SUM Summerset Group

[Shareguy]

Looks like a solid result

Net profit after tax of NZ$269.1 million, down 50.5% on FY21
Total assets of NZ$5.8 billion, up 18.6% on FY21.

NTA $9.44 a share.

Divi $0.223 against Fbar estimate $0.205 and Craig's $0.22

[Basil]

Very solid result

And a great presentation ......clear, concise and no attempt to 'hide' / 'forget' things

Well done

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SUM/407279/389355.pdf

Agree 100%.   Excellent result and also very nice to see them going to great lengths to look after residents during the recent cyclone, chartering a helicopter and flying in bigger generators and supplies and making sure everyone gets hot meals despite the power outages.

Fully deserves its blue chip status.
Notable highlights and observations.
Development margin up strongly to 29.7%.
FY22 PE of only 12.75 based on underlying profit.
Outlook comments about build rate for FY23 being slightly higher 625-675 units notwithstanding the review of high rise Parnell development...which will surely be put on ice for now.
NTA $9.44
Uncontracted resale stock nearly doubled from 80 units to 150 units.  Full transparency, not deliberate concealment and obfuscation like a certain company many obsess about on the other forum.

The board and management are doing a great job of carrying on the legacy and groundwork laid by Julian Cook and Rob Campbell.

Metrics comment:  Cheap when you consider they have a lot of growth to come from their Australian operations (which are currently a drag on profitability).
I can see why SUM are a favorite with institutions.
Disc: None held at this point but when we see the tide change in the property market..."I'll be back" 

[winner (n)]

Interesting how the fair value movement of investment property of + 268.7 million almost matched the profit for the period of 269.0 million.

And it did last year too + 537.5 fair value of investment property versus 543.6 of profit

Spooky - I imagine valuing retirement villages is quite a specialized art

And SUM have some great accountants as they got 3.9 million as an income tax credit this year as opposed to only 27k last year. yay

Shows there's no or little money in running villages and caring for people

They are just property companies

[Basil]

LOL I think we've all known that for some time.  The problem is if you have too much care in the mix like one company in this sector does, you're always going to be the runt of the litter no matter what anyone says they think they know about the future.
~ 70% care, plain and simple,....people bought a "pup" when OCA was floated.
SUM and ARV have the care mix fit for purpose in my opinion.

[Shareguy]

One thing that I see in reports every where is the demand for these services is going to grow dramatically. 

The graph in the Summerset annual report highlights it well in my opinion and says

"The New Zealand population aged 75 and over is forecast to almost triple in the next 50 years".

[lorraina]

Bit of a bugger as I doubt I will live to 124 to see it.lol.

[Untamed]

Time will tell, but you cannot ignore the fact that many elderly folk moving into an RV, place a high level of importance on continuity of care. Most of them take that into consideration when they buy a villa or an apartment. For many, if it came down to a choice between a standalone village (property only) OR an RV that provides a continuum of care, I know which one they would choose (all other things being equal).

By your reckoning, all RVs should provide independent living only. Villas and/or apartments. Nothing else. Do you really believe that is a model that would work better than the current one? Would those RV's that only provide property attract more customers or less (than now)?

I think you are being very naive if you seriously believe RVs should not be providing care.

Who knows what the future holds. But maybe consider the possibility that you could actually be wrong.

LOL I think we've all known that for some time.  The problem is if you have too much care in the mix like one company in this sector does, you're always going to be the runt of the litter no matter what anyone says they think they know about the future.
~ 70% care, plain and simple,....people bought a "pup" when OCA was floated.
SUM and ARV have the care mix fit for purpose in my opinion.

[winner (n)]

Realised gains (profit / development margin) on new sales increasing nicely over recent prior periods

 Average gain last few periods have been H220 $112K / H121 $135k / H221 $159k / H122 $181k / H222 $212k

Mix has some impact but that trend looks pretty healthy to me during a period of declining house prices.

Sum must be doing something right

PS - and gains on resales not looking too bad either

[Basil]

Time will tell, but you cannot ignore the fact that many elderly folk moving into an RV, place a high level of importance on continuity of care. Agreed and SUM and ARV provide that

Most of them take that into consideration when they buy a villa or an apartment. For many, if it came down to a choice between a standalone village (property only) OR an RV that provides a continuum of care, I know which one they would choose (all other things being equal).

By your reckoning, all RVs should provide independent living only. Can you please point me to a post when I have ever suggested that.
Villas and/or apartments. Nothing else. Do you really believe that is a model that would work better than the current one? Would those RV's that only provide property attract more customers or less (than now)? You are miles off on a tangent.  Its about getting the right mix of ILU and care that's fit for purpose both from a residents point of view and shareholders.  I believe I've made it clear which companies are fit for purpose in terms of shareholders returns.

I think you are being very naive if you seriously believe RVs should not be providing care.

Who knows what the future holds. But maybe consider the possibility that you could actually be wrong.

If you are going to make broad sweeping statements about what I believe then please take the time to read what I've actually said and stop drawing conclusions that any reasonably well read person wouldn't make.  To be crystal clear,  in my opinion ARV and SUM seem to have the mix right in terms of ILU and care units. RYM are on record as stating they are looking to decrease their level of care relative to ILU and OCA are hopelessly overweight in the care sector that's earning them a pitiful return on capital.  That's not a problem that can be fixed in the foreseeable future.
There's a reason why SUM companies are vastly outperforming others and that's because they have a winning recipe for shareholders and residents.  Most people want a full feature village with all the bells and whistles as well as care.    That's why SUM companies have no trouble selling their units and others...oh dear...

Changing gears and looking at the presentation what I found quite interesting in terms of prospective new sales in a lower real estate environment is that SUM's average ILU Auckland price is just south of $1m (page 19 of the presentation), whereas RYM's are $1.4m.  That's quite some difference in terms of affordability in the Auckland region and a useful lead indicator in terms of the relative affordability of their ILU's going forward.  Granted their villages are in different suburbs so a direct comparison is not possible but nevertheless that quite a big difference in price.  It'll be interesting to see how that plays out in the years ahead.  I think RYM's VERY high prices are a major contributing factor to the terrible trouble they've got themselves into with skyrocketing debt.  That and their debt has been egregiously mis-managed.

[Untamed]

I don't believe I made any "broad sweeping" statements. I based my comments on your post, but also on previous posts you have made in all the RV related threads. You have made it very clear that you think there is no money to be made in care, and have implied that providers should reduce their care offerings in favour of the "property" offerings. I don't think anyone here would disagree with my observations.

You have a tendency to post comments that come across is a less than complimentary way. Your "bought a pup" comment is a prime example. We all make our own investing decisions. Criticising someone for theirs, even if done in an indirect way, is really not helpful or supportive.

As I said, I think you should consider the fact that you could actually be wrong, especially about OCA. What you see as the "rank outsider" may actually be the smartest strategist.

If you are going to make broad sweeping statements about what I believe then please take the time to read what I've actually said.  ARV and SUM seem to have the mix right in terms of ILU and care units. RYM are on record as stating the are looking to decrease their level of care relative to ILU and OCA are hopelessly overweight in the care sector that's earning them a pitiful return on capital.

There's a reason why SUM companies are vastly outperforming others and that's because they have a winning recipe for shareholders and residents.  Most people want a full feature village with all the bells and whistles as well as care.    That's why SUM companies have no trouble selling their units and others...oh dear...

[Basil]

OCA was floated in 2017 with the promise of a 6 year business transformation that would radically improve the returns on care to shareholders.
We're almost at the 6 year point now and at an EBITDA level the net result of their so-called transformative process is that returns have nearly halved.

A whopping 15 (not a typo), of the villages that were included in the float have either been sold (5) or (10 on the market for sale with little prospect of achieving a satisfactory outcome for shareholders) identified as having no potential for development.  My contention is the transformation process has not worked and there are hundreds of care suites not sold under an ORA (a fact management are doing their best to conceal from shareholders under a growing mountain of debt).

I call a spade a spade, investors were sold a pup.  The shares are trading lower than they were when it floated nearly 6 years ago (weighted average share price of all shares issued is I understand about 91 cents when the IPO shares and subsequent DRIP shares and cash issue are taken into account).
It's been a dismal failure for investors because their business model is systemically flawed and incapable of remediation.
If you want to give them another 6 years to improve shareholder returns...fill your boots and good luck with that.  I'd rather back companies with a business model that has been proven to work well for shareholders.

Just for interest you might like to go back and have a look at the share price performance of  SUM floated at $1.40 in November 2011 and on 30 November 2017 six years later the shares traded at $5.28. 3.77 times your money in 6 years whereas OCA is trading at a 15% discount to the volume average weighted price at which shares have been issued at after trading for nearly 6 years.

Interestingly, both IPO's came from sell-down's by private equity, in SUM's case Quadrant Capital.  My conclusion is that over many years now SUM's business model has proven its effective for shareholders and its worked and OCA's hasn't.
If you think their relative performance is somehow going to magically flip around the other way going forward, good luck with that.

I stand by my pup comment because in my opinion, and I am perfectly entitled to it, shareholders were sold exactly that.  Many of their villages were originally part of the not for profit Presbyterian Support services care program and they were designed in such a way to be not for profit without many facilities.  Not really fit for purpose in a listed entity promising growth.

At this point its clear to me the tide is going out on this sector and all boats go lower on an outgoing tide.  Good luck with your OCA shares.
Leaky boats tend to fall much further than ones without leaks.

[Untamed]

We don't have to agree. We just have to consider the possibility that we could be right ... or wrong. Me included. But thank you for the "good luck" wishes - they definitely can't hurt 

.....At this point its clear to me the tide is going out on this sector and all boats go lower on an outgoing tide.  Good luck with your OCA shares.
Leaky boats tend to fall much further than ones without leaks.

[Basil]

https://www.nzherald.co.nz/business/cyclone-gabrielle-the-fate-of-1000-hawkes-bay-retirement-village-residents/ATJE75FHJBGLFMUWKTH4IGP4W4/

[Shareguy]

Craig's analyst today stated

weak cashflow result in 2H22, with net debt stepping up to $1049m (c.$120m above consensus) and unsold new stock increasing.

[winner (n)]

Very good slide SUM included in their results. Steady state free cash flow of $236m (positive) should help allay punters (including Craigs guru analyst) fears of perceived high debt

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