Ryman Research Report

Ryman Healthcare Limited

Comprehensive Company Analysis

INVESTMENT RESEARCH GROUP LIMITED

July 25, 2013 PREVIEW

RYM.NZ Healthcare 25th July, 2013

Investment Research Group 1 | P a g e

Contents 1.0 Introduction ............................................................................................................................................................. 2

2.0 Analyst Recommendations & Revisions .................................................................................................................. 2

3.0 Highlights ................................................................................................................................................................. 2

4.0 Business Description ................................................................................................................................................ 4

4.1 Revenue Breakdown: .......................................................................................................................................... 4

4.1.1 Care Fees: ..................................................................................................................................................... 4

4.1.2 Management Fee: ........................................................................................................................................ 5

4.1.3 Resale: .......................................................................................................................................................... 5

4.1.4 New sales: .................................................................................................................................................... 5

5.0 Industry Overview and Competitive Positioning ..................................................................................................... 5

5.1 The Ryman Difference ......................................................................................................................................... 8

6.0 Investment Summary............................................................................................................................................... 8

6.1 Ryman continues to deliver resounding results: ................................................................................................. 8

6.2 Ryman’s Position: ................................................................................................................................................ 9

7.0 Financial Analysis ................................................................................................................................................... 10

7.1 Earnings ............................................................................................................................................................. 10

7.2 Cash Flow .......................................................................................................................................................... 10

7.3 Balance Sheet & Financing ................................................................................................................................ 11

8.0 Management & Substantial Investor Overview: .................................................................................................... 11

9.0 Investment Risks .................................................................................................................................................... 12

9.1 Property Cycles: ................................................................................................................................................. 12

9.2 Political risks: ..................................................................................................................................................... 12

9.3 Interest rate risk: ............................................................................................................................................... 12

9.4 Tax risk: ............................................................................................................................................................. 13

10.0 Market Consensus ............................................................................................................................................... 13

11.0 Summary .............................................................................................................................................................. 13

Appendices .................................................................................................................................................................. 14

Appendix i: 5 Years Consolidated Income Statement (Historical) ........................................................................... 14

Appendix ii: 5 year Consolidate Balance Sheet (Historical) ..................................................................................... 15

Appendix iii: 5 year consolidated Cash flow Statement (Historical) ....................................................................... 16

Appendix iv: Relevant Links ..................................................................................................................................... 17

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Ryman Healthcare Ltd

Current Price: $7.05

1.0 Introduction Ryman Healthcare Ltd (RYM) is the largest listed developer, owner and operator of retirement and aged care living in New Zealand. With 25 villages across the country, Ryman’s 3,500 staff offer serviced and independent apartment living, as well as rest home, hospital and dementia care to over 6,000 residents. The company was founded by Kevin Hickman and John Ryder in 1982 and was listed on the NZX in 1999.

2.0 Analyst Recommendations & Revisions

*Source: Reuters Analyst consensus 25th July, 2013

3.0 Highlights Strong balance sheet: Ryman Healthcare has a current ratio of 1.06 and a debt to equity

ratio of just 31.5%. The company often collects payment for the properties before construction begins. This allows the company to fund new builds with very little debt. Also low debt to equity ratio enables Ryman to have the cushion for increased funding to support their future growth.

Advantageous demographics: Statistics New Zealand forecasts an increase of 53.5% of people over the age of 65 from 2016 to 2031. Management indicates that Ryman is shifting focus towards targeting their services at the 75 plus market for several reasons. Welcoming guests in the higher age bracket results in higher turnover of units as resident’s health is further deteriorated and higher level care is required sooner after arrival. Also due to the higher level of care required by the older residents, Ryman can charge higher care fees.

1-5 Linear Scale Current 1 Month 2 Month 3 MonthAgo Ago Ago

1) BUY 0 0 2 22) OUTPERFORM 3 3 2 23) HOLD 2 2 1 14) UNDERPERFORM 0 0 0 0(5) SELL 1 1 1 1

Mean Rating 2.83 2.83 2.33 2.33Consensus Recommendation Hold

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Key Statistics

Shares on Issue: 497.58M

Open Price: $7.05

Market Cap: $3.507B

PE Ratio (ttm): 27.35

EPS (ttm): 27.35c

DPS (ttm): 10.0c

Div Yield (ttm): 1.42%

NTA: 146.89c

*calculated on the basis of 25th July open price

Robust dividend growth: Ryman has had a steady dividend growth over the past 12 years, achieving a 5 year average annual growth of 17.61%. We attribute this to strong profits emerging from the company’s healthy earnings. Ryman has paid out $290 million in dividends since listing in 1999 without issuing additional capital.

Expansion and opportunity in Australia: The Company purchased new sites in the Auckland suburb of Birkenhead along with Petone in Lower Hutt and informed about more land acquisitions in the year ahead, as they increase New Zealand land bank from three to four years’ stock. Ryman plans to take the expansion into Australia one step at a time, beginning with its first village in Melbourne. Ryman have commenced construction in Melbourne and plans to open it in 2014.

*PE Ratio = Price-to-earnings ratio; EPS = Earnings per share; ttm = trailing twelve month period; DPS = Dividend per share; NTA = Net tangible Asset per share.

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Ryman Research Report