Moderation in Dwelling Price to Impact Ryman’s Development Profits. FVE cut 4% to NZD 13

Narrow-moat-rated Ryman Healthcare reported first-half fiscal 2019 earnings of NZD 19.3 cents per security and guided to full-year earnings of NZD 44.6 to 47.6 cps. Our forecasts sit in the middle of the guidance range, having been trimmed to NZD 45.8 cps from NZD 46.7 cps to account for rising nurses' wages. We also trimmed the expected profit Ryman makes on newly developed independent living units, or ILU, as dwelling prices in Australia have fallen faster than anticipated, down roughly 10% over the past year. Further, Ryman’s recently acquired development sites are in Melbourne fringe locations where dwelling prices are comparatively low, impacting the expected profit on each new ILU. Following these revisions, our fair value estimate declines by 4% to NZD 13.00. Ryman continues to screen as undervalued, currently trading around NZD 11.00.