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Forsyth Barr

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Metlifecare (MET)</h2>
FY19 Result — Initial Thoughts
Steady operating performance
The FY19 result was in line expectations with underlying profit up +4% to NZ$90.5m compared with our forecast of NZ$91.5m. The 2H dividend was 7.25 cps (+7%), also ahead of expectations. The result was driven by steady gains in all areas with resales gains the standout as expected. Operating revenue was up +7%, slightly below expectations but was offset by lower operating costs. Realised gains on resales and new sales were also very close to forecast leading to underlying EBITDA of NZ$98m, in line with our forecast.
Resales gains were a key driver and well above the pcp at $71.5m driven by higher pricing (up +6% at NZ$572k per units), margins (very attractive at 35.3% and helped by the high embed value per unit in the portfolio) and volumes (up +3%).&nbsp; Resales vacancy of uncontracted stock is around 2-3% and looks consistent with prior periods. Demand indicators remain robust with village occupancy at 97% and care occupancy at 96%.
New sales gains at NZ$16.9m were in line with our forecasts with stronger volumes (116 units) and pricing offset by weaker margins.
Softer near-term development activity flagged
The FY19 &nbsp;build rate was below expectations at 112 units versus our forecast of 148 units. As forecast 70 new care beds were built.
MET has signalled&nbsp; a more cautious build rate is expected in FY20 as it readjusts its processes in a difficult market, but expects to deliver around 280 units and beds in FY21, in line with our forecast.
Gearing has increased but remains modest at 15% and is all project related. NTA was up slightly at NZS$6.96.
Investor briefing
Conference call: 10.30am (NZ time) dial 09 950 5335, 04 830 1013 or 0800 122 360, AU 1 800 760 146. Passcode: 10001221
Result summary
<table class="table table-striped">
<tbody>
<tr>
<td>
12 months ending 30 June
</td>
<td>
FY18
</td>
<td>
FY19
</td>
<td>
Chg
</td>
<td>
Forbar
</td>
</tr>
<tr>
<td>
Revenue
</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td>
Care fees &amp; village fees
</td>
<td>
59.9
</td>
<td>
65.4
</td>
<td>
9%
</td>
<td>
67.4
</td>
</tr>
<tr>
<td>
Management fees/other
</td>
<td>
56.8
</td>
<td>
59.0
</td>
<td>
4%
</td>
<td>
62.2
</td>
</tr>
<tr>
<td>
Operating revenue
</td>
<td>
116.7
</td>
<td>
124.4
</td>
<td>
7%
</td>
<td>
129.6
</td>
</tr>
<tr>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td colspan="3">
Fair value movement of investment property
</td>
<td></td>
<td></td>
</tr>
<tr>
<td>
Realised value movement
</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td>
Resales
</td>
<td>
62.3
</td>
<td>
71.5
</td>
<td>
15%
</td>
<td>
70.3
</td>
</tr>
<tr>
<td>
New Sales
</td>
<td>
16.4
</td>
<td>
16.9
</td>
<td>
3%
</td>
<td>
17.2
</td>
</tr>
<tr>
<td>
Total realised value movement
</td>
<td>
78.7
</td>
<td>
88.4
</td>
<td>
12%
</td>
<td>
87.5
</td>
</tr>
<tr>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td>
Total underlying revenue
</td>
<td>
195.4
</td>
<td>
212.8
</td>
<td>
9%
</td>
<td>
217.1
</td>
</tr>
<tr>
<td>
Total Costs
</td>
<td>
104.0
</td>
<td>
114.8
</td>
<td>
10%
</td>
<td>
119.1
</td>
</tr>
<tr>
<td>
Total Underlying EBITDA
</td>
<td>
91.4
</td>
<td>
98.0
</td>
<td>
7%
</td>
<td>
98.1
</td>
</tr>
<tr>
<td>
Depreciation &amp; impairment
</td>
<td>
4.2
</td>
<td>
5.8
</td>
<td>
38%
</td>
<td>
4.2
</td>
</tr>
<tr>
<td>
EBIT
</td>
<td>
87.2
</td>
<td>
92.2
</td>
<td>
6%
</td>
<td>
93.8
</td>
</tr>
<tr>
<td>
Net interest
</td>
<td>
0.0
</td>
<td>
-1.7
</td>
<td></td>
<td>
-2.4
</td>
</tr>
<tr>
<td>
EBT
</td>
<td>
87.2
</td>
<td>
90.5
</td>
<td>
4%
</td>
<td>
91.5
</td>
</tr>
<tr>
<td>
Tax/other
</td>
<td>
0.0
</td>
<td>
0.0
</td>
<td></td>
<td>
0.0
</td>
</tr>
<tr>
<td>
Underlying profit
</td>
<td>
87.2
</td>
<td>
90.5
</td>
<td>
4%
</td>
<td>
91.5
</td>
</tr>
<tr>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td>
EPS - Underlying profit (cps)
</td>
<td>
49.7
</td>
<td>
42.5
</td>
<td>
-15%
</td>
<td>
42.9
</td>
</tr>
<tr>
<td>
2H Dividend
</td>
<td>
6.75
</td>
<td>
7.25
</td>
<td>
7%
</td>
<td>
6.75
</td>
</tr>
<tr>
<td>
FY Dividend (cps)
</td>
<td>
10.00
</td>
<td>
11.00
</td>
<td>
10%
</td>
<td>
10.50
</td>
</tr>
<tr>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td>
NTA (per share)
</td>
<td>
6.89
</td>
<td>
$6.96
</td>
<td>
1%
</td>
<td></td>
</tr>
<tr>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td>
Key drivers
</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td>
12 months ending 30 June
</td>
<td>
FY18
</td>
<td>
FY19
</td>
<td>
Chg
</td>
<td></td>
</tr>
<tr>
<td>
Sales - new units
</td>
<td>
98.0
</td>
<td>
116.0
</td>
<td>
18%
</td>
<td>
103.6
</td>
</tr>
<tr>
<td>
Ave unit price - new sales (NZ$000)
</td>
<td>
655.0
</td>
<td>
689.0
</td>
<td>
5%
</td>
<td>
706.7
</td>
</tr>
<tr>
<td>
Sales - resold units
</td>
<td>
343.0
</td>
<td>
354.0
</td>
<td>
3%
</td>
<td>
363.1
</td>
</tr>
<tr>
<td>
Ave unit price - resales (NZ$000)
</td>
<td>
541.9
</td>
<td>
571.9
</td>
<td>
6%
</td>
<td>
578.1
</td>
</tr>
<tr>
<td>
Gross development margin (%)
</td>
<td>
26.5
</td>
<td>
21.1
</td>
<td>
-20%
</td>
<td>
23.5
</td>
</tr>
<tr>
<td>
Gross resales margin (%)
</td>
<td>
33.9
</td>
<td>
35.3
</td>
<td>
4%
</td>
<td>
33.5
</td>
</tr>
<tr>
<td>
New apartments/units
</td>
<td>
185.0
</td>
<td>
112.0
</td>
<td>
-39%
</td>
<td>
148.0
</td>
</tr>
<tr>
<td>
New beds
</td>
<td>
69.0
</td>
<td>
70.0
</td>
<td>
1%
</td>
<td>
70.0
</td>
</tr>
</tbody>
</table>
Source: Forsyth Barr analysis, company reports
<a href="http://www.forsythbarr.co.nz/about-us/our-people/research/jeremy-simpson/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://www.forsythbarr.co.nz/about-us/our-people/research/jeremy-simpson/&amp;source=gmail&amp;ust=1566870023713000&amp;usg=AFQjCNF1xw_qVzUu6L9CK4VHDB26A0Jqwg" rel="noopener">Jeremy Simpson</a>&nbsp; CFA
Director / Senior Analyst, Equities&nbsp;
<table class="table table-striped">
<tbody>
<tr>
<td>
T:&nbsp;
</td>
<td>
+64 9 368 0022
</td>
</tr>
<tr>
<td>
M:&nbsp;
</td>
<td>
+64 21 995 998
</td>
</tr>
<tr>
<td>
TF:&nbsp;
</td>
<td>
0800 367 227
</td>
</tr>
<tr>
<td>
F:&nbsp;
</td>
<td>
+64 9 368 0092
</td>
</tr>
<tr>
<td>
P:&nbsp;
</td>
<td>
PO Box 97, Auckland 1140
</td>
</tr>
<tr>
<td>
&nbsp;
</td>
<td>
&nbsp;
</td>
</tr>
<tr>
<td>
W:&nbsp;
</td>
<td>
<a href="http://www.forsythbarr.co.nz/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://www.forsythbarr.co.nz&amp;source=gmail&amp;ust=1566870023713000&amp;usg=AFQjCNFoFE9jTCCkTK_MXzeQ2xLSNfgo8Q" rel="noopener">www.forsythbarr.co.nz</a>
</td>
</tr>
<tr>
<td>Twitter:</td>
<td>
<a href="http://twitter.com/forsythbarr" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://twitter.com/forsythbarr&amp;source=gmail&amp;ust=1566870023714000&amp;usg=AFQjCNFMCALraDEIB5sdsznJu5OyQV786Q" rel="noopener">@forsythbarr</a>
</td>
</tr>
</tbody>
</table>

Metlifecare (MET)
FY19 Result — Initial Thoughts
Steady operating performance
The FY19 result was in line expectations with underlying profit up +4% to NZ$90.5m compared with our forecast of NZ$91.5m. The 2H dividend was 7.25 cps (+7%), also ahead of expectations. The result was driven by steady gains in all areas with resales gains the standout as expected. Operating revenue was up +7%, slightly below expectations but was offset by lower operating costs. Realised gains on resales and new sales were also very close to forecast leading to underlying EBITDA of NZ$98m, in line with our forecast.
Resales gains were a key driver and well above the pcp at $71.5m driven by higher pricing (up +6% at NZ$572k per units), margins (very attractive at 35.3% and helped by the high embed value per unit in the portfolio) and volumes (up +3%).&nbsp; Resales vacancy of uncontracted stock is around 2-3% and looks consistent with prior periods. Demand indicators remain robust with village occupancy at 97% and care occupancy at 96%.
New sales gains at NZ$16.9m were in line with our forecasts with stronger volumes (116 units) and pricing offset by weaker margins.
Softer near-term development activity flagged
The FY19 &nbsp;build rate was below expectations at 112 units versus our forecast of 148 units. As forecast 70 new care beds were built.
MET has signalled&nbsp; a more cautious build rate is expected in FY20 as it readjusts its processes in a difficult market, but expects to deliver around 280 units and beds in FY21, in line with our forecast.
Gearing has increased but remains modest at 15% and is all project related. NTA was up slightly at NZS$6.96.
Investor briefing
Conference call: 10.30am (NZ time) dial 09 950 5335, 04 830 1013 or 0800 122 360, AU 1 800 760 146. Passcode: 10001221
Result summary




12 months ending 30 June


FY18


FY19


Chg


Forbar




Revenue








Care fees &amp; village fees


59.9


65.4


9%


67.4




Management fees/other


56.8


59.0


4%


62.2




Operating revenue


116.7


124.4


7%


129.6











Fair value movement of investment property






Realised value movement








Resales


62.3


71.5


15%


70.3




New Sales


16.4


16.9


3%


17.2




Total realised value movement


78.7


88.4


12%


87.5











Total underlying revenue


195.4


212.8


9%


217.1




Total Costs


104.0


114.8


10%


119.1




Total Underlying EBITDA


91.4


98.0


7%


98.1




Depreciation &amp; impairment


4.2


5.8


38%


4.2




EBIT


87.2


92.2


6%


93.8




Net interest


0.0


-1.7



-2.4




EBT


87.2


90.5


4%


91.5




Tax/other


0.0


0.0



0.0




Underlying profit


87.2


90.5


4%


91.5











EPS - Underlying profit (cps)


49.7


42.5


-15%


42.9




2H Dividend


6.75


7.25


7%


6.75




FY Dividend (cps)


10.00


11.00


10%


10.50











NTA (per share)


6.89


$6.96


1%












Key drivers








12 months ending 30 June


FY18


FY19


Chg





Sales - new units


98.0


116.0


18%


103.6




Ave unit price - new sales (NZ$000)


655.0


689.0


5%


706.7




Sales - resold units


343.0


354.0


3%


363.1




Ave unit price - resales (NZ$000)


541.9


571.9


6%


578.1




Gross development margin (%)


26.5


21.1


-20%


23.5




Gross resales margin (%)


33.9


35.3


4%


33.5




New apartments/units


185.0


112.0


-39%


148.0




New beds


69.0


70.0


1%


70.0




Source: Forsyth Barr analysis, company reports
Jeremy Simpson&nbsp; CFA
Director / Senior Analyst, Equities&nbsp;




T:&nbsp;


+64 9 368 0022




M:&nbsp;


+64 21 995 998




TF:&nbsp;


0800 367 227




F:&nbsp;


+64 9 368 0092




P:&nbsp;


PO Box 97, Auckland 1140




&nbsp;


&nbsp;




W:&nbsp;


www.forsythbarr.co.nz



Twitter:

@forsythbarr





Metlifecare (MET): FY19 Result — Initial Thoughts

Metlifecare Ltd

Metlifecare (MET): FY19 Result — Initial Thoughts