Forsyth Barr broker Lyn Howe said Summerset had confirmed demand remained strong for new and resold units and produced "strong" fourth quarter 2016 sales, total group sales rising 14%, in line with the brokerage’s expectations. Forsyth Barr’s target price remained unchanged at $5.75 and its stock recommendation remained "neutral".
"While no forward-looking statements were provided, Summerset advised it had built slightly more than its 400-unit target in full-year 2016."
Summerset, the country’s second-largest provider, is due to release its full-year 2016 result in late February.
Fourth-quarter new unit sales were up 18% at 106, ahead of the brokerage’s forecast of 97, while unit resales were down 11 at 50, compared with Forsyth Barr’s expectations of 66. Summerset has 20 villages at present, with 3230 combined units, apartments and care beds.
Overall, 2016 new sales were up 24% at 414 units, on 303 the previous year, while resales were flat at 244, compared with 245 the previous year.
"Resale numbers can move around from quarter to quarter, being dependent on when they become available, resale time, paperwork and any refurbishment requirements."
Over time, turnover rates should increase as residents’ average age rose and the portfolio grew, but those rates would be affected by Summerset’s high build rate, given new villages typically had younger residents.
She also noted while long-term growth potential was significant and Summerset had the development expertise, there was increasing execution risk when the company later on tackled large developments in Auckland.
