Retirement Stock Divergence | Ryman Healthcare

25 May 2021

Global markets were higher overnight (S&P 500 index +1.0%) as investors favoured equities, and treasury yields edged lower ahead of US personal consumption prices released later this week –  another closely watched indicator of inflation.

The gains were broad based with all sectors in the green, led by the tech sector as investors jumped back into interest rate sensitive stocks as US treasury yields slipped down to 1.60% and shook off volatility which continues to plague cryptocurrency markets over the weekend. Stocks benefiting from economic reopening also gained such as airliners and cruise ships as there were more positive developments in terms of vaccine roll-outs and travel restrictions in parts of the world.

European markets (Stoxx 600 +0.1%) ended higher on a quiet day of trade with some markets closed for holiday. Most sectors were up led by real estate and tech, while financials and utilities were laggards.

Ryman Healthcare (RYM:NZX)

Retirement village operator Ryman Healthcare (RYM) shares are down -8.5% over the last two trading days since reporting a weak result for the 2021 financial year. Ryman's long standing CEO has also stepped down which has added to pessimism.

The fall has come despite realising impressive revaluation gains which saw reported net profit after tax soar to $423.1m – benefiting from a buoyant property market. Investors were concerned with Ryman's level of debt and weaker "recurring" earnings, and that the high level of debt will limit Ryman's expansive build rate which has been the main contributor to their growth over recent times. 

We have always been concerned with Ryman's lofty valuation, and this recent pull back was long over due in our view. Currently Ryman is still one of the more expensive Retirement village operators trading at 2.4x higher than its NTA (net tangible asset) per share. We do not think this is 'cheap' given the market is currently paying a premium for the sector, and still prefer Summerset as our key sector pick. 

Australia & New Zealand Market Movers

The Australian market edged higher on Monday (ASX 200 index +0.2%) as major banks lifted the market higher with most sectors in the green other than materials, as major miners were weaker.

Commodity prices were mostly weaker, with iron ore prices slipping -5.3% as China try to curb speculative and hoarding activity for iron ore, steel, copper and aluminium. The move was a “big watch out” call for Australia given China’s pattern of slapping trade tariffs on exports. This saw BHP (-1.8%), RIO (-2.2%) , Oz Minerals (-4.6%) and Fortescue Metals (-4.2%) all fall lower.

Kogan shares continued their wild ride, jumping +14.7% and reversing most of Friday's losses. 

The Healthcare sector was the best performer, with market heavyweight CSL up +1.8%, while Resmed was up +3.5% following a broker upgrade. 

The New Zealand market was lower yesterday (NZX 50 index -0.1%) dragged down by Ryman Healthcare.

The bad run for Synlait milk continues as it fell -1.6% after telling investors it expects a full year loss of $20m to $30m, versus breakeven expectations announced on 29 March. The reset comes following a detailed review of near-term prospects by refreshed management. A2 Milk also followed suit down -2.8%.

Kiwi Property group shares were up +1.7% following their 2021 full year result, set a plan for their asset developments potentially bringing forward works of their mixed use Drury site and disposal of retail assets. 

Metro Performance glass was higher following the release of a solid result for the 2021 financial year, as earnings came in towards to higher end of guidance and with comments that demand remains supportive. 

Global markets were higher overnight (S&P 500 index +1.0%) as investors favoured equities, and treasury yields edged lower ahead of US personal consumption prices released later this week - another closely watched indicator of inflation.

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