Confidence in Ryman's continued good performance

Suzanne Kinnaird
Suzanne Kinnaird
Brokers are upbeat over Ryman Healthcare's 2017 outlook, following its 14th consecutive profit gain last week, with upgrades to profit expectations and share price targets.

Ryman's full year to March total revenue was up 15% to $261million and after-tax profit, without valuation gains, rose 16% to a record $158million.

Ryman owns and operates 30 retirement villages in New Zealand and Australia, with more than 10,000 residents and has four new villages planned, three in New Zealand and one in Australia, plus three more in the consenting process.

Craigs Investment Partners broker Chris Timms maintained a "hold'' recommendation on the stock, but raised the share price target from $8.53 to $8.80.

Mr Timms said while there may be weakness in development profits during 2017, the growth in profits from the resale of units, underpinned by the buoyant housing market, should more than offset the weakened development profits.

"We still think Ryman will be able to deliver earnings per share growth in line with its 15% medium-term target in full-year 2017,'' he said.

Forsyth Barr broker Suzanne Kinnaird retained an ``outperform'' recommendation, revising the share price target up 60c to $9.90 and underlying profit estimates for 2017 up 2% to $181 million.

She noted Ryman had reiterated its target to build 800 beds/units per year in New Zealand for full-year 2017, spread across five villages.

"Given its second village in Melbourne is taking longer than expected to get consent, total build during 2017 is expected to be lower than 2016, with no contribution expected from Australia,'' she said.

New Zealand and Australia's ageing population ensured rising demand for retirement village accommodation and aged care, in particular Ryman's hospital and dementia facilities, she said.

"Ryman remains very well positioned, given its fully integrated villages, strong brand and track record,'' Mrs Kinnaird said.

Mr Timms said the key drivers for 2016 year-on-year growth came from 21% growth in unit resale profits, both by volume and margin, and continued growth in the new unit count.

"It was very much a year of two halves, with second-half 2016 earnings jumping 25% on the first half, driven by higher new-unit sales, as four new villages opened, as well as a meaningful lift in the resale margin,'' he said.

 

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