Jeremy Hutton: Milford Asset Management Equities Analyst on Ryman Healthcare entering a trading halt

Ryman Healthcare has entered a trading halt as it proposes to raise $1 billion of new capital to reduce debt and reset the balance sheet.

The retirement village operator was forced to offer shares at a significant discount to get investors on board. 

Milford Asset Management's Jeremy Hutton explains further.

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Episode Transcript

Speaker 1 (00:00):
Right now, let's have a look at the market's Jeremy
Hutton from Milford Asset Management as with us, Hey, Jeremy.

Speaker 2 (00:05):
Hey, Rian, how are you going? Yeah?

Speaker 1 (00:06):
Good? Thank you? Shareholders feeling the pain this with the
capital rays from Ryman Healthcare.

Speaker 2 (00:13):
Yeah, retirement village operator. Ryman is conducting a second massive
capital raise in as many years, asking the market for
another one billion dollars, and this is following the nine
hundred odd million it raised in February twenty twenty three.
So Ryman had to raise this money at quite a
big discount to try and get investors on board. The

(00:33):
offer price was at three dollars and five cents, and
that was almost thirty percent lower than the last closed
price on Friday before the deal. So the proceeds are
again being used to pay down debt. But the last
FADS was done at five dollars in twenty twenty three,
and Ryman at its peak was almost at fifteen dollars
in the boom time, so it's been a really painful

(00:55):
reset for Ryman shareholders as well.

Speaker 1 (00:58):
Certainly has now a new CEO at the helm, Is
she clearing the decks and calling the bottom here?

Speaker 2 (01:06):
Yeah? Potentially you know, this should take Ryman to a
much more comfortable place. Naomi James is the new CEO.
She's still relatively new in the role, but clearly of
the view that the large interest bill on the debt
was impacting the business operationally, putting a lot of pressure
on other parts of Ryman. And she has coupled this
big debt reduction with plans for big cost savings as well,

(01:30):
so trying to find another one hundred million dollars per
year of cost savings. So hopefully, you know, this is
the last reset for Ryman, but it is a massive
change from the former high flyer that we saw a
few years ago.

Speaker 1 (01:42):
Certainly, especially when you look at that share price coming
off the pig of fifteen dollars that you mentioned, what's
the growth that looked like?

Speaker 2 (01:50):
Yeah, that's the big question still out there for investors.
Ryman previously had the mantra of build, build, build, and
build its retirement units at pretty much any cost. And
you know, this did enable huge growth of the business,
but that was in more buoyant property markets, but it
also did add a huge amount of debt and clearly

(02:10):
overextended the business too much. Times have change now and
so has Rayman's near term retirement unit build rate. The
go forward build rate that they've guided to has been
slashed to about a quarter between a quarter and a
third of what it was this year. So huge changes
in their growth profile going forward.

Speaker 1 (02:31):
Yeah, big shift. How does it look against its competitors?

Speaker 2 (02:36):
Yeah, it's interesting, you know, it's a very big change
in the retirement village model intors. Investors will need to
think about that. Ryman's effectively running the business morph on
a cash flow focus, where its key pair Somerset, is
still continuing to go all in on growth. So it
does present an interesting trade off or a decision for

(02:57):
investors if they want to pick between these two retires
and operators.

Speaker 1 (03:01):
How's this effecting, because obviously this has been a massive
story this week, one of the bigger ones from over
reporting season. How's it impacting the wider inst x?

Speaker 2 (03:12):
Yeah, the inst X has had a really tough month
today so far. In February, you know, it was down
over five percent at one point, mainly as investors were
weighing up this large capital raise. And what tends to
happen in these capital raises, particularly the bigger ones, is
that investors do sell a lot of other shares to
help fund funder this, so it does create a bit
of sogginess in the market, but I do note that

(03:35):
the inst X did bounce back a bit today, up
about one percent, so investors perhaps have got their head
round this big rhyme and capital raise and have a
little bit more confidence.

Speaker 1 (03:44):
Jeremy, thank you, Jeremy Hutton Milford Aesset Management. For more
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