Planned growth puts Ryman in good position

The Frances Hodgkins Retirement Village, overlooking St Clair. Photo by Gerard O'Brien.
The Frances Hodgkins Retirement Village, overlooking St Clair. Photo by Gerard O'Brien.
Rising star Ryman Healthcare's growth strategies are expected to underpin improved revenue and profits of between 15% and 20% when it reports its half-year performance, later this week.

The listed aged-care provider has 25 villages across New Zealand with more than 6000 residents. An announcement in July confirmed Petone would be home to its 28th village.

Earlier this year, it lifted its new-bed build rate forecast from 550 annually to 700.

About a year ago, Ryman shares were trading about $2.59 before steadily climbing to a year-high of $4.12 in mid-September, and have since traded at just over $4.

Both Forsyth Barr and Craigs Investment Partners brokerages maintain a "buy" recommendation on Ryman stock, and forecast at least 15% revenue gains, for the half to September.

Craigs Investment Partners broker Peter McIntyre said a "key" indicator for Ryman was it having "reinvested heavily" during full-year 2012 and lifted its annual build-rate forecast to 700.

"Ryman is leveraged to New Zealand's ageing population, which provides solid and sustainable market growth.

Ryman's competitive advantage lies in its capability to develop its own facilities," Mr McIntyre said.

He highlighted strong historical cashflows in recent years, of $149.4 million (2010), $133 million (2011) and $169.2 (2012) as being sufficient to support ongoing developments.

He forecast about 15% gains to both underlying profit and total operating revenues, figures respectively of $47.1 million and $85 million.

Forsyth Barr broker Peter Young forecast revenue for the first half of the 2013 year to rise 18% to $148.5 million, with earnings before interest tax, depreciation and amortisation up similarly to $84 million.

"Strong gains are expected for all areas of Ryman's operations," Mr Young said.

With its expanding village portfolio, Mr Young expected care fees would "grow strongly" and also expected increasing levels of premium payments.

"Despite the subdued economic environment, Ryman has continued to hold up its high occupancy levels and enjoy high levels of pre-sales for its new villages," he said. Occupancy and pre-sales were "critical" factors for driving growth in the sales prices, he said.

Mr McIntyre said Statistics New Zealand had estimated that during the next 20 years the number of New Zealanders over 75 would more than double, from 250,000 to 516,000, and in Australia double to 2.8 million - with its first village project for Melbourne being designed now.

However, Mr Young cautioned that growth rate was at risk for the first 12 months' operation of new care developments and extensions, as they were "typically loss making" during the first year until occupancy rates increased.

Mr Young was forecasting a realised gain of $33 million from the villages portfolio, from new sales and resales of existing occupancy advances, plus an estimate of as-yet unrealised gains of $26 million.

In Dunedin, Ryman operates the recently opened Yvette Williams Retirement Village in Roslyn and the Frances Hodgkins Retirement Village, overlooking St Clair.

-simon.hartley@odt.co.nz

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