Forsyth Barr has initiated coverage on the rest-home operator, which is planning to build in Dunedin.
The sharebroker has an accumulate recommendation on the stock and a value of $1.66 a share. Summerset last traded at $1.31.
Ms Kinnaird said Summerset needed to demonstrate improvements in terms of development margins, recycling capital, development sell-down rates and growing underlying profitability before any significant re-rating was achieved.
The provision of high-quality care facilities would be a key long-term driver.
"This adds a strongly defensive quality to the cash flows."
There were about 250,000 people in New Zealand aged 75 and over, she said.
That was expected to more than double by 2032, providing a significant opportunity for investors in the sector.
However, to capitalise in the age care sector, operators needed scale and expertise in what was a complex and management intensive industry.
Summerset was well positioned to deliver strong growth in earnings and cash flows, Ms Kinnaird said.
The company was less profitable than Ryman Healthcare was when it was a similar size to Summerset now.
"We believe the key reasons include Ryman's ability to earn attractive development margins, ability to match new build with demand, resulting in a quick recycling of capital and a more profitable aged care operation." Summerset was regarded as a leading developer and operator in the industry with a successful track record of growth, she said.
The company opened its first village in 1997 in Wanganui and had continued to expand throughout New Zealand.
In the last four years, it had expanded its portfolio from 921 retirement units and 168 care beds up to 1364 retirement units and 323 care beds.
Summerset listed on the NZX on November 1 following a successful capital raising of $123.6 million. Private equity owner Quadrant reduced its holding to around 56% and $50 million had been retained to fund Summerset's growth plans.
Summerset is forecasting operating earnings for the year to December 31 of $11 million from revenue of $39.1 million. In the 2010 year it reported earnings of $8.6 million from revenue or $34.2 million.
