Recent land acquisitions have lifted retirement village operator Summerset Group's development pipeline to more than eight years at its current 300-units-per-year build rate, Forsyth Barr broker Suzanne Kinnaird says.
Summerset, which has a retirement village in Dunedin, bought two additional Auckland development sites and acquired expansion land in Warkworth.
Given the size of the land bank, the sales momentum in the business and the development progress undertaken in the year to date, Summerset should comfortably beat its 300-unit target for the current financial year, she said.
Forsyth Barr had upgraded its build assumptions for the 2016 financial year and beyond to 400 units from 350. Summerset signalled at its 2014 result a move to focus on smaller villas, more apartments and a strategy to increase its number of care apartments.
That increased the density of the village and would attract older residents. In time, increasing levels of rest-home care were expected to be delivered into care apartments, freeing up the care facility to focus on higher-level hospital care, Ms Kinnaird said.
''The only material change we have made to our forecasts is lifting our forecast build rate to 400 units a year from 2016 onwards and that Summerset sells close to this level each year.''
The 2015 financial year and first-half earnings forecasts of $34.5 million and $16.3 million respectively were unchanged. Summerset would report its first-half result on August 11.
What's changed
• Underlying earnings: 2015 financial year unchanged, 2016 up 7.9%
• Share target price: increased 30c from $4.35 to $4.65.
• Rating: unchanged at outperform.
