SUM Summerset Group

[BlackPeter]

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

And I thought SUM is the shining star of the retirement villages? Better don't tell the OCA distractors ... they said that the need for TV ads indicates business going downhill? SUM must be pretty desperate these days ...

But hey, this was for OCA, wasn't it. Obviously - if SUM is doing ads, all must be good for them.

[Basil]

https://www.youtube.com/watch?v=1DdyGoSzjXs
They should just stick with Jude Dobson.  She comes across as very relatable, likeable and trustworthy.
Suzanne Paul has been peddling all kinds of snake oil and lotions over the years...
By the way I have visited that village and been in that waterfront home that guy is talking from and stood on that exact deck.  Was hard to tear myself away from it, the sun was shining, the tide was in.   What a stunning village and awesome north facing home, no wonder he is happy !  That one is 133 sq m and I reckon that's perfect for this dog.  Was $1.6m in 2017 when I was there.

I have noticed a big uptick in advertising by all the companies in this sector.  I guess that's what happens when there's record numbers of units being delivered and house sales are at 22 year lows.  Good sector to avoid entirely at this stage.  All boats, even the best of them like SUM go lower on an outgoing tide.

[winner (n)]

Week close over $10 ...haven't seen that for best part of a year

2nd quarter sales update early next week should be interesting

[Left Field]

Latest update out.......looking good for the holders ( tho' no mention of discounting to achieve sales targets.)

https://www.nzx.com/announcements/414535

Summerset Group is pleased to report 273 sales for the quarter ending 30 June 2023, comprising 126 new sales and 147 resales, the highest number of resale settlements in a quarter the company has ever seen. Summerset has achieved 483 settlements for 1H23.

Summerset CEO Scott Scoullar said the result is pleasing and indicative that demand for the company's retirement living offering remains strong, despite a period of tough property market conditions, which now appear to be easing.

Uncontracted new sale stock decreased by 17% from 308 as at 31 December 2022, to 256 units, with 152 new homes delivered in the period.

[winner (n)]

Much better update than the March one

Record resales quarter is good stuff

Sales for H123 down on last year so won't be much growth if any in Underlying Earnings when they report in August

Nonetheless things look better than they did at the end of March

Chart still looks cool

[Greekwatchdog]

For Bars update. Down to Neutral. Was Outperform.

Summerset (SUM) and Ryman Healthcare (RYM) have led the recent bounce in aged care stocks, with share prices up ~+30% over the last three months. This bounce is well deserved and driven by improved housing sentiment; but is there more to come? We still see strong valuation support in the aged care sector overall, but believe that SUM specifically will consolidate recent share price gains rather than outperform the market from here. Specifically we view 2023 as somewhat of a transition year for SUM as it ramps up to deliver its first units in Australia as well as building on three apartment-heavy sites simultaneously in New Zealand. SUM has an excellent track record of cash recovery of capex. 2023 will, on our estimates, see a meaningful step up in working capital driving net debt up considerably, something we do not expect from the remainder of the sector. We downgrade to NEUTRAL with an unchanged target price of NZ$10.55.

What's changed?
Earnings: Annuity EBITDA down 0%/-1%/-2% in FY23/FY24/FY25, underlying earnings down -8%/-7%/-7% on lower new sales.
Rating: Downgrade to NEUTRAL from OUTPERFORM.
Well deserved bounce in valuation; but likely to be tougher from here
SUM is currently valued at a near all time high premium to RYM using our preferred valuation metric of EV/Annuity EBITDA. We acknowledge SUM's best in class track-record of cash recycling and earnings growth, something the market is rightly giving it credit for. However, we note that compared to RYM, SUM is still largely unproven in Australia, no longer has lower leverage and has benefited from a substantially lower care proportion of earnings, something that has been a drag on RYM's earnings. We value RYM and SUM on the same EV/Annuity EBITDA multiple and therefore see more upside in RYM.


1H23 sales; decent re-sales, weak new sales
SUM's 2Q23 sales numbers showed a meaningful bounce back from its very weak 1Q23. Looking at the first half as a whole resales for 1H23 was up a healthy +9% on 1H22, while new sales were down -17%, driven by lower deliveries. In its 2Q23 release SUM highlighted again that its deliveries would be heavily back end loaded, but it was even more skewed than we had expected. Deliveries in the first half were <1/4 of expected full year deliveries. We have reduced our expectations for FY23 new sales accordingly.


Debt likely to build meaningfully through FY23
SUM's debt is almost exclusively project finance and we do not consider the build up of debt to be concerning, in particular given SUM's strong track record of cash recovery of capex. However, we do think that SUM, much like the rest of the sector, is unlikely to re-rate to previous asset multiples unless it can demonstrate an ability to grow organically without adding significant debt.

[Shareguy]

Thanks for posting. Thought this comment was interesting.

However, we do think that SUM, much like the rest of the sector, is unlikely to re-rate to previous asset multiples unless it can demonstrate an ability to grow organically without adding significant debt.

[Left Field]

Results out

https://www.nzx.com/announcements/416856

SUMMERSET FIRST HALF UNDERLYING PROFIT OF $87.2M, UP 5.7%

• Underlying profit for 1H23 of NZ$87.2m, up 5.7% on 1H22
• Reported (IFRS) profit after tax of NZ$133.1m
• Total assets of NZ$6.3 billion, up 17.2% on 1H22
• Gearing ratio of 35.5%
• Two new sites acquired in New Zealand
• 152 new retirement units delivered
• 483 sales of occupation rights for the half
• Development margin of 33.5%
• Interim dividend of NZ11.3 cents per share

[Shareguy]

Results out

https://www.nzx.com/announcements/416856

SUMMERSET FIRST HALF UNDERLYING PROFIT OF $87.2M, UP 5.7%

• Underlying profit for 1H23 of NZ$87.2m, up 5.7% on 1H22
• Reported (IFRS) profit after tax of NZ$133.1m
• Total assets of NZ$6.3 billion, up 17.2% on 1H22
• Gearing ratio of 35.5%
• Two new sites acquired in New Zealand
• 152 new retirement units delivered
• 483 sales of occupation rights for the half
• Development margin of 33.5%
• Interim dividend of NZ11.3 cents per share

First glance looks like a good result. Slight beat on FB forecast
underlying profit at $79m and dps of 11 cps.

Big increase in development margin.

[Basil]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SUM/416856/401022.pdf

Looks sound to me.  When the tide finally starts coming in on the property market I'll be very happy to be a shareholder again.  I see no compelling reason to own any of the others compared to SUM.

[winner (n)]

SUM not one to do a bit of skiting and do peer comparisons so interesting they included this slide in their presentation

[BlackPeter]

SUM not one to do a bit of skiting and do peer comparisons so interesting they included this slide in their presentation

Funny comparison.

What is the point of comparing NTA per share if the share prices are widely differing?

Much better to own a company with $1.50 NTA and $1 share price, rather than a company with $10 NTA and a $10 share price (assuming NTA is your thing).

If they would have wanted to convey anything meaningful, they would have normalised these NTA's by the respective share price;

[Basil]

My theory is they are on the defensive a little there.  Fact is gearing is up from 29.4% this time last year to 35.5% which is a pretty big jump in 12 months.  Also in the preso they note forward build guidance is probably going to be towards the bottom of the 625-675 range due to the need to take a prudent approach to stock management, or words very close to that effect.  I expect gearing to be in the very high 30's by year end...a product of an ongoing weak real estate market and their very strong 2H build rate more than anything else.  I don't think it's time to jump back in yet....but the tide might turn in 2024.

[winner (n)]

My theory is they are on the defensive a little there.  Fact is gearing is up from 29.4% this time last year to 35.5% which is a pretty big jump in 12 months.  Also in the preso they note forward build guidance is probably going to be towards the bottom of the 625-675 range due to the need to take a prudent approach to stock management, or words very close to that effect.  I expect gearing to be in the very high 30's by year end...a product of an ongoing weak real estate market and their very strong 2H build rate more than anything else.  I don't think it's time to jump back in yet....but the tide might turn in 2024.

They did make the point that New Zealand gearing ratio with Australian growth related debt excluded is 28.9%

Australia was always going to be a debt 'burden' while being developed ...let's hope it's not much of a burden eh

[Shareguy]

Yes Net debt (+$226m to $1.3B) and gearing (+310bps to 35.5%) something to watch.