SUM Summerset Group

[Onemootpoint]

That's significant; indeed a spooky graph.

My guesstimate is a share price overlay on the same graph will follow similar lines so to speak. The question is, has the market priced it in? Fully? Or not quite done yet?

[Basil]

Just spent half an hour with a client who's one of Auckland's top Auctioneer's.  Crickey its tough out there.  He's freelance and works from home and pleased he does.  A lot of his friends in the real estate business are struggling to pay their leases and staff.

SUM are undoubtedly best of breed in my opinion and they're obviously feeling the effects of the headwinds.
As you say Winner, resales flat with Arena numbers included (and all the extra shares issued for that acquisition) was a very poor result.  RYM having to do a capital raise of $900m because their sales are not generating sufficient cash flow and OCA sales are almost certain to also be impacted by the deep malaise the real estate market is in.

Interesting times for this sector.

[BlackPeter]

115 new sales and 95 resales in Q1 2023 vs 167 & 112 in Q1 2022.

So 31% less new sales but only 15% less resales.

No mention of how stock levels are building up?

Just read the announcement. They sold 115 new units and delivered 57, which points to stock levels going down. Didn't talk though about stock levels of resale apartments.

Anyway - this clearly must be good ;

[Waltzing]

The QV prices graph 5 years... even if house prices rise again surely they cant go past the peek again...for a while...

[winner (n)]

The market gave the sales update a big thumbs down eh ....share price down more than 3% and probably more tomorrow

[Breezy]

The market gave the sales update a big thumbs down eh ....share price down more than 3% and probably more tomorrow

Probably only worth $6 odd anyway.

[Buzz]

The market gave the sales update a big thumbs down eh ....share price down more than 3% and probably more tomorrow

Those sales figures are awful, and promising what would be a stellar 2H sales result is overconfident with little substance to back it up. Like BP says, the unknown is how many were available for sale (new), OCA got caught by that, poor new sales ... doh, because there were none available for sale! SUM is overpriced imo. Rebalanced a few in the sector today, lighten up on SUM, put it into others.

[Basil]

A rising tide lifts all boats and obviously the opposite of that is true as well.
Still quite some way to go before we get to low tide in my opinion.

[Buzz]

A rising tide lifts all boats and obviously the opposite of that is true as well.
Still quite some way to go before we get to low tide in my opinion.

For sure, the old market maxims hold true. Wouldn't be surprised to see SUM get a hiding off these results, 6 months is a long time to wait to see whether they're immune to the same factors that have pummelled the sector (I don't think they are) .. aside from RYM which clearly screwed themselves with the debt repayment. 

[Breezy]

A rising tide lifts all boats and obviously the opposite of that is true as well.
Still quite some way to go before we get to low tide in my opinion.

Maybe but I reckon all the other boats have been caught up in a faster outgoing tide than SUM and have pretty much bottomed, SUM may be about to be caught in a rip.

[Shareguy]

Sure big headwinds but downside limited in my opinion with risks priced in.

Would have to be a kitchen fill of cockroaches or another huge correction in asset values or a major event to get to $6.

Disc, long term holder.

[Buzz]

Sure big headwinds but downside limited in my opinion with risks priced in.

Would have to be a kitchen fill of cockroaches or another huge correction in asset values or a major event to get to $6.

Disc, long term holder.

Will be interesting to see, but investing abhors a vacuum and SUM just posted a Dyson in their very poor sales results.

Rather than a big bang like popping the balloon, I think the vacuum of poor sales underpinned by unsubstantiated promises of outstanding sales over the next reporting period will erode investor confidence (assuming the property market is still getting hammered), so a slow steady leak in SP seems more probable imo.

They also still have an underwhelming dividend compared to other sectors, which the conservative investors looking for income will be questioning. If it's all as good as they say, the least they could do is compete against no/low risk bank returns, even if both are losing against inflation. Would cash flows allow it though? Maybe they need to temper their enthusiasm and optimism for growth like the rest of the sector are?

Anyway, I don't think many were expecting to see SUM post such poor sales results, especially after last reporting Scott said the property market downturn hadn't really affected them. Seems like snake oil now in hindsight. 

[Greekwatchdog]

For Bars review..

Summerset Group (SUM) reported weak 1Q23 sales, with combined new sales and resales down -25% versus 1Q22. We find this disappointing, but (so far) not concerning. The turnover in the New Zealand housing market is at record lows and days to sell at record highs. Expansion of lead times is to be expected. Contracted sales, a strong indicator of forward sales and end demand, was up strongly versus an admittedly likely weak 1Q22. Overall, we walk away with the impression that SUM is not immune to the current well publicised slowdown in the housing market, but that the weakness is primarily coming through in the form of extended lead times rather than lower prices or reduced end-demand. That said, the bears on aged care stocks are currently getting more support for their view than the bulls. Over the next 12 months demonstrating an ability to generate cash will be key to share price performance. We retain our OUTPERFORM rating and reduce our price target -NZ55c to NZ$10.55.

What's changed?



Earnings: FY23/FY24/FY25 underlying EPS down -10%/-6%/-4%. Annuity EBITDA down -3%/-4%/-3% driven primarily by reduced newsales gains but also slightly lower resales gains.
Target price: Down -NZ55c to NZ$10.55 driven by lower earnings and slightly higher net debt.


1Q23 sales shows the signs of a slowing housing market


SUM reported new sales of 115 and resales of 95 for 1Q23, both ~17% of our prior FY23 forecasts. Pre-COVID ~22% of sales were completed in Q1. Resales were down -15% on 1Q22, and -4% on a rolling 12 month basis, and lower than expected due to settlement timing delays. Contracted resales rose +41 from the end of FY22, indicating strong growth in resales contracts. New sales were down -31% on a strong 1Q22. The main reason for the decline given was the low delivery of new homes; only 57 were delivered in 1Q23. SUM stated it remains on track to deliver between 625 and 675 new homes in FY23, with >75% coming in 2H23.

Conversion from contracted sales to completed sales declined materially — most likely explanation is expanding lead times


Our understanding is that a contracted sale primarily represents the payment of a fully refundable deposit of a few thousand dollars. The conversion tends to be very high and when a contracted sale is not completed, the primary reason is a change to a different unit within the village or a change of health circumstances. Over the last five years SUM has converted well over 100% of period end contracted sales to completed sales the following quarter. At FY22 (December 2022), SUM had 279 contracted sales (163 new sales and 116 resales) and converted only 75% (210) during 1Q23. The reduced conversion can either be explained by a relatively dramatic reduction in conversions from contract to completed sales (a clear negative) or lead times have expanded well above historic levels (more transitory). Both REINZ days to sell data (up almost +50% ) and management commentary at FY22 suggests the latter.

[Shareguy]

Forbar say Over the next 12 months demonstrating an ability to generate cash will be key to share price performance.

Time to batten down the hatches for all retirement stocks I think. Pause the dividend and start buying back the shares.

[winner (n)]

Suzanne Paul in a Summerset ad on TV

Some of the residents loved being part of it

Anyway Suzanne not as terrible as that Tina

https://www.summerset.co.nz/about-us/news/retire-like-a-king/

All part of a campaign in a lead up the Coronation ...hopefully not enduring.

Might even be iin a Briscoes ad

Suzanne overload

https://thespinoff.co.nz/pop-culture/04-05-2023/why-is-suzanne-paul-suddenly-the-face-of-everything