Time for retirement 2 ?

Metlifecare Ltd [MET.NZ] is now an interesting little stock. It has spent many years languishing at around $2.30 due to its high ownership of shares in a small group. But now it has been released from that grip and looks like it will now florish on its own.

It all happened in July and now places the company in direct competition with Ryman Healthcare Ltd [RYM.NZX] and Summerset Group Holdings Ltd [SUM.NZX].

What do we make of the share price then ?

At $2.95 at close of business yesterday it makes this share the second cheapest and Summerset the next followed by Ryman.

Net asset backing is $3.04 for Met which makes this star, $1.10 for Summerset and $1.30 for Ryman. Clearly the leader by a long shot is Met which still hasn't reached its NTA.

As far as returns go it is only Ryman paying a paltry 2.05% that is turning over. Demand for its scrip has recently seen it shares rise to record highs.

You know me I like a bargain so if you prepared to wait a long time you might get Ryman for a steal, I think it will go down from here, but if you want get in right now you might want to consider getting in with the Met overall its the best bet.

Good luck!


Disclosure : I own RYM shares in the Share Investor Portfolio.



MET @ Share Investor

Stock of the Week: Metlifecare Ltd
Stocks on My Watchlist: Metlifecare Ltd
Stock of the Week: Ryman Healthcare Ltd
Time for retirement?

Discuss Metlifecare @ Share Investor Forum - Register free


Summerset IPO @ Share Investor

Summerset IPO: A Closer Look
Summerset Prospectus

Discuss Summerset Heathcare @ Share Investor Forum - Register free


Ryman Healthcare @ Share Investor

Share Price Alert: Ryman Healthcare Ltd 2
Ryman Healthcare Ltd: 2011 Half Year Profit Review
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Share Investor Q & A: Ryman Healthcare's CFO Gordon MacLeod
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Long Term View: Ryman Healthcare Ltd
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Time for retirement?


Discuss Ryman Healthcare @ Share Investor Forum - Register free


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Summerset IPO: A Closer Look

The coming Summerset Group Holdings Ltd [SUM.NZX] IPO (read the prospectus) will be an interesting one.

The aged care sector that this newly listed company will occupy is a fast growing and profitable one for companies that run the right business model and manage their clients well.

As well as numerous independent aged care homes and larger privately owned chains a listed Summerset will compete with two NZX listed companies. Metlifecare Ltd [MET.NZX] and Ryman Healthcare Ltd [RYM.NZX]

MET has been poorly managed and is currently undergoing a capital restructure of some kind and Ryman has had stellar revenue and profit growth since its listing almost 15 years ago.

Given the promise of the sector at large, the Summerset IPO could be one of the best IPOs the NZX has seen for some years.

Management at Summerset have put an IPO value on the company of $307 million of which approximately $120 million are the proceeds of the partial sell-down of approx 30% of the company and the balance is to be majority owned by present owners Quadrant Private Equity and various members of management. Shares will be $1.40 a piece.

Lets take a closer look at this IPO to see how it stacks up.

Summerset operate 13 villages, 1,364 retirement units, 323 care beds, have over 1,700 residents and approximately 450 staff. They have an aggressive development schedule that would close to double the size of their retirement units within five years and part of the IPO funds are to fund that expansion with the bulk of the funds raised put towards paying off debt.

All good thus far with the exception of the amount of IPO funds to be used for paying off debt - why should future shareholders pay off debt from the majority 70% shareholders?

Lets looks at some numbers.

It is not until page 64 of this 144 page prospectus that we get the prospective and historical financials for the company, albeit once again tainted by the use primarily of pro-forma figures and the usage of "underlying profit" accounting terms to smooth figures that make comparisons from year to year difficult.



Total revenue over the 5 years to 2010 (pro-forma) show it has almost doubled but so have expenses and forecast figures look even less promising. Financing costs look to have taken the bulk of any profit over the years and the IPO proceeds look to ameliorate that somewhat.

Audited figures for the 2010 year saw a loss of 1.9 million dollars so the forecast for 2011 of 9.6 million and 17.2 million in 2012 (before financing costs) look to be out of the ballpark in terms of historical performance.

I like the aged care sector very much as I have invested in Ryman Healthcare and Summerset may operate their business well but it is hard to tell this because of the use of pro-forma figures.

The large debt accrued by present management will still be a worry for the new shareholders even after a small portion is paid off.

The lack of liquidity in the market, because current shareholders will still retain 70% of the shares, will affect minority shareholders because of the veto power of the majority shareholders so don't look for management to favour the minority if they don't have to.

Metlifecare shareholders have found this out to their detriment over the years.

This IPO is one of the best the NZX has seen for years (there have only been 3 [1,2,3]over the last 2 years and none of them spectacular) but I have reservations as the whether it is a starter for the average investor like me.

Best those interested wait for some results to the NZX before plunking down the shekels and then see the fair value for the company.


Disc I own RYM shares in the Share Investor Portfolio


Summerset IPO @ Share Investor

Summerset Prospectus
Discuss SUM @ Share Investor Forum


Metlifecare @ Share Investor

Metlifecare: Its Assets could be worth more under different management
Stock of the Week: Metlifecare Ltd
Stocks on My Watchlist: Metlifecare Ltd
Time for retirement?

Discuss Metlifecare @ Share Investor Forum
Download MET Company Reports


Ryman Healthcare @ Share Investor

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Long VS Short: Ryman Healthcare Ltd
Time for retirement?

Discuss RYM @ Share Investor Forum
Download RYM Company Reports





c Share Investor 2011

Time for Retirement?

Two new Retirement Home Village operators are going to list on the NZX in the next few months. Last week AMP announced the floating of their Retirement unit and today ING have announced that their two village's are on the block for a float to the public.

When these two operators are listed it will bring the number of listed retirement home operators to four.

These IPOs' are part of a wave of activity sweeping the retirement village sector.

CVC Partners said last month that it was looking at selling Guardian Healthcare and Goldman Sachs JBWere's private equity unit is rumoured to be looking to float, sell or raise new capital for its Vision Senior Living group.

The two IPO's also have a connection of sorts. NZ First Capital, who are floating Summerset and Forsyth Barr, who is floating ING's retirement unit, got together to float the abysmal IPO failure, Feltex, a few years ago. Reminders of overvaluations , high debt and creative accounting still resound in the investment community from that fiasco.

The ING groups' village's are by far the smallest by number of units at around 150 with only two properties, while AMPs' Summerset has 11 village's and over 1500 occupants.

ING are asking for $NZ100m while AMP are looking at 300m.

Ryman Healthcare [RYM.NZ], the biggest listed Retirement operator, has a market cap of over 1B and Metlifecare[MET.NZ]around 700m.

Ryman Healthcare has today just reiterated its profit growth for the current year at around 20%. It has been growing at this rate for many years and seems confident that it will grow at this rate for years to come.

At first glance AMP's Summerset looks like a great opportunity to get into this industry, which is growing rapidly as the population gets older. How good the offer really is will only become fully apparent as we get a look at the prospectus in a few weeks time. Until then we can reserve judgement.

On the other hand the ING offer I have some problems with. While ING is a highly reputable company, the track record of some of the participants may give cause for some restraint before plunking down your moola. Colin Reynolds was the head of the pyramid "property development" company Chase Corp which went bust in the 1980s, while Robin Congreve was involved with Fay Richwhite during the Winebox tax fiasco. Beware.

One of their villages is also 20 years old so may need some capital to fix up the paintwork and spruce up the surroundings and decor for the 21st century.

The retirement sector looks set for good growth for some years to come. With good margins and rapidly increasing and also affluent population. The baby boomers, when they do decide to relinquish their hold on the rest of us, will provide a mini-boom in this industry in 10-15 years.

The added bonus of consolidation as the players in this sector get more numerous is an added attraction. Currently the majority of retirement home living is being done by individual owners of villages, that is, operators owning just one village. Good assets are always up for sale.

Of course no investment is without risk and the retirement sector, like every other one, cannot continue to grow unabated the way it has. It will have its ups and downs.

Post prospectus of AMPs' Summerset, if the figures and management look good, I am going to buy as much as I can. If it is the golden egg that I think it is then demand is going to far outstrip supply.

Burger Fuel eat your heart out.

DISCLOSURE I own Ryman Healthcare shares

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c Share Investor 2007