-30% long term.

(4) Reduce its greenfield landbank to 1940 units and beds, below our prior estimate, as Ryman has decided to exit two broad acre sites, at Rolleston (354 units/beds) and Kealba (264 units/beds), due to concerns around competition and demographics in their catchments. Ryman's divestment programme will now see it sell 9 sites in total, raising $200m. Ryman will retain the high density sites at Essendon, North Cobourg and Takapuna as we had thought likely. Overall, RYM's reduced landbank points to a build rate of c.200-300 units and beds per annum long run (vs CIPe c.260), though it is likely to be less than this over the medium term.

[Basil]

Meanwhile SUM are building approx 700 units per annum and likely to ramp up further in the years ahead as they expand in Australia. Hmmm.

[BlackPeter]

Meanwhile SUM are building approx 700 units per annum and likely to ramp up further in the years ahead as they expand in Australia. Hmmm.

Which may or  may not be good.

I guess this is one of the things you only notice afterwards .... didn't at the last crisis the fast growers have the biggest issues?

[Basil]

Which may or  may not be good.

I guess this is one of the things you only notice afterwards .... didn't at the last crisis the fast growers have the biggest issues?

SUM have gradually increased their their build rate over the 14 years they've been listed with no drama's of any significance and no need to raise fresh capital.
All I'm saying is its staggering that RYM was once building ~ 1,000 units a year, and now even after 2 x $1 Billion capital raises is reduced to only building 200-300 units.  Surely you'd agree that's a pretty spectacular fall from grace.  Not only is their about a quarter of the former new build development margin going forward, that's on a vastly expanded number of shares and in the long run if you're not building decent numbers of units it obviously impacts the number of resales.  My contention is quite simply, RYM is a pale shadow of the company it once was and SUM are going to continue to eat away at their market share in the future.

[BlackPeter]

SUM have gradually increased their their build rate over the 14 years they've been listed with no drama's of any significance and no need to raise fresh capital.
All I'm saying is its staggering that RYM was once building ~ 1,000 units a year, and now even after 2 x $1 Billion capital raises is reduced to only building 200-300 units.  Surely you'd agree that's a pretty spectacular fall from grace.  Not only is their about a quarter of the former new build development margin going forward, that's on a vastly expanded number of shares and in the long run if you're not building decent numbers of units it obviously impacts the number of resales.  My contention is quite simply, RYM is a pale shadow of the company it once was and SUM are going to continue to eat away at their market share in the future.

No doubt about the past, and how both of the companies will look in 5 or 10 years from now - nobody knows.

Looking at the value of the share is it however not difficult to see, that Rymans SP is (compared to the underlying value) lower than SUM. Pretty easy to see, why the market gives SUM a bonus and RYM a discount.

Based on that do I think that RYM has based on curent SP rates a better chance to increase its value than SUM. Not hard to imagine in a handful of years a RYM share trading again between 5 and 6 dollars (i.e. doubling). Personally I'd think that Ryman will double its current SP earlier than SUM.

As I said ... no one knows how the businesses are run in 5 or 10 years and how they perform, but at this stage I see RYM's shares just as much higher discounted than SUM.

Anyway, hold both, but admittedly - more in Ryman. 

[Basil]

Based on that do I think that RYM has based on curent SP rates a better chance to increase its value than SUM. Not hard to imagine in a handful of years a RYM share trading again between 5 and 6 dollars (i.e. doubling). Personally I'd think that Ryman will double its current SP earlier than SUM.

I remember the days when many Ryman zealots were adamant 1 RYM was always going to be worth 2 SUM.
Now its about 4 times the other way round lol.

Share prices follow earnings per share and that's why OCA has gone nowhere other than range trade since they listed nearly 9 years ago and also why with no earnings RYM is completely lost in the wilderness and likely to stay that way for years.  They even want to reinvent the way they measure earnings....gosh, all hope is lost when they abandon underlying profit which has been the benchmark in this sector forever and a day.

Buying retirement companies based on discount to NTA is a big mistake in my opinion but each to their own.   

[BlackPeter]

I remember the days when many Ryman zealots were adamant 1 RYM was always going to be worth 2 SUM.
Now its about 4 times the other way round lol.

Share prices follow earnings per share and that's why OCA has gone nowhere other than range trade since they listed nearly 9 years ago and also why with no earnings RYM is completely lost in the wilderness and likely to stay that way for years.  They even want to reinvent the way they measure earnings....gosh, all hope is lost when they abandon underlying profit which has been the benchmark in this sector forever and a day.

Buying retirement companies based on discount to NTA is a big mistake in my opinion but each to their own.   

Hmm - clearly coutas longterm proposition re RYM:SUM was wrong ... but lets face it, I never supported his theorem. The same is true about your current downtalking of RYM. Will change with the trend, and trends do change.

That's the thing with cyclical companies - some praise them at high and dump them at low, while others buy them at low and sell tham at high. Personally I prefer the second strategy.

Not quite sure about your remark buying based on NTA? I don't think I ever did that or recommended that. At best it is one of many indicators (and depends on the quality of the assetts as well). My financials are looking at NTA, past and future PE, analyst assumptions, risks, market predictions. But sure - my future predictions are as good or bad than everybody elses - which includes you as well.

[Basil]

I called RYM a sell in 2014 at $8.50.
I remain happy with that call.
Some people get it that this company has two parts to its history. When Simon Challis was CEO and after that. Management quality since he left has been poor to say the least.

[BlackPeter]

Oliver Manders assessment of the RYM investor day ...

https://www.nzshareholders.co.nz/scrip-article/a-new-course-for-ryman-healthcare/

As far as I can see the article can be accessed by everybody. If there are however problems, just join the NZSA - a great way to help them to help NZ shareholders! Anyway - if you are not a current member, why not join them anyway?

[entrep]

I threw a whole bunch of the recent forum posts from here into AI along with their recent Investor Day information pack and got the following.

1. The DMF contract book turn is doing the heavy lifting and nobody's talking about it
75% of incoming residents are already signing on 30% DMF terms. The legacy book is largely on 20%. Ryman expects around half the portfolio to be on the new terms by FY29. This isn't aspirational — it's arithmetic. Every resale that settles mechanically upgrades the DMF rate on that unit permanently. Even if property prices go sideways and management execute nothing else, DMF cash collections are growing materially each year just from turnover. This is the closest thing to a free lunch in the entire investment case and it barely rates a mention.

2. The serviced apartment pivot is the most interesting strategic move and got zero airtime
Q3 new serviced apartment sales were 40 — more than double Q2 and the best quarter in the dataset. Meanwhile everyone's focused on independent living unit sales easing (which was explicitly flagged as expected post-Nellie Melba Stage 4).

The Investor Day reveals they're piloting a fundamentally different serviced apartment model — flexible à la carte services, "age in place" capability, premium care suites. They're trying to turn what is currently the highest-vacancy product in the portfolio into an assisted living platform that bridges independent living and full aged care.

If this works, it creates a recurring service revenue stream that didn't exist before and addresses the biggest occupancy problem in the portfolio simultaneously. Average entry age for SAs is 85.7 years — right in the sweet spot of the demographic wave. Early-stage pilot, so execution risk is real, but the strategic logic is sound.

3. The Resident Fund product is quietly brilliant and nobody mentioned it

This is new and genuinely innovative. When a resident moves from independent living to aged care, instead of Ryman paying out their ORA equity and then trying to attract new capital into the care room, the resident can carry their equity across. The daily room premium gets discounted as an incentive.

The worked example in the deck: Ryman collects $31k in premiums plus saves $33k in interest over a 24-month care stay. $8.3m retained since pilot launch with 15%+ conversion rates. 30% of care residents already transfer from within Ryman villages, so the addressable base is large.

This is a genuine competitive moat. Standalone aged care operators can't offer it. It solves the cash-out/cash-in timing mismatch that has been one of the fundamental problems with the business model, and it eliminates the DMF tenure risk on the care side.

If they can scale this to even 30–40% conversion on internal transfers, the impact on net cash flow is meaningful. I'd like to see this broken out in future results reporting.

4. The $800m stock overhang — do the maths against market cap

The deck quantifies unsold stock at ~$800m across 1,335 units: $470m in new sales stock and $330m in paid-out resale stock where the previous resident has already been repaid.

Market cap is ~$2.5 billion. The paid-out resale stock alone is pure cash release — no development spend, no refurbishment beyond what's already done. Selling through that $330m would be equivalent to ~13% of the market cap returning as cash to the business. Combined with the $200m+ land divestment target ($110m already contracted), you're looking at potential $500m+ cash release over the next 2–3 years.

The constraint is obviously housing market conditions and pricing discipline. But even at a modest selldown pace, the cash generation from existing stock is substantial.

5. The question nobody is asking: what happens if the NZ housing market actually recovers?

All of the targets in the Investor Day appear to assume flat-to-modest property price growth. The $150m CFEO improvement is built on occupancy, contract book turn, cost savings, and care margin — not property price appreciation. Property prices aren't even mentioned as an assumption.

Think about what that means. If Auckland (where a big chunk of the portfolio sits) recovers even 10–15% from here over the next 2–3 years — which is not aggressive given it's already well off peak — the upside to resale margins, new sales pricing, and capital gains is entirely incremental to the guided $150m. The entire Investor Day framework is essentially built on a "no property recovery" base case.

6. The real bear case isn't the one people are debating

The actual risk with Ryman at this point isn't whether SUM is a better operator (it clearly has been). The risk is time.

No dividends until FY28. CFEO improvement phased over 3+ years. Political dependency on NZ care funding reform (recommendations due before the election — what if the election changes the calculus?). Housing market recovery timing uncertain.

If you're earning 5% in a term deposit and Ryman takes 3 years to re-rate to $4.50, your annualised return is roughly 16% — excellent. But if it takes 5 years, it's roughly 9% — still decent but you've carried meaningful single-stock risk and illiquidity for that. The margin of safety in the price protects your capital, but the opportunity cost of being early is real.

[winner (n)]

We got there before Winner and it did not hold. The investor day I think will be a catalyst. 

That $3 seems to be getting further and further away..... $2.48 as I post