New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

Equity Bottom-Up

<ul><li>Ryman Healthcare (RYM) downgraded its expectations for FY24 underlying earnings by -13% at the midpoint due to weak new sales volumes and weak resales margins.</li><li>A silver lining is that net debt is expected to remain stable, likely due to lower capex.</li><li>The relative weakness in new sales (still expected to be up ~+50% from the very weak first half, but down ~-10% versus 2H23) is not that surprising, in particular as it appears to be concentrated in a few villages where the main building is yet to be completed. </li></ul>

Ryman Healthcare (RYM) downgraded its expectations for FY24 underlying earnings by -13% at the midpoint due to weak new sales volumes and weak resales margins.A silver lining is that net debt is expected to remain stable, likely due to lower capex.The relative weakness in new sales (still expected to be up ~+50% from the very weak first half, but down ~-10% versus 2H23) is not that surprising, in particular as it appears to be concentrated in a few villages where the main building is yet to be completed. 

<ul><li>Ryman Healthcare (RYM) reported a strong 1H24 result and delivered on all key markers on its path to re-establishing itself as a cash generative, sustainably growing business after three difficult years.</li><li>Specifically: (1) cash generation from existing operations swung from a negative in 1H23 to +NZ$50m in 1H24; (2) care EBITDA margins are on track to double from ~6% in FY23 to ~12% in FY24, re-tracing almost half of the drop since pre-COVID (~19% in FY20); and (3) RYM reiterated its target to be free cash flow positive in FY25 and onward. It gave substantial additional disclosure to support the credibility of that target.</li><li>None of the four major listed aged care operators have delivered a single year of positive free cash flow over the last decade. </li></ul>

Ryman Healthcare (RYM) reported a strong 1H24 result and delivered on all key markers on its path to re-establishing itself as a cash generative, sustainably growing business after three difficult years.Specifically: (1) cash generation from existing operations swung from a negative in 1H23 to +NZ$50m in 1H24; (2) care EBITDA margins are on track to double from ~6% in FY23 to ~12% in FY24, re-tracing almost half of the drop since pre-COVID (~19% in FY20); and (3) RYM reiterated its target to be free cash flow positive in FY25 and onward. It gave substantial additional disclosure to support the credibility of that target.None of the four major listed aged care operators have delivered a single year of positive free cash flow over the last decade. 

Ryman Healthcare - 1H24 Result — What a Difference a Year Makes

Thematic (Sector/Industry)

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<li>It takes approximately 15 years for a retirement village to be built and reach cash flow maturity, with an additional several decades of operational activity to follow.</li>
<li>The Aged Care sector operates on a time scale, where impacts from climate change are highly relevant.</li>
<li>In addition, the elderly are at the centre of the business model, some of the most vulnerable members of society. </li>
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It takes approximately 15 years for a retirement village to be built and reach cash flow maturity, with an additional several decades of operational activity to follow.
The Aged Care sector operates on a time scale, where impacts from climate change are highly relevant.
In addition, the elderly are at the centre of the business model, some of the most vulnerable members of society. 






<ul><li>On the face of it, little has changed in the aged care and NZ housing markets over the past six months.</li><li>House/unit prices are broadly flat and turnover remains a challenge.</li><li>But that hasn't stopped the aged care operators continuing to report record high sales numbers. </li></ul>

On the face of it, little has changed in the aged care and NZ housing markets over the past six months.House/unit prices are broadly flat and turnover remains a challenge.But that hasn't stopped the aged care operators continuing to report record high sales numbers. 

Aged Care Sector - Montgomerie-Ibbotson Aged Care Pricing Index

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>The <a href="https://www.smartkarma.com/entities/arvida-group-ltd" target="_blank" data-smartkarma-citation="entities:14485:1" rel="noopener">Arvida (ARV NZ)</a> IE considers Stonepeak’s NZ$1.70 offer fair and reasonable as it is within the NZ$1.63 to A$1.94 valuation range. </li>
<li>The transaction will require OIO approval, statutory supervisors' consent and shareholder approval. The <a href="https://www.smartkarma.com/entities/metlifecare-ltd" target="_blank" data-smartkarma-citation="entities:19219:1" rel="noopener">Metlifecare Ltd (MET NZ)</a> precedent suggests that the OIO and statutory supervisor should be forthcoming.</li>
<li>The offer is attractive and recent changes in substantial shareholders are benign. At the last close and for the 13 November payment, the gross/annualised spread was 3.0%/15.2%. </li>
</ul>


The Arvida (ARV NZ) IE considers Stonepeak’s NZ$1.70 offer fair and reasonable as it is within the NZ$1.63 to A$1.94 valuation range. 
The transaction will require OIO approval, statutory supervisors' consent and shareholder approval. The Metlifecare Ltd (MET NZ) precedent suggests that the OIO and statutory supervisor should be forthcoming.
The offer is attractive and recent changes in substantial shareholders are benign. At the last close and for the 13 November payment, the gross/annualised spread was 3.0%/15.2%. 


Arvida Group (ARV NZ): Scheme Vote on 25 September

New Zealand

Ryman Healthcare Limited provides private health care services through its development, management and operation of retirement villages, nursing homes and geriatric hospitals.  The Company's facilities are located in Christchurch, Dunedin, Invercargill and Wellington.

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Ryman Healthcare (RYM NZ)

Ryman Healthcare - A Painful Transition

Ryman Healthcare (RYM) downgraded its expectations for FY24 underlying earnings by -13% at the midpoint due to weak new sales volumes and...

Forsyth Barr

Ryman Healthcare - 1H24 Result — What a Difference a Year Makes

Ryman Healthcare (RYM) reported a strong 1H24 result and delivered on all key markers on its path to re-establishing itself as a cash...

Forsyth Barr

Aged Care Sector

It takes approximately 15 years for a retirement village to be built and reach cash flow maturity, with an additional several decades of...

Forsyth Barr

Aged Care Sector - Montgomerie-Ibbotson Aged Care Pricing Index

vOn the face of it, little has changed in the aged care and NZ housing markets over the past six months. House/unit prices are broadly flat and...

Forsyth Barr

Arvida Group (ARV NZ): Scheme Vote on 25 September

The offer is attractive and recent changes in substantial shareholders are benign. At the last close and for the 13 November payment, the gross...

Arun George

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