Morningstar

Morningstar, Inc.

Equity Bottom-Up

Ryman Healthcare is a well-managed company operating retirement villages in New Zealand and Melbourne. The company stands to benefit from a fast-growing elderly demographic in New Zealand and Melbourne. We expect Ryman Healthcare's business to expand strongly during the five years to 2024, driven by new construction in New Zealand and Australia and from the resale of existing units as a result of portfolio growth. Historically, rising dwelling prices have boosted the funds retirees have to…

The slide in Melbourne dwelling prices continues, as CoreLogic reports a 9.8% decline in the median dwelling price for the year to March 2019, bringing the total decline since the peak to 10.3%. We are not overly concerned by the orderly retracement in dwelling prices as retirement living and aged care are very long-duration businesses. There is a silver lining to falling dwelling prices, as prices for development sites are falling, helping to restore initial development margins on future sites…

<p>Narrow-moat-rated Ryman Healthcare’s fiscal 2108 earnings growth of 14.2% to NZD 40.7 cents per share was 1% above our forecasts. Compositionally, Ryman’s performance was a beat, as more earnings came from reselling units, countering a temporary decline of 24% in the number of new units developed. We’ve raised our fair value estimate by 13% to NZD 11.30 mainly on raised expectations for long-term profits from reselling independent units and serviced apartments, which represent 53% of fiscal 2018…</p>

<p>As part of an investor tour, we visited Ryman Healthcare’s five Melbourne sites, and of these, only the 251 unit and 82 bed Weary Dunlop Village in Wheelers Hill is fully operational. Permits have yet to be received for the remaining four sites, but is well advanced for two. Australian demographics look very supportive of Ryman’s expansion in Australia. Given the average entry age to a retirement village is 75, the retirement and aged care sectors have very positive growth fundamentals…</p>

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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