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Buy, sell, hold: Ryman Corp

By Jenny Ruth

Wednesday 1st October 2003

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 Jenny Ruth
Ryman builds, owns and manages retirement villages. It has 12 facilities around New Zealand and is developing a further two sites in Auckland and Napier.

Vital Statistics:
The company was founded in 1984 by Christchurch partners John Ryder and Kevin Hickman, and listed in mid-1999 after a $40.5 million capital raising with 30 million shares issued at $1.35 each. This is the only time it has asked the market for cash. Its goal is to double in size every five years - so far it's exceeded that target, having grown net assets by 2.5 times since listing, from $38.4 million in 1999 to $124 million this year. Ryman pays out about 50% of profits in dividends, keeping the rest to fund development.

It appears to have ample capacity to continue financing its progress internally, with debt at March 31 only 32% of total assets.

Sales have climbed from $31.1 million in 1999 to $94.4 million this year, and net profit has grown from $6.2 million to $15.3 million. The only year it didn't increase profit was 2002, when the net result fell 21.5% to $11.1 million. This near-unblemished track record sets Ryman apart from the patchy performances from the other three listed companies in the sector. It has won best retirement village in New Zealand awards for three years running.

Share price performance:
Volatile. The shares traded below the issue price in the first few months, then suddenly spiked through $2 in January 2000, and just as suddenly sank back to near the issue price. There was then a gradual rise, but the 2002 performance obviously disappointed and they dropped to $1.45 in April this year. By late August, they were heading back to the $1.90 level. Analysts says the shares are worth more, with James Beale at ABN Amro Craigs valuing them at $1.99 and John Cairns at Forsyth Barr saying they are worth at least $2.20, assuming the company doesn't continue developing villages. Both analysts say their estimates are conservative and recommend investors buy. Liquidity has been a major issue until recently, with 78% of the shares held by four shareholders - Ryder, Hickman, Emerald Capital and Ngai Tahu. In mid-June Ryder, who stepped down from active management in April last year, sold his stake completely and the other three reduced their holdings. The three major shareholders now own 48% between them and the company hopes to make it into the Top 50 index soon.

Current strategy:
Ryman aims to provide a continuum of care from independent apartments, through serviced studios, resthome facilities and hospitals at all its villages. The first fully fledged example of this strategy was its Rowena Jackson home in Invercargill, which became its blueprint.

Management:
Analysts cite Ryder and Hickman's management as a key factor in the company's success. While an outsider might worry about the implications of Ryder's withdrawal from the company, Hickman is showing no signs of losing interest - chief financial officer Simon Challies says Hickman has been "spurred along" since taking sole control of the top job. The company also has considerable depth of management: Challies has been with the company for five years, construction manager Ray Versey 12 years, sales manager Debbie Jarratt 14 years, and director of nursing Barbara Reynen 11 years.

Recent track record:
Challies says the two founders have been committed to keeping virtually every function in-house, rather than outsourcing, saying this gives the company far greater control and flexibility in developing its villages. The team worked on four different sites last year and has a new $100 million village in Remuera, a $20 million village in Napier and three other expansion projects in train this year. Hickman has said he expects to confirm the purchase of another site by the end of this year. But despite all this activity, the company is becoming less dependent on development profits, and is increasing its recurring income from ongoing care fees, resales of occupation rights and deferred management fees. In 2003, new sales of occupation rights accounted for 37.5% of total sales, down from 41.5% in 2000.

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