Monday, May 19, 2008

Why did you buy that stock? [Ryman Healthcare]

With Ryman Healthcare [RYM.NZ] announcing its annual results for the year ending 31 March 2008 to the market on Thursday 22 May 2008, I thought I would elaborate on some of the reasons why I bought the stock in this latest of a series of columns.

Ryman, the operator of approx 3000 retirement units,
up from 900 eight years ago, increased profit by approx 20% in November 2007 and has future plans to grow at a similar rate in the medium term.



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The historical aspect of company performance initially attracted me and once again that has got to be down to good management. The company has managed to grow in spectacular fashion without asking shareholders for additional funds and has positioned itself well for the future.

Now there are quite a few different companies that will give you exposure to the New Zealand listed property market and one other listed retirement village operator, Metlifecare [MET.NZ] but I chose Ryman over Metlife because of the size of its current land bank for future use, approx enough for 2000 units.

Although currently the real estate market and property values are suffering from a downturn and that should be reflected in the announcement on Thursday(although having said that shares were up by more than 4% on good volume today possibly indicating something good on Thursday) , the other reason I like Ryman is that its revenue streams are multiple and set to grow dramatically as we all grow older and wish to stay in the more independent villages that the likes of Ryman and Metlife offer.

The first revenue stream is income derived from developing and selling the units, continuing revenue to take care of residents and property and another cut when the unit is on-sold.

This provides a good cashflow for the company to function well and during the tougher times, this makes it easier for the company to sustain their business model.

Another easy to understand business, this encouraged me to buy and its ability to differentiate itself from other single property residences in the form of a strong brand of villages countrywide help keep the competition at bay.

I have held the company for around 3 years and it has cost me approx $1.75 per share. I would purchase more at lower than cost levels, given the ability of my wallet to allow it.


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Related links

Ryman Healthcare Financial data

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c Share Investor 2008