Ryman well placed to ride out downturn

Wednesday 2nd December 2009

Ryman Healthcare, the retirement village operator whose shares have soared almost 50% this year, is well placed to ride out the property downturn after enjoying “stupendous” earnings growth in the past four years, according to research firm Morningstar.

“Given the favorable demographics, we expect the aged care business to grow well in excess of GDP growth,” said Morningstar analyst Nachi Moghe, who rates the stock a ‘hold.’

The company’s sale of 123 new units and 196 existing units in the first half was “higher than our expectations and far higher than the 89 units built during the period,” he said.

Ryman has been expanding its suite of retirement villages, with construction of units in Auckland, Nelson, Orewa, Whangerei, New Plymouth and Christchurch after sales helped lift underlying profit in the first-half by 12% to $29 million.

The retirement village operator is anticipating a stronger performance from new sales in the second half, aiming to sell an additional 177 units, bringing the total for 2009 to 300. Re-sales in the second half probably won’t match the level of the first half.

Shares of Ryman last traded at $2.06 and have made three times the gains of the benchmark NZX 50 Index’s 15% advance this year.

Moghe said New Zealand still has a shortage of quality aged care homes and with some 3,000 people turning 85 each year, construction of new units can’t keep pace with demand.

“RYM is clearly benefiting from this trend and has taken advantage of this opportunity to increase its build rate from 250 to 300 units per year,” he said. Its current land bank of 1,138 units can support approximately four years of development activity, he said.

Ryman “has the ability to price its units competitively because it’s the lowest-cost operator in the industry’” said Moghe.

Businesswire.co.nz

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