Summerset's $60 million Bishopscourt village facility in
Dunedin. Photo by Peter McIntosh.
Summerset's stellar growth and strong share price gains
are coming in for sharp analyst and investor scrutiny as the
retirement village operator embarks on its next phase of
growth, with more than 2000 village units in the pipeline.
Summerset is expected to deliver a flat first-half result,
because of head office expansion and construction costs at
numerous sites, when it delivers its half-year report on
Forsyth Barr broker Haley Van Leeuwen said she expected a
''flat underlying result'' because of an increase in
operating costs as Summerset ''scales up'' for the next level
Of most interest to investors when Summerset reports will be
its outlook statement, mounting cost pressures, pre-sales
activity, short-term development timetable and profit margin
''Summerset is facing increased near-term cost pressures that
will negatively impact its earnings growth rate,'' she said.
Craigs Investment Partners broker Peter said since Summerset
said on July 7 that sales of new units were below
expectations - albeit with good re-sales of existing units,
its share price had deteriorated.
Since July 7, it had fallen 41c from $3.37 to trade around
''The market is trying to work out if the sector has reached
saturation point or not,'' he said.
Aside from Ryman and Metlifecare and their respective
expanding developments, private rest-home operator Oceania
could list on the stock exchange, while international
aged-healthcare company Bupa had been buying up villages, Mr
Summerset is the country's third-largest listed retirement
village operator and has a land bank equivalent to 2116
village units and 595 beds set aside at a variety of sites.
Mr McIntyre said while competitor Ryman Healthcare was the
market leader, with a better operational track record,
Summerset had made ''rapid progress'' since it emerged from
AMP ownership in 2009, albeit having a ''less proven'' track
record than Ryman.
''Overall we see Summerset as higher risk, but potentially
higher reward, if its strategy is executed well,'' Mr
Ms Van Leeuwen said Summerset was well positioned to
successfully grow its business and had the potential to
self-fund expansion by recycling capital.
''Summerset is demonstrating an ability to capitalise on
these themes, but it is also facing increasing costs
near-term as it rapidly expands,'' she said.
Ms Van Leeuwen said while first-half new sales appeared
''soft'', she expected a strong pick-up during the second
half, given the timing of new developments, plus confirmation
of a high level of pre-sales activity.
''Caregiver wage costs are increasing for the industry as a
whole and Summerset is opening a number of new care
facilities, which we expect to be loss-making initially,'' Ms
Van Leeuwen said.
Mr McIntyre also noted investors were expecting forthright
guidance from Summerset in the areas of new sales, re-sales
and new developments.
Yesterday, Summerset announced it would develop a $130
million village in the Auckland suburb of Ellerslie to
accommodate 400 people, after being granted resource consent,
The 3.8ha village will have 250 units, including townhouses,
villas, apartments and care apartments where residents can
receive rest-home level care in their homes, as well as an
80-bed care centre providing rest-home and hospital-level
It has completed a village in Manukau and is close to
finishing a village in Warkworth.
Earlier this year, the company started work on a $70 million
village in Karaka and a $120 million village on the
waterfront in Hobsonville.