OCA - Oceania Group - retirement villages

[Daytr]

So they are valuing OCA at 94 - 95c, pretty similar to my valuation of 99c.

Operational performance will be key.
Are they operating at a profit?

[winner69]

As one who can extrapolate from incomplete information my forecast F24 Underlying Profit is $60.1m ...slightly more than F23 ...even though they sold heaps more

Difference between me and Forbars $45.6m extrapolation is my development gains number is a lot higher than their’s

Come end of way all will be revealed

[Balance]

For Bars brief review

Oceania Healthcare's (OCA) FY24 sales update was below our expectations. 2H24 sales softened from a solid 1H24 and is illustrative of the current subdued housing market. While recent commentary on its ‘The Helier’ development has been constructive, it appears the remainder of its new sales inventory is proving a tougher sell in the current housing market. But OCA continues to hold prices steady, and any uptick in sales activity is likely the positive catalyst the stock needs to sell its inventory and reduce debt. We still remain of the view that net debt should fall in FY25 and see this update more as a delay in its turnaround rather than a cancellation. Encouragingly, further non-core site sales at book value provide further support to its book valuation. OCA trades at ~0.45x book value and we retain our OUTPERFORM rating.

What's changed?

• Earnings: FY24/FY25/FY26 underlying earnings down -24%/-9%/-4% on slower new sales
• Target price: Decreased to NZ$0.95 (from NZ$1.02) due to lower annuity EBITDA and higher net debt.

New sales — solid sales at The Helier, softer elsewhere


OCA reported 2H24 new sales comfortably below our expectations, this is despite solid sales at its flagship The Helier development. In February OCA stated in news articles it had applications for/had sold 20 apartments and four care suites at The Helier, up from six in November (only one was settled in 1H24). These sales achieved in the six months since opening constitute ~25% of the apartments at The Helier. We believe this is a solid result, however, this implies OCA sold ~50 units from its other new sales inventory of ~330 units in 2H24. We view this as soft despite volatility in new sales period to period and the current subdued housing market backdrop.

Sales of non-core sites at book value encouraging


OCA's sale of three further non-core sites and a land parcel at book value is encouraging. This provides another data point to support the book valuations; with OCA trading at less than half its total book value we see valuation as attractive. It had seven sites held for sale at its 1H24 result and has sold four of these over the period (only one land parcel settled in 2H24). Of the NZ$40m in proceeds achieved, NZ$13m was received in 1H24, we estimate ~NZ$2m will be received in 2H24 and the remainder in 1H25.

Build rate guidance in-line, net debt higher on lower sales proceeds


OCA's FY24 deliveries and FY25 build rate guidance were in-line with our expectations and company commentary at its 1H24 result. As a result of the soft sales our net debt estimate increases and we move our expectation of peak net debt forward six months from 1H24 to FY24. Unsold new stock remains elevated for OCA and any pick up in housing market turnover will likely be the catalyst needed to sell through this and drive: (1) a reduction in net debt, (2) an uplift in earnings, and (3) a likely re-rating of the stock.

In other words, another profit downgrade.

And if I recall correctly, the 'solid sales' at its flagship The Helier were actually negotiations (or words to that effect) for 20 apartment sales?

[Daytr]

As one who can extrapolate from incomplete information my forecast F24 Underlying Profit is $60.1m ...slightly more than F23 ...even though they sold heaps more

Difference between me and Forbars $45.6m extrapolation is my development gains number is a lot higher than their’s

Come end of way all will be revealed

Yeah I am referring to operational profit, not profit from builds and resales etc.

[winner69]

Yeah I am referring to operational profit, not profit from builds and resales etc.

If operational profit means day to day profit from looking after people and running villages no doubt it will be a LOSS …but we’ll never know

But as long as the float has grown no worries eh

[ValueNZ]

That’s still 1.5% a pop. Trying to beat the indexes by 1.5% long term will be hard. Most professionals can’t do it.

As Bogle would say, fees matter.

Just coming back to this, realised you meant beating an index 1.5% YoY which is absolutely not true.

The 1.5% is just a transaction fee not a yearly fee.

To beat a hypothetical return of an index at a 8% CAGR over 30 years, I would need to generate a return of at least 8.06% CAGR after that 1.5% transaction fee at the start.

[ValueNZ]

I wouldn't sweat it too much ValueNZ, at your age I was busy buying carparts and motorcycles and haven't really got anything show for it than memories. I hope you keep making posts at 25, 30, 35 years of age etc, not to rub peoples faces in it but showing that you don't have get it perfect, you just have to stick to it and start as early as possible.

Cheers man.

Nothing wrong with making memories either. I just derive a lot of satisfaction from the process of investing and learning about companies, so it's hard for me to justify spending money on cars and other things.

[ValueNZ]

So regular 8c EPS seems likely? Thats an earnings yield of 13.1% (0.08/0.61).

That plus growth of the float around likely ~12%, it's really hard to complain too much.

That's despite being in a depressed property market.

[Rawz]

So regular 8c EPS seems likely? Thats an earnings yield of 13.1% (0.08/0.61).

That plus growth of the float around likely ~12%, it's really hard to complain too much.

That's despite being in a depressed property market.

You need to have a look at TWR and their float. EPS and float forecast to grow quicker than OCA. And their earnings yield is 16% based on recent forbar research.

[Daytr]

If operational profit means day to day profit from looking after people and running villages no doubt it will be a LOSS …but we’ll never know

But as long as the float has grown no worries eh

The way I look at it. If, and I say if the day to day operations is running at a loss it eats into the profit made from DMF, sales, resales etc.