LIC - Lifestyle Communities

[System]

Lifestyle Communities Limited (LIC) develops, owns and manages affordable independent living communities for people over the age of 55. Lifestyle Communities has five strategically located sites or villages that are either under management, development or planning with a total capacity of 1100 sites.

http://www.lifestylecommunities.com.au

 

[PinguPingu]

According to Commsec/SMH these guys are reporting today, not quite exactly sure what they do here, aged living care you own? Came up on my momentum scanner.

 

[peter2]

Not a popular company it seems.

The chart below is part of a research project and should not be considered a recommendation to buy this stock. If you want to read more about the project log in to read the P2 Weekly Portfolio thread.

Setup: Weekly key reversal off support with average volume Grade B due to my bias against sector
Buy limit: 5.30, iSL 4.80, initial target 6.30

 

[Dona Ferentes]

Not a popular company it seems.

others think differently. That consolidation around $5 lasted into May 2019; the trajectory since then has been steadily up and now $9+

And, by November 2019,

...retirement living provider Lifestyle Communities earned a 21 per cent upgrade to its price target from Goldman Sachs. The broker lifted its target on Lifestyle Communities to $10 a share, citing accelerating capital recycling that should allow the company to deliver at least two communities a year.

Goldman says the company remains self-funding with no need for additional equity, adding that its growing annuity asset base and contracting cap rates should allow it to debt-fund land acquisitions and developments.

The greater-Melbourne area also provides the company a strong tailwind because it has a lot of flat land available for development, higher population growth than the national average, and a growing proportion of retiree-aged people with no retirement savings outside the family home.

With a recent acquisition on the Bellarine Peninsula, Lifestyle Communities’ portfolio has increased by approximately 170 home sites to 3,730 which includes sites in planning, development or under management.

Business Snapshot
LIC Founded in 2003
Develop and manage land lease communities which generate long-term sustainable revenue streams:

• Focused on affordable housing for the over 55s market
• Residents own their home and lease the land upon which their home is located

The Land Lease industry

• There are 2,500 Residential Land Lease Communities (RLLC's) and caravan parks around Australia. Of those:
  - 1,650 are pure tourist parks
  - 750 are mixed use parks with tourists and permanents
  - 170 are dedicated RLLC's
• NSW and QLD represent 82% of the industry
• Victoria has the lowest saturation of RLLC's per head of population
• Estimate that 70,000 people in Australia live in RLLC's and mixed use parks (compared to 190,000 people in retirement villages)

....The high cost of housing in Australia, stimulated by tax incentives and fuelled by years of cheap credit, and the swelling ranks of senior Australians heading into retirement are perennial topics at the proverbial barbecue.

Less well known is the remarkable level of relative poverty, by global standards, of those retirees. Among the OECD nations, Australia has the third-highest rate of relative income poverty for people aged over 65 at 25.7 per cent, following Korea and Latvia. The OECD metric is based on the proportion of the population with disposable incomes of less than 50 per cent of the median household. By contrast, the Czech Republic, Denmark, France, Luxembourg, the Netherlands and the Slovak Republic have the lowest poverty rates, all between 3 per cent and 4 per cent.

The latest Household, Income, Labour Dynamics in Australia (HILDA) survey out this week also showed that people aged 65 and over face the highest level of income inequality within their age group, compared with other age cohorts. Australian retirees' nest eggs are small too. The median superannuation balance for men aged 60-64 is $110,000. For women it's $36,000. That's a long way short of the $545,000 needed for a comfortable retirement for a single person, according to the Association of Superannuation Funds of Australia.

"We fall into the trap of thinking the typical retiree is worried about their $2 million account in their SMSF and is walking down the beach in pastel knitwear with perfect teeth and a labrador," said Ross Elliott from property consultancy APP. "But it only applies to a very small minority of the population. Most people don't have the sort of money to buy their way into the typical retirement product."

But they do have enough to get into a prefab home on a manufactured housing estate. And, so goes the theory, they'll have enough left over after selling their home to top up their underfunded retirement..

...At Lifestyle Communities, which is focused on Victoria and levies a deferred management fee, site fees are $173 per single and $200 per couple per week per home. The average sales prices for those moving out of their Lifestyle home was $365,962 in the 2018 first half.

https://www.afr.com/property/reside...s-a-boom-for-listed-landlords-20180731-h13dto

 

[Dona Ferentes]

The "2020 financial year presented new challenges to trading conditions in Victoria with the onset of the COVID-19 pandemic forcing the business to adapt quickly. Lifestyle Communities’ conservative balance sheet settings saw it well placed to face the changing trading conditions with strong liquidity and capital management and an agile team. The COVID-19 pandemic had a modestly negative impact on the FY20 results with some new home settlements taking longer than anticipated to settle due to changing conditions in Victoria’s property market.

"Lifestyle Communities’ profit after tax was $42.8 million for the 2020 financial year, down 22.2% on the previous year. Lower new home settlement numbers and lower property revaluation gains were primary drivers of this result; however their impact was partially offset by a 25% increase in annuity income from site rentals and deferred management fees, which was up from $22.4 million to $28.1 million.

Lifestyle Communities’ shareholders will receive a final fully franked dividend of 2.5 cents per share, taking the total dividend for the year to 5.5 cents per share, in line with 5.5 cents per share in the prior year."

goes on to say: "The easing of restrictions in June led to an immediate increase in enquiry back to pre-COVID levels, which gives us confidence that demand will quickly pick back up when restrictions lift again.”
Quite likely a beneficiary, in the longer term? I'd suspect the elderly 'customers' would prefer to defer any move to Aged Care, and try to stay in these 'communities' for longer. Maybe the focus and service delivery could morph to meet this expectation?

 

[Dona Ferentes]

surging ahead .... closing at $21.67. ATH.... probably a 'rebound' stock?


........ and included in the S&P200 Index

 

[Dona Ferentes]

Funding Lifestyles of the Rich and somewhat famous:

how to wipe 10% off, from $22 to sub $20. But rebounding a bit today

Lifestyle Communities founder and MD James Kelly sold a $43 million stake to .. institutional investors, in a trade handled by Goldman Sachs.
The line crossed the market on Wednesday morning at $21.50 a share, which was a 2.3 per cent discount to the prior close.

His holding went from 8.8% to 6.8%

 

[Dona Ferentes]

Ally Selby: Welcome to Buy Hold Sell. I’m Ally Selby, and we have a very special one for you today. We scoured the top holdings of some of the country’s finest small-cap managers and today we’ll be taking a look at some of their favourite stocks. Today, I’m joined by Ben Rundle from Hayborough Investment Partners and Martin Hickson from 1851 Capital.

Next up we have fundie favourite Lifestyle Communities, which nearly doubled its net profit after tax in the first half. Ben over to you, is it a buy, hold, or sell?

Ben Rundle (HOLD): I think it’s a hold only on the valuation grounds. It’s one of my favourite companies. I think the management team is absolutely first class. They’ve done a great job of showing why high levels of customer service can be such a success. I really like the business, they’ve grown without using extra capital, and will continue to do so. It’s just super expensive, so it’s a hold for me.

Ally Selby: Its share prices sunk around 21 per cent year to date. Is it looking a little bit cheaper now? Is it a buy, hold, or sell?

Martin Hickson (HOLD): It’s definitely looking cheaper than it was, but I think it’s still quite expensive on 30 times PE. They’ve done a fantastic job over the last few years, got the tailwind of an ageing population supporting that business. But I think given that valuation, it’s a hold.

......................... though I'm with Aust Foundation (AFI), which mentioned it as a full disposal in the last reporting season (when it was in the $18-23 range, closing at $20 by end of Dec) ; AFI viewed the "long term prospects for Lifestyle were increasingly challenged as competitive intensity increases". ... and sold out. Now around $17

 

[Dona Ferentes]

and probably another casualty of RBA rate action? The headwind of more expensive money outweighing the tailwind of demography??
..... Lifestyle Communities down 8% today, to $13.50. Less sales, less financing, less social mobility?

 

[Dona Ferentes]

..... Lifestyle Communities down 8% today, to $13.50.

now $12.21 down 0.8% which is probably up as the ASX is tanking.

Lifestyle Communities expects to deliver between 390 and 405 new home settlements and between 140 and 150 resale settlements attracting a deferred management fee.

The company reported 322 new homes were sold and awaiting settlement at the end of April, up from 252 at the end of December.

The company reaffirmed its forecast to deliver 1100 to 1300 new home settlements and 450 to 550 resale settlements attracting a deferred management fee between FY22 and FY24.

“The supply chain in the construction industry remained under pressure in recent months, but our build program remains on track,” said LIC managing director, James Kelly. “We recently received a planning permit for our latest development at Woodlea and look forward to commencing construction soon.”

 

[Dona Ferentes]

:
1HFY23 highlights
• Four new projects launched – Woodlea, Bellarine, Phillip Island, St Leonards – The Shores
• Lifestyle Mount Duneed and Lifestyle Kaduna Park completed final settlements
• 214 new sales and 141 new home settlements
• New home settlements will be second half weighted due to project timing
• 72 Established home resales attracted a deferred management fee
• Existing debt facility increased by $150m to a total of $525m
• Signed contract to purchase a new site in Warragul
• Profit after tax decreased from $27.5m in 1HFY22 to $25.2m in 1HFY23 driven by project timing resulting in lower new home settlements in the period
• Portfolio of 5,599 home sites of which 3,334 home sites are occupied by 4,773 homeowners

...lifted dividend by 1c ... but ...increased debt and interest servicing costs .
Have to run to keep still, "the market has spoken".

 

[The Triangle]

:
1HFY23 highlights
• Four new projects launched – Woodlea, Bellarine, Phillip Island, St Leonards – The Shores
• Lifestyle Mount Duneed and Lifestyle Kaduna Park completed final settlements
• 214 new sales and 141 new home settlements
• New home settlements will be second half weighted due to project timing
• 72 Established home resales attracted a deferred management fee
• Existing debt facility increased by $150m to a total of $525m
• Signed contract to purchase a new site in Warragul
• Profit after tax decreased from $27.5m in 1HFY22 to $25.2m in 1HFY23 driven by project timing resulting in lower new home settlements in the period
• Portfolio of 5,599 home sites of which 3,334 home sites are occupied by 4,773 homeowners

...lifted dividend by 1c ... but ...increased debt and interest servicing costs .
Have to run to keep still, "the market has spoken".
View attachment 152923

I don't get it. I could see this ending badly.

Debt levels are going up big and fast (+$100m this half to $350m). Profit levels not really changing enough to match for me to be happy with the debt growth. Dividend yield is less than 1%. LIC tells is that due to accounting rules they must put all the "building/capex" in as operating costs which is why operating cashflow appears rather low... Those interest costs are hurting and going to continue to hurt.

The value investment properties on the balance sheet are also climbing, which is interesting when we're seeing builders going broke every week and we're seeing housing prices decrease all across Australia... If I get this right, they've adjusted the value of their investment properties by about $25 million upwards this past half - which is just about their entire profit $25,240,000 - If I plot up the last 6.5 years, I get the following chart below... Pretty scary.

 

[Dona Ferentes]

I keep telling my mate to sell.

 

[Dona Ferentes]

I don't get it. I could see this ending badly.

...or maybe just not going well. Down 3 per cent to mid $15 with today's news. The need for growth could be unsustainable, as is a 'revaluation strategy ' if debt is

Lifestyle Communities® Trading Update
Key Highlights:
• FY23 new home settlements expected to be in the range of 355 to 365
• The company maintains its previous guidance of delivering between 1,100 to 1,300 and 1,400 to 1,700 new home settlements between FY22 and FY24 and FY23 and FY25 respectively
• Underlying profit for the full year is expected to be in line with FY22 due to increased annuity income driven by a higher number of homes under management
• Valuations of the company’s investment properties have been completed with no material change to the underlying valuation assumptions, resulting in a full year underlying fair value adjustment of approximately $70 million pre-tax
• Lifestyle Communities® welcomes its 5,000th homeowner in June
• Six out of seven project launches planned for FY23 have been completed. The remaining project is on track to commence construction in June
• Lifestyle Communities® will have eleven development projects in various stages of completion by the end of FY23

 

[Dona Ferentes]

low $17s... now raising capital

..
• Community Operations cash flows grew by 12% compared to the prior period — supported by increased homes under management and DMF
• Resales prices continue to increase — average annual capital growth over 9%

Strong operating performance from established business
• Headwinds: 13 consecutive interest rate rises and persistent high inflation
• Consumer confidence impacted by increased insolvencies in the construction sector
• Broader residential market slowdown

Challenging conditions …
• Challenging conditions create opportunities to buy additional land
• Four new land contracts signed since 30 June
• Currently reviewing an increased number of high-quality land buying opportunities
.
Cap raise entitlement @ 1 for 6.08

..... at $16.00 per share.
.
OUTLOOK
• No change to 3-year guidance .... expect 1,400 to 1,700 settlements between FY24 and FY26
• Homeowners currently taking longer to list their homes meaning some settlements expected in FY24 will now fall in FY25
• FY24 settlements are expected to be similar to last year
• Second half will see an uplift in settlements as Riverfield and Phillip Island ramp up
• Continued construction activity and spend across the projects in active development plus some early works at Yarrawonga and Ocean Grove II
• Community operations cash flow expected to continue to increase underpinned by ongoing rental and DMF annuities from the 3,673 homes under management

 

[Dona Ferentes]

low $17s... now raising capital
.
Cap raise entitlement @ 1 for 6.08
..... at $16.00 per share.

Institutional Entitlement Offer raised a total of approximately $201 million at A$16.00 per new share. The retail component of the Entitlement Offer will be open on Thursday, 29 February 2024 and is expected to raise $74 million, taking the total size of the Entitlement Offer to approximately $275 million.

and back trading
...the games they play !

 

[Dona Ferentes]

hmmm ... now $15.52

The Retail Entitlement Offer closed on Thursday, 14 March 2024. It raised approx. $74 million at the offer price of $16.00 per new share, taking the total amount raised under the Entitlement Offer to $275 million.

Eligible retail shareholders took up approximately 0.8 million new shares under the Retail Entitlement Offer, representing a take-up of approximately 17.2% of the new shares available under the Retail Entitlement Offer. The approximately 3.8 million new shares that were not taken up under the Retail Entitlement Offer will be allocated to sub-underwriters of the Retail Entitlement Offer.

 

[Dona Ferentes]

I don't get it. I could see this ending badly..

FY24 Trading Update
Lifestyle Communities currently has 432 new homes that have either settled during FY24 or that are contracted, will be ‘construction complete’ and available for settlement before 30 June 2024. When we announced our half year results, we expected circa 350 new homes to settle in FY24 based on pre-sales contracts we held at that time and the experience from prior years of conversion rates. Subsequently,
beachside and northwest Melbourne locations have been slower than predicted.

Noting a typical settlement in the external market is 60 days from contract execution, at this point in the year we now have a much clearer view on which properties are likely to settle prior to 30 June 2024. Of the 432 new homes referenced:
- 290 of these homes have either already settled or have a confirmed settlement date prior to 30 June;
- The customers for 92 of these homes are marketing their existing homes for sale to facilitate their settlement with Lifestyle Communities;
- The customers for the remaining 50 homes are expected to list their existing homes for sale in the coming weeks.

As a result, new home settlements for FY24 are now estimated to be in the range of 290 to 310. This is below our previously expected new home settlements for FY24 notwithstanding we have sufficient sales and homes completed to meet or exceed that previous expectation.

Based on projects we currently have in the market, our settlement expectations for FY25 are 425 to 475. Assuming
marketing conditions and settlement timeframes persist our target new home settlement range for FY23 to FY25 will be 1,080 to 1,130. We remain comfortable with the FY24 to FY26 range of 1,400 to 1,700 new home settlements.

Managing Director, Mr James Kelly, said “Our construction program is on track, and we have no issue delivering homes for settlement when needed. We were pleased to achieve 110 new home sales in the first quarter of calendar year 2024 which indicates that demand for our product remains. It’s a matter of external timing for customers to sell their homes which remains difficult to forecast”.

 

[Dona Ferentes]

I keep telling my mate to sell.

down down .... under $11.

all very terse

Response to Media
The Board of Lifestyle Communities Limited (ASX: LIC) advises that it is aware of media coverage aired by the ABC today. The coverage includes references to allegations made by some homeowners at one of our communities at Wollert in northwest Melbourne.

Lifestyle Communities have been engaging with the group of homeowners since February 2024. The homeowners have not been satisfied with our responses and have made applications to the Victorian Civil and Administrative Tribunal (VCAT).

Lifestyle Communities respects the rights of homeowners to pursue the VCAT pathway and believes this is the appropriate forum for resolution of the matter.

Lifestyle Communities takes its compliance obligations extremely seriously and has obtained legal advice throughout its 21 years to ensure it operates in accordance with relevant legislation, and its policies are consistent with other industry operators.

Lifestyle Communities rejects the allegations made in the VCAT applications and will defend them accordingly. Deferred management fees are permissible in all states except for South Australia. In Victoria, most land lease operators charge a deferred management fee.

 

[Dona Ferentes]

Institutional Entitlement Offer raised a total of approximately $201 million at A$16.00 per new share. The retail component of the Entitlement Offer ... taking the total size of the Entitlement Offer to $275 million.

as low as $9.08 today ... some unhappy participants

FY24 Key Results, and
Forward Guidance Withdrawn​

Summary:
• Subject to finalisation of the Company’s audit, FY24 operating profit after tax expected to be in the range of $52.4m to $53.4m (FY23: $71.1m)
• New home settlements in FY24 were 311 (FY23:356) and resale settlements in FY24 were 151 (FY23: 178)
• Average time on market for established homes sold in FY24 was 63 days and average annual capital growth on those sales was 10.02%. On average, homeowners made a profit of $86k after paying the Deferred Management Fee
• Property valuations have been completed but also remain subject to finalisation of the Company’s audit. Balance sheet valuation of the investment property portfolio is $1.14 billion (FY23: $962 million). Weighted average rent capitalisation rate at the end of FY24 is 5.21% (FY23: 5.14%) and average DMF valuation at the end of FY24 is $64k per home (FY23: $61k per home)
• Lifestyle Communities announces that all forward-looking guidance it has previously provided is withdrawn due to the difficulty in quantifying the impact the uncertainty caused by recent media coverage might have on future sales and settlements