Ryman praised for cautious approach

Ryman Healthcare plans to build retirement villages in Australia. Photo / Thinkstock

Ryman Healthcare's Australian push has brought praise after the company bought land in Melbourne this month.

William Curtayne of institutional investor Milford Asset Management said New Zealand companies had a poor record in Australia but Ryman was more likely to be successful because of its low-risk approach.

On November 1, Ryman said it had bought a site in Wheelers Hill, the company's first village in Australia after building 24 villages here with 3085 units and 2022 care beds.

David Kerr, Ryman chairman, said the company would apply its standard formula in Australia.

"Ryman plans to develop a medium density village along similar lines to the villages it has successfully developed in Auckland and Wellington, and plans to offer the full continuum of care including independent apartments, serviced apartments, a village centre and an aged care centre.

"Our focus will be on successfully establishing this first village in Melbourne, and learning how to adapt our model to the Australian market, while maintaining our expansion in New Zealand," said Kerr.

Curtayne said the average house price in Wheelers Hill was around A$700,000 ($920,000) making the area similar to Remuera, where the company's Edmund Hillary village is.

"However the catchment area in Wheelers Hill is greater than for most of its New Zealand villages because of higher population density. Ryman is expected to start construction of the Wheelers Hill project towards the end of 2012," Curtayne said.

"Stage one will include approximately 150 units compared with 550 new units on this side of the Tasman each year. Thus the Melbourne project will represent around 20 per cent of the company's new units in year one and about 4 per cent of Ryman's total portfolio when completed, hence Ryman is taking a measured approach towards its Australian expansion.

"There are a number of plus factors across the Tasman including a much higher population, superior unit prices and care beds are more lucrative in Australia than New Zealand.

"In general New Zealand companies have not been successful in Australia. However Ryman is reducing its downside risk by taking a cautious approach and there will be great returns for investors in the long term if the company can replicate its New Zealand success in Australia," Curtayne said.

Kerr said the Melbourne land purchase followed Howick and Waikanae purchases this year which had lifted the company's landbank to over 2500 units and beds.

This year the company announced a lift in its build rate to 550 units and beds annually and will open new villages in Gisborne, Tauranga and Christchurch.

Craig Tyson, OnePath equity investment manager, said Ryman had just released a stunning result with first half-year profits up 15 per cent in a tough market.

"Ryman is now the seventh biggest company in the NZX-50, bigger than Fisher & Paykel Healthcare. The company has not raised equity since listing in 1999 and now has a value of $1.3 billion. If you had invested $1000 in 1999, then that would have returned dividends and capital of over $14,000," Tyson said.

It would be a close call between Mainfreight and Ryman as the most successful listed company in New Zealand over the past 10 years in terms of the most important metric: returns to shareholders, Tyson said.