Retirement operator rides high on demographics

Friday 1st October 2004

Shares in retirement village operator Ryman Healthcare have continued their good run as investors see further upside in this long-term growth sector.

The company, which operates a mix of aged-care facilities and independent units, is driving aggressive expansion as it looks to increase profits 15% a year.

Like its peers, Ryman is putting heavy emphasis on this country's ageing population, with statistics showing the number of people over 65 almost doubling by 2026.

Ryman, which reported a net profit of $15.3 million in the March year, recently acquired a new site in Christchurch and now has a landbank sufficient to provide a further 940 retirement village units and 427 resthome/hospital beds.

Forsyth Barr said in a research note this landbank supported its forecast growth profile but noted the share price was above its valuation of $2.83."To support the current price further acquisitions would have to be made."

Ryman shares have rocketed from $2.20 in January to $3.20, giving the company a market capitalisation of $315 million.

Forsyth Barr also notes the company's acquisitions of vacant land adjacent to its existing Hamilton and Lower Hutt retirement villages were encouraging as both sites had infrastructure in place.

Another significant factor for the healthcare developer's success is the general investment climate.

According to industry participants, older investors are looking for capital- gain-type assets rather than income (which remains subject to certain thresholds for people in retirement care).

Ryman not only makes a margin from developing its retirement villages and resthome facilities (it owns a building company), but also makes a margin from re-sales of apartment units, which revert back to the company when residents move on or die.

Ryman was trading according to expectations in the current financial year, chairman David Kerr told shareholders at the company's recent annual meeting.

Last month Fisher Funds Management took a 5.25% stake in the company.

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