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Ryman's dip a buying opportunity as Australian expansion looms, First NZ says

Thursday 15th August 2013

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Ryman Healthcare, the retirement village operator whose shares are the second-best performer on New Zealand's benchmark index this year, may exceed its expectations of 15 percent earnings growth, according to brokerage First NZ Capital, which rates the stock 'outperform'.

The slight pull-back in Ryman's stock price since the company's annual meeting on July 30 is an "attractive buying opportunity", First NZ said in a research note published today. Ryman's stock has dropped 2.8 percent this month, although the shares are up 52 percent so far this year, ahead of an 11 percent gain in the benchmark NZX 50 Index.

Ryman chairman David Kerr told the annual meeting that the company had, just four months into the 2014 financial year, already secured its full-year target of four new development sites in New Zealand, allaying concerns that retirement village operators would struggle to find additional sites. Construction of its first Australian village in Melbourne is well advanced and on schedule for opening in April, he said.

"Ryman has started selling the first stage of its Melbourne village, which we see as the most important catalyst for the stock in at least five years," First NZ said in its report. "Views are sufficiently divergent in the market to warrant substantial upside if the village proves a success. We firmly believe Ryman will succeed in Australia."

Ramping up its purchase of New Zealand sites, which increases the company's landbank from three to four years, frees up Ryman's team to focus on buying more Melbourne sites, First NZ said.

"We believe Ryman will surprise with the pace of Melbourne expansion," the brokerage said.

The company's comments at the annual meeting that the first quarter was in line with expectations can be interpreted as confidence that annual profit will meet or exceed the guidance of at least 15 percent earnings growth, First NZ said.

Shares in Ryman gained 0.1 percent to $6.92.

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