Summerset Group Holdings Limited

SUM Details

Summerset Group Holdings Limited (NZX: SUM) is the third largest operator as well as the second largest developer of retirement villages and aged care facilities in New Zealand.

Financial Results for the H1 FY 2023

• SUM announced an underlying profit of $87.2 Mn for H1 FY 2023, reflecting the 5.7% increase on the YoY basis. In the six months ended 30 June 2023, the company recorded 483 sales comprising 241 new sales and 242 resales.
• Summerset reported the development margin of 33.5%, up from the 28.1%, for the same period last year, above the company’s longer-term expectations of development margins in the 20% - 25% range.

Key Updates

SUM reported 260 sales for the quarter ending 30 September 2023, comprising 133 new sales and 127 resales. The company has achieved a total of 743 settlements for year-to-date 2023.

Outlook

In Australia, the construction at SUM’s Cranbourne North village continues as well as remained on track to deliver the first homes in Q4 of this year. Looking ahead, the company has robust construction delivery pipeline for Q4 with the main building at Summerset Palms (Te Awa, Napier) to be delivered as well as residents moving in from November.

Key Risks

Weak global growth, volatility in the market, geopolitical tensions, etc. are some of the risks SUM faces.

Relative Valuation

P/E Based Illustrative Valuation

Stock Recommendation

Over the last three months, the stock has given a return of -5.0%. The stock has made a 52-week low and high of NZD 10.57 and NZD 8.04, respectively. The company’s performance is exposed to the risks related to the global slowdown as well as geopolitical tensions. Therefore, investors should exit the stock.

Hence, a ‘Sell’ rating has been provided on the stock at the closing price of NZD 9.94 per share, up by 0.20% as on 18^th October 2023.

Technical Overview:

Daily Price Chart

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Disclaimer

Kalkine New Zealand Limited is a Financial Advice Provider (“FAP”) and is authorised by a Class 1 Financial Advice Provider Licence issued by Financial Markets Authority (“FMA”) to provide financial advice. Kalkine provides only general financial advice through its research reports following a person becoming a member. The reports contain buy/sell/hold and other recommendations in relation to equity financial products. The recommendations and opinions [on this website] / [in this report] do not take into account any of your investment objectives, financial situation or needs. Before you make a decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement from the product issuer. You should consider the appropriateness of advice taking into account your own objectives, financial situation and needs and seek independent financial advice before making any financial decisions. If you act on the advice in the research reports, you may have to pay fees, expenses or other amounts (but not to Kalkine).  Further information about the complaints and dispute resolution process, as well as information about Kalkine’s duties are available on Kalkine’s website.  Please read our Financial Advice Provider (FAP) disclosure statement and Complaints Handling Guide, which are available on the website.