Thursday 25th August 2016
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Infratil chief executive Marko Bogoievski is happy with the 80 percent gain the value of the infrastructure investor's stake in retirement village operator Metlifecare, but doesn't expect the minority interest will be a long-term hold.
Wellington-based Infratil has branched out into new sectors such as retirement villages as it looks to fill its portfolio with a mix of solid cash-generating investments to help fund riskier ventures that may need capital to pursue development opportunities. Speaking after yesterday's annual meeting in Wellington, Bogoievski said Metlifecare falls into the development category with aspirations to add to its 24 existing villages and beef up its aged care services.
Infratil bought 19.9 percent of Metlifecare in October 2013 at $3.53 a share, spending $147.9 million and citing the sector and demographic trends at the time.
Bogoievski said that minority position "doesn't fit our portfolio in the long term", but was happy with how it's performed. Metlifecare recently traded at $6.36 a share, an 80 percent premium to what Infratil paid.
Metlifecare's property portfolio spans 24 villages with 4,025 units and 354 care beds and it has three more villages under construction, with a land bank that can cater to another 1,386 units and 387 care beds. That portfolio was valued at $2.52 billion as at June 30, up from $2.18 billion a year earlier.
The country's second-biggest listed retirement village operator yesterday reported a 26 percent increase in annual underlying earnings to $66.1 million in the year ended June 30. Within that Metlifecare's wage bill rose 16 percent to $4.6 million from a year earlier, which chief executive Glen Sowry was part of a plan they began a year ago to lift its investment in the company's care services, which are a key component of a potential resident's decision.
Care services accounted for about 9 percent of Metlifecare's income, and Sowry said it was "a key area we're looking to grow".
Bogoievski said Metlifecare was "playing a bit of catch-up" in the care services, with rivals Ryman Healthcare and Summerset Group already operating integrated care services at their villages.
Infratil doesn't forecast any capital expenditure or investment for Metlifecare in the 2017 financial year, though its other retirement village investment, a half-stake in RetireAustralia, is expected to require between $60 million and $70 million of capex to fund Infratil's share of new units.
Bogoievski said Australia hadn't adopted the New Zealand model of retirement village, but was slowly making inroads with the likes of Ryman's foray into Melbourne, Victoria.
Infratil is investigating different strategies such as in-home services for RetireAustralia, with govrnment policies preferring to keep people at home rather than "put them into expensive facilities or even mid-priced facilities".
The investment firm's shares recent traded at $3.36, up 2.6 percent so far this year.
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