Sunday, July 20, 2008

Stocks on my Watchlist: Metlifecare Ltd

Once a darling of the NZX stockmarket, Metlifecare Ltd[MET.NZ], one of two listed retirement and elderly care village companies, the other being Ryman Healthcare [RYM.NZ], its share price now languishes at a NZ$ 4.36 close this last Friday 18 July and they announced a loss for the half year to December 31 2007 of $12.3 million.

The loss has been explained by management as a result of changes from the application of International Financial Reporting Standards (IFRS). Ryman on the other hand reported a significant increase in profit for the same period.

However, this must put in context with a market that is trying to do its best impression of a lead balloon being tossed from the Empire State Building.

So what would be so attractive to a prospective purchaser?

The fact that the sector of the economy that the MET participates in has had a history of good results and its long term future looks excellent because as we all know the elderly amongst us, save you and I, are living longer and will increasingly need and want the safety, care and security that a well managed retirement village will give them.

Of course long term success is no guarantee, but Metlifecare is a well managed company with a history of good planning, focused property development, for their individual villages and good returns for shareholders and as I have said operates in a growth industry.

Now there have been a couple of attempts over the last few years for a takeover of this company but bidders have been unsuccessful as there are several large shareholders and a couple of them declined to let the bidder have their way, Fisher Funds, the New Zealand fund manager but one of them.

The last bid for the MET was in excess of the closing price last Friday 18 July, which was well short of a stock price high of above 9 bucks Kiwi in 2007. This brings me to another reason why this company is on my radar.

In my humble opinion the current share price represents good value and aren't there heaps of them around at the moment! Net asset backing per share is $6.93, you do the math. Market conditions as they are today have cut the company's capital value by more than half, just like its listed competitor, Ryman Healthcare, which I already own.

So what, the property market, which by definition Metlifecare has exposure to, is in the doldrums. That simply ain't going to last and I wouldn't be surprised if the company isn't getting its tyres kicked by larger investors looking for good companies.

OK, I know Mr Market has got a bad case of the Wiggles right now and it is hard to "pick the market bottom", but if you are one of those guys who do the Rorschach chart predictions, do yourself a favour and stick this one on your slide rule.

I'm putting on my watchlist and looking for a weak day(yes another one) to buy.

Related Share Investor Reading

Why did you buy that stock? [Ryman Healthcare]
Time for retirement?

c Share Investor 2008

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