Forsyth Barr analyst Jeremy Simpson has downgraded his profit and dividend forecasts for Summerset Group and lowered his investment recommendation.
Mr Simpson says investors should hold off on buying Summerset shares unless they already own them.
His previous recommendation was that investors should accumulate the retirement village operator's shares, a mild form of a buy recommendation.
Mr Simpson has lowered his 12 month price target for Summerset's shares by 10 cents to $3.90 and is forecasting normalised profit for the year ending June will come in at 25.2 million dollars.
While that's still an increase of almost 16 percent on the profit Summerset reported in 2013, it's more than 8 percent lower than Mr Simpson's previous forecast.
He has also cut his forecast for the following year's profit by more than 6 percent.
Mr Simpson says Summerset is expected to open two to three new aged care facilities in the current year, the first it has opened for a number of years.
He says, typically, aged care facilities lose money in their first 12 to 24 months until they are near fully occupied.
As well, Summerset is facing higher costs.
Mr Simpson says a recent court decision granting higher wages to care givers is being appealed and any wage increases are likely to be at least partly offset by increased government funding, but the industry is already having to deal with tight margins.
He says Summerset's move to increase its building capacity to about 300 units a year will probably mean increased head office costs.
