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

<div><div><div><div><ul><li>Reliable, accurate and relevant metrics are crucial to the valuing company.</li><li>For the listed aged care operators, opaque and unusual representation of value creation has moved from a nuisance to business-critical.</li><li>There has been a near total loss of investor confidence in the aged care operators ability to generate value for shareholders. </li></ul></div></div></div></div>

Reliable, accurate and relevant metrics are crucial to the valuing company.For the listed aged care operators, opaque and unusual representation of value creation has moved from a nuisance to business-critical.There has been a near total loss of investor confidence in the aged care operators ability to generate value for shareholders. 

<ul><li>Digital Hearts Holdings is a provider of QA testing for corporate customers, the second-largest in Japan by market cap.</li><li>After a volatile FY3/24, the company expects to return to double-digit growth and margin expansion this year in preparation for the spin-off in 2025 of its enterprise-focused businesses (AGEST Group).</li><li>Similar growth rates are expected over the medium term due to the expansion of services, the provision of a wide range of adaptable solutions, and the tailwind of an acceleration in AI-driven demand for data collection and tagging.</li></ul>

Digital Hearts Holdings is a provider of QA testing for corporate customers, the second-largest in Japan by market cap.After a volatile FY3/24, the company expects to return to double-digit growth and margin expansion this year in preparation for the spin-off in 2025 of its enterprise-focused businesses (AGEST Group).Similar growth rates are expected over the medium term due to the expansion of services, the provision of a wide range of adaptable solutions, and the tailwind of an acceleration in AI-driven demand for data collection and tagging.

Ryman Healthcare - Two Growth Engines to Tap

<ul><li>At its FY24 result Ryman Healthcare's (<wbr>RYM) new management and board lifted the veil on a decade plus of opaque accounting practices and half truths.</wbr></li><li>What was behind the veil was worse than we had anticipated.</li><li>The aggressive revenue recognition and poor cash recovery of capex was largely expected. Capitalising village start up costs (now abandoned), a meaningful valuation uplift (~+NZ$400m, now written down) at directors' discretion, as well as overstating expected cash recycling from villages under construction to the tune of ~NZ$250m was not. </li></ul>

At its FY24 result Ryman Healthcare's (RYM) new management and board lifted the veil on a decade plus of opaque accounting practices and half truths.What was behind the veil was worse than we had anticipated.The aggressive revenue recognition and poor cash recovery of capex was largely expected. Capitalising village start up costs (now abandoned), a meaningful valuation uplift (~+NZ$400m, now written down) at directors' discretion, as well as overstating expected cash recycling from villages under construction to the tune of ~NZ$250m was not. 

Ryman Healthcare - A Bitter Pill to Swallow, But a Necessary One

Thematic (Sector/Industry)

<ul><li>The proposed acquisition of Arvida Group (ARV) by Stonepeak Alps BidCo injected meaningful optimism into the listed aged care sector.</li><li>And rightly so. The aged care sector is suffering from a combination of (1) a lack of confidence in the business model driven by years of weak cash generation; (2) concerns around house prices and interest rates; and (3) an overly negative outlook on care profitability.</li><li>Whilst all issues are understandable, we view them as largely backward looking. </li></ul>

The proposed acquisition of Arvida Group (ARV) by Stonepeak Alps BidCo injected meaningful optimism into the listed aged care sector.And rightly so. The aged care sector is suffering from a combination of (1) a lack of confidence in the business model driven by years of weak cash generation; (2) concerns around house prices and interest rates; and (3) an overly negative outlook on care profitability.Whilst all issues are understandable, we view them as largely backward looking. 

Aged Care Sector - M&A Arrives to Aged Care

<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. 

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 - Metrics Matter

For the listed aged care operators, opaque and unusual representation of value creation has moved from a nuisance to business-critical.

Forsyth Barr

Ryman Healthcare - Two Growth Engines to Tap

Digital Hearts Holdings is a provider of QA testing for corporate customers, the second-largest in Japan by market cap. After a volatile FY3/24,...

Forsyth Barr

Ryman Healthcare - A Bitter Pill to Swallow, But a Necessary One

At its FY24 result Ryman Healthcare's (RYM) new management and board lifted the veil on a decade plus of opaque accounting practices and half...

Forsyth Barr

Aged Care Sector - M&A Arrives to Aged Care

The proposed acquisition of Arvida Group (ARV) by Stonepeak Alps BidCo injected meaningful optimism into the listed aged care sector.

Forsyth Barr

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

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