Metlifecare: Its Assets could be worth more under better management

It is interesting what you might find when trawling through company reports for some reason other than the one you eventually find more interesting. This is the case with Metlifecare Ltd [MET.NZ] as I was looking through their 2009 Annual Report.

As you digest the fruitless 2009 they have had, along with incentives still paid to directors who managed significant losses in 2009 and 2008 one comes across one of the most interesting things in their bloated 80 page advertisement for their directors (most NZX companies are guilty of using ten words when one would do and including unnecessary things like director bios and what they might do in the weekends in absence of hard easily understood data), the net tangible asset (NTA) backing per share - incidentally it can be found on page 75.

The NTA is roughly speaking what shareholders would get if the company were wound up and sold. With Metlifecare their assets, which are mostly in property, are difficult to assess in todays uncertain property market but NTA can be one good indication of what a company is worth if sold in part of outright.

Metlifecare's NTA was a staggering NZ$3.54 as at June 2009 while its shares traded at around $1.80 per share!

At close of trading last Thursday Metlifecare shares were trading at $2.30. Still a significant discount to its asset backing.

This tells us a number of things. Firstly the company is worth more either in part or whole being sold outright and it also tells us that management are not extracting full value for shareholders because they are running the shareholders business in a very poor manner.

It could also indicate that management and or their accountants Price Waterhouse Coopers and their valuers have grossly overvalued their properties in today's repressed property market, so beware before you jump on board the MET bus.

Ryman Healthcare [RYM.NZ] which is Metlifecare's listed successfully run rival, has an NTA of 86c per share with a $2.08 share price by comparison but has managed a record half year profit for 2009.

If asset valuations can be trusted, this company should be on anyone's watchlist as a pure play in the hope that someone decides to sniff around and pick up all or some of the company and salvage it from its mediocre management.


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


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c Share Investor 2010

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.


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c Share Investor 2008

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