OCA - Oceania Group - retirement villages

[Beagle]

Who knows? But ten years in a senior job with one company must be some sort of record these days!

;)

Can't argue with that !

[Maverick]

Your neighbours / bowling mates must be on talking terms again with you by now Winner?

[Beagle]

Beagle - in reply to you post that seems to have gone

NZ Superfund could take just under half of Macca’s lot easy peasy in a few months

Probably would see a far greater future return from Oceania than they would ever have got from MET

Yes, I suspect they are not impressed by the board or management of MET and see the proposed takeover as a "get out of jail free" card.
Infratil weren't impressed either. As you suggest, they will be flush with cash in the next few months and looking to reinvest that, probably in the same sector.
I wonder if they're impressed by OCA's board and management or whether they will choose some other company in the sector ?

[winner69]

Your neighbours / bowling mates must be on talking terms again with you by now Winner?

Yep a lot happier - even Turners not so bad for them at the moment

Bit of a worry when punters like them get excited though ....a bit like when the shoeshine boy and taxi drivers start talking shares when the markets are at all time highs ....usually ends up in tears

[Brain]

Yes, I suspect they are not impressed by the board or management of MET and see the proposed takeover as a "get out of jail free" card.
Infratil weren't impressed either. As you suggest, they will be flush with cash in the next few months and looking to reinvest that, probably in the same sector.
I wonder if they're impressed by OCA's board and management or whether they will choose some other company in the sector ?

The board is elected by shareholders and again an again I see cases where the boards meet to eat their lunch. The shareholders collectively have the power to get rid of these guys. This seems to be a problem with the NZ listed companies there is no real accountability. In cases of poor governance shareholders sell their shares rather than doing something about it.

To me the real task in investing is to invest with the best boards and management. This is not an easy task.

[Beagle]

The board is elected by shareholders and again an again I see cases where the boards meet to eat their lunch. The shareholders collectively have the power to get rid of these guys. This seems to be a problem with the NZ listed companies there is no real accountability. In cases of poor governance shareholders sell their shares rather than doing something about it.

To me the real task in investing is to invest with the best boards and management. This is not an easy task.

Agreed and the choices are somewhat limited :)

[Food4Thought]

OCA sell off potential
...with the Maquirie Group at 11year 50bn run since GFC... keep something in the back pocket for a rainy day.

Still happy I sold half my SUM some time ago and got a heap of OCA. Hard for SUM to x2 - x5 over the next 10 years but OCA... I see potential.

Better spread of risk too. Still a big fan on SUM. It's been a long time coming and this year has started with a mighty good run.

Happy holder

[Benny1]

Wonder if the NZ super fund and Infratil would do a deal with Macca's to soak up the rest of Macca's stake?
A combined Retire Australia/OCA would give huge economies of scale...and with the MET takeover NZ Super could make a tidy play to stay invested within both the NZ and Aussie retirement sectors?
Gives an easy exit for Macca's too....
Just a thought....

[Maverick]

The rise of OCA share price lately has been very welcome but even now after such a rapid jump in a short time , it significantly languishes its peers in proportion to their own SP jumps. I can only deduct two very simple reasons why this is the case.


It still needs to demonstrate concrete evidence that its model works.

It's model is not as good as its peers and doesn't justify the same ratings


This Friday`s announcement will give solid guidance as to which answer is correct (or where abouts in between )

I'm personally expecting a substantial lift in underlying profit because the multiple retarding factors last year that are now drivers.
To explain;
Last year they were hampered by emptying operational buildings by turning customers away (hurting revenue )and retaining inefficient staff ratios ( appearing as out of control staff expenses) while rebuilding and commissioning 3 major sites. Also they obviously can't sell what had not been finished.

This HY, on day one, they have all of these 3 sites fully completed (actually had one month still to go on the Hamilton and Sands care suits), and selling down. All these three factors have fully reversed and are now working for us.

Wait there is more….the two major site developments this FY are both non operating sites. In other words, no customers are being turned away and no staff being retained ‘on hold’.

If my expectations of an underlying profit of around 34 million is even close then the above answer is “A” .I believe the market will start to accept this model and the “new kid” will start to be welcome into the fold and some good catchup will be in order.

If I'm wrong and the answer above is “B” then I might have to start looking for a job “flying rubber dog **** out of Hong Kong”

[BlackPeter]

The rise of OCA share price lately has been very welcome but even now after such a rapid jump in a short time , it significantly languishes its peers in proportion to their own SP jumps. I can only deduct two very simple reasons why this is the case.


It still needs to demonstrate concrete evidence that its model works.

It's model is not as good as its peers and doesn't justify the same ratings


This Friday`s announcement will give solid guidance as to which answer is correct (or where abouts in between )

I'm personally expecting a substantial lift in underlying profit because the multiple retarding factors last year that are now drivers.
To explain;
Last year they were hampered by emptying operational buildings by turning customers away (hurting revenue )and retaining inefficient staff ratios ( appearing as out of control staff expenses) while rebuilding and commissioning 3 major sites. Also they obviously can't sell what had not been finished.

This HY, on day one, they have all of these 3 sites fully completed (actually had one month still to go on the Hamilton and Sands care suits), and selling down. All these three factors have fully reversed and are now working for us.

Wait there is more….the two major site developments this FY are both non operating sites. In other words, no customers are being turned away and no staff being retained ‘on hold’.

If my expectations of an underlying profit of around 34 million is even close then the above answer is “A” .I believe the market will start to accept this model and the “new kid” will start to be welcome into the fold and some good catchup will be in order.

If I'm wrong and the answer above is “B” then I might have to start looking for a job “flying rubber dog **** out of Hong Kong”



Good post. I do expect this year an improved result, but assume that proper "harvest" will start next FY.

Not too fuzzed with this financial round as long as it shows that both cost and sales clearly move each into a desirable direction;

I suspect they will :);

[winner69]

Oceania reports an underlying net profit after tax* of $24.1 million for the six months ending 30 November 2019, a substantial 17.6% ($3.6 million) increase compared to the prior corresponding period

Good result ....should see share price kept its upward momentum

[winner69]

Their accounts are so complicated there is a compelling temptation to simply look at the NTA change and add any dividends paid during the period. That would save me a ton of work wouldn't it Winner.

Hope you don’t do this sum on H1 accounts, especially using the May numbers as a starting point - ie what’s happened last 6 months.

[Beagle]

Hope you don’t do this sum on H1 accounts, especially from the May numbers - ie what’s happened last 6 months.

NAV up just 1 cent, add back dividend paid during the period and you get total comprehensive change in value of just 3.5 cents per share. Ouch !!
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/347503/315683.pdf

Underlying earnings are nowhere near what Mav was hoping for and even undershot my more conservative estimate.

Sales at Sands and Meadowbank are only just meeting expectations by the look of it. (Those without sea views will be much harder to sell at the Sands in my opinion).
Care earnings from their established business model continue to deteriorate as I predicted due to increased labour costs.

First impressions, I am really quite underwhelmed. Costs keep rising at a fast rate and I continue to believe this is a company that has at best, very average discipline when it comes to internal control systems around cost.

Disc: Don't own and not intending to buy.
Good luck to holders.

[winner69]

Oceania H120 saw 42 more sales than pcp ....Underlying Earnings up $3.6m

SUM sales FY19 more or less the same as pcp ....Underlying Earnings probably up about $20m On pcp

That’s what I struggle to understand with OCA ...sell heaps more and don’t make much more

[Beagle]

It around cost control. Julian is as tough as old boots, Earl is a real people person and people pleaser. He's running it for the residents and staff. Julian knows who he's really running it for, that's the key difference right there. Earl is just too nice a guy. Need to be tough to be an effective CEO for shareholders.

[winner69]

The charismatic one will love presenting this to analysts etc ...it’s so so positive

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/347503/315683.pdf

[winner69]

Mention of a bond offer as well

Leverage increasing all the time

Borrowings up $20m while divie $13m paid out

[BlackPeter]

Good to see sales of their new units rising, but admittedly from a low base. Their sales are still only wee drops compared to a bucket full of old units (which need renovation). Much of their money goes into development of new units / renovations they plan to deliver in FY20, which clearly will make a difference if they manage to sell them as well.

Not quite sure I understand the lack of patience of some of the posters here. I see them moving into the right direction - and if they start to sell the more than 500 units they plan to deliver in FY20 (vs 55 this HY) then we will see as well a meaningful contribution to the NPAT. Sure - they have still a big overhang of older care facilities, and only bringing these numbers down (by converting them into newer more lucrative units) will over time meaningful improve their cost base and profit.

Having said that - the dividend paid out of care isn't that bad, isn't it, and they can afford to pay it.

Compared to last year HY underlying NPAT up from $20.5m to $24.1m, IFRS NPAT more than ten-folded (admittedly on a quite small number last time), total assets up from $1.2b to $1.5b, sales volume up from 144 to 186 (and second half seems to be historically better) ... which reason would holders have to whinge?

[Beagle]

Another 2-3 years before they're 50-50 new model v ever deceasing profitability of old model.
OCA most susceptible to the rampant increase in human resource costs because they're by far the most care focused on the companies in this sector.
Stands to reason that they will continue to under perform because of this fact, i.e. their business model is conceptually weaker than others due to its substaintial exposure to ongoing significant wage and salary increases. Other companies in this sector have considerably lower exposure with significantly higher percentage of independent living units.

In a time of high wage cost increases and scarcity of staff, conceptually others in the sector have a significant relative advantage because of the significant differences in their business model.

[couta1]

Well the market seems happy otherwise it would have dropped like a stone after its run up.

[BlackPeter]

BP - Underlying Net profit before tax barely changed. Another 2-3 years before they're 50-50 new model v ever deceasing profitability of old model.
OCA most susceptible to the rampant increase in human resource costs because they're by far the most care focused on the companies in this sector.
Stands to reason that they will continue to under perform because of this fact, i.e. their business model is conceptually weaker than others due to its substaintial exposure to ongoing substantial wage and salary increasses.

Sure - good thing needs time. I recon this is the reason market rates OCA shares at this stage lower vs NPAT than it rates the other players (well, but MET).

With Ryman you buy perfection - and will get punished if it fails. With SUM you buy a faster growth machine, but while I like (and hold) SUM as well, I am wondering whether markets got with them at current a bit ahead of themselves.

With OCA you buy potential. I like potential :) and see OCA (compared to the others) as undervalued;

[couta1]

According to the Gold standard Couta ratio SUM is currently overvalued compared to both RYM and OCA.:cool:

[Beagle]

Sure - good thing needs time. I recon this is the reason market rates OCA shares at this stage lower vs NPAT than it rates the other players (well, but MET).

With Ryman you buy perfection - and will get punished if it fails. With SUM you buy a faster growth machine, but while I like (and hold) SUM as well, I am wondering whether markets got with them at current a bit ahead of themselves.

With OCA you buy potential. I like potential :) and see OCA (compared to the others) as undervalued;

Metrics are not all that dissimilar but with SUM you get much higher growth rates and management that have proven they are capable of delivering same. Potential is fine as long as you're not paying the same price as for vastly higher growth and proven expertise.


According to the Gold standard Couta ratio SUM is currently overvalued compared to both RYM and OCA.:cool:

Old wives tales are going to be completely useless going forward mate :p

[couta1]

Lol, that's what you have been trying to convince yourself of for the last 6 yrs Beagle.

[Davexl]

It around cost control. Julian is as tough as old boots, Earl is a real people person and people pleaser. He's running it for the residents and staff. Julian knows who he's really running it for, that's the key difference right there. Earl is just too nice a guy. Need to be tough to be an effective CEO for shareholders.

Call me soft-hearted, but share price demand & supply is about more than just the numbers, though I love that sustainable dividend. Most of all I love the BRAND of Oceania, "Earl is a real people person and people pleaser. He's running it for the residents and staff". That BRAND is what attracted me to Oceania, as a place my dear old Mum would've been happy in, along with the happy & professional staff taking care of them.
That BRAND is gold to me and many others, value it correctly, stick that in the accounts and carry on forward from there. Converted long term holder!

[Beagle]

Lol, that's what you have been trying to convince yourself of for the last 6 yrs Beagle.
Youi know me mate, I'm going to stick "doggedly" to my belief that earnings per share is what really matters :)


Call me soft-hearted, but share price demand & supply is about more than just the numbers, though I love that sustainable dividend. Most of all I love the BRAND of Oceania, "Earl is a real people person and people pleaser. He's running it for the residents and staff". That BRAND is what attracted me to Oceania, as a place my dear old Mum would've been happy in, along with the happy & professional staff taking care of them.
That BRAND is gold to me and many others, value it correctly, stick that in the accounts and carry on forward from there. Converted long term holder!
You're a good soul and I get where you are coming from. Other faster growing companies also have very happy residents. SUM resident satisfaction level is over 97%. I don't think Julian and his team are silly enough to think they can grow the company fast without having an incredibly high percentage of very happy residents.

My contention is simply that the staff shortage and rate of increase in staff costs and likely future difficulties with this, confers a significant advantage to sector players who have a far higher predominance of happy independent living residents than those needing high level's of care, or put another way, without facing anywhere near the same level of headwinds from staff costs SUM with their business model are considerably better positioned to continue to grow faster. I wouldn't invest in them if there was even a hint that they are doing this in an unethical way. They are well managed and well governed by an extremely experienced team.

I also like the fact that OCA are really looking after our really elderly folks who need advanced level's of care but the investment case isn't as compelling, at least in my opinion, but each to their own.

It'll be interesting to see what Maverick makes of this result. My read is if they can do ~$30m underlying in the second half that's $54m and barely any growth in last year or the year, so underlying eps on 609m shares is 8.9 cps. At $1.34 that out them on a forward PE of 15.1

PPE asset accretion has been minimal, as noted earlier, total NTA is up just 1 cent.

I have SUM on a forward FY20 PE of 14.4 growing much faster and with a vastly longer and more proven track record. I think if I bough a stake in OCA as a matter of diversification it would more than likely be a case of getting sub par returns for the sector and I can't have that because it would affect my BPI for 2020.

[Snow Leopard]

BP - Underlying Net profit before tax barely changed....

You really need to learn how to read accounts properly ;) .

[Davexl]

Thanks for the kind word Beagle. I do need to understand the numbers much better and I used to be an engineer and studied experimental physics at uni for a bit, but accounts remain a bit of a black box to me, though my grandfather was a chartered accountant and investor in the dim, dark old days in NZ history. I'm hoping for a little bit of inheritance there lol!

[Beagle]

OCA accounts are without doubt in my opinion the hardest to understand of any listed company on the NZX.

All above comments are on a "at first glance basis". Will have a detailed look at them in due course.

[Maverick]

My 34m underlying expectations were completely off, perhaps that`s even an understatement!
The main factor was the sales at The Sands are much slower now than when they first started. They sold only 4 in the last 3 months , while they sold 18 in the first 3 months.(which I had projected at that earlier rate)
However their sales at Meadow Bank are humming along as expected.
So while I am disappointed at the slow Sands sales, I am reassured by other areas and particularly the cares suite sales are nicely on track.

The other major let down was their care profit. There expenses are creeping as expected (as Beagle often and quite correctly points out) but the surprise to me is their care revenue has remained flat.At the AGM Earl stated that care profits would be inline with last year but right now they are down 24%. (and there has been 3 years of decline now)

The “care” profits continuing to decline is a large concern but the growing village portion of the profit is already dwarfing it and this gap will only widen.

There is lots of good news though,
Village profits are significantly up (about 20%)and on a very nice trajectory looking back over a few years.
They seem to be selling their care suites in line with expectations.
Their DMF revenue is rising consistently and increasingly.
A higher occupancy rate (though I`m confused as to why revenue has stagnated even with more customers), efficiencies should really start to kick in.
Higher dividend, that`s always good.
Loads of work in progress with a clear execution strategy.

I`m disappointed for now but still happy to hold as I still see a very bright future but I will certainly be following up the 2 areas mentioned.

[Joshuatree]

You really need to learn how to read accounts properly ;) .

Please share your reading of the watery ones inwards SN.

[Beagle]

The main factor was the sales at The Sands are much slower now than when they first started. They sold only 4 in the last 3 months Maverick

That has to be real worry given the real estate market In Auckland has been pretty good in this last quarter. With waterfront developments, units are separated out into two distinct categories in residents minds. Those with sea views and those without. The ones with stunning seas views will always sell quickly regardless of the price difference because there's plenty of people with plenty of money who want a first class unit. Those without a sea view is analogous to a cruise ship trying to fill inside cabins with no sea view on a cruise. Its a MUCH harder sell. The way unit sales have slowed down suggests they have a serious problem with selling non sea view units and this has to be a concern going forward.


The other major let down was their care profit. There expenses are creeping as expected (as Beagle often and quite correctly points out) but the surprise to me is their care revenue has taken quite a dive. At the AGM Earl stated that care profits would be inline with last year but right now they are down 24%. (and there has been 3 years of decline now) Maverick

Earl was very wrong to give you the guidance he did. "Blind Freddy" could tell you there was a problem coming here and this underscores my belief that its very important that investors look at the established historical trend in what is happening with any company and listen less to management's theory that they have stopped the rot. Unfortunately this ongoing trend is likely to continue as noted above as OCA has by far the greatest exposure to staff wage and salary increases in the sector. While it is true that over the long run the very gradual change in their business model to eventually get to a 60 / 40 new ORA model v old model after about 4-5 more years will ameliorate this problem, its not a problem solver per se and if they can't control costs future gains from the change in their business model with be eaten up to a large extent by care service cost increases.

My Key Reservation.
I just don't think there is great money in providing "intensive" care services to very elderly residents no matter how you slice and dice it. The real money in this sector is in selling someone a unit for $X and making 30% of $X when you do so, letting them do their own thing and then taking 30% off them when they pass on and reselling it for 2$X to the next incoming resident 7 or so years later. My contention is a simple one, the lower the number of staff involved in this "capital gain and 30% licence fee charge model" the better for shareholders.

[winner69]

OCA share price will be over $1.40 next week I reckon ...bit of a stretch for today

If punters switch from SUM to OCA it’ll go ever higher

[Beagle]

OCA share price will be over $1.40 next week I reckon ...bit of a stretch for today

If punters switch from SUM to OCA it’ll go ever higher

Why would they, more expensive on a forward PE basis and substantially lower growth. No overhang with SUM either. Notice how its MET with their lower level care model the predators are trying to take over...because that's where the real money is !

[LAC]

Decent result, esp for the long term holders. I was hoping the expenses would be a little under control by now though...

[King1212]

OCA share price will be over $1.40 next week I reckon ...bit of a stretch for today

If punters switch from SUM to OCA it’ll go ever higher


More likely switch from OCA to SUM

[trader_jackson]

When OCA released their results, its then that people begin to realize how great the one that shan't be named is (it starts with an A and ends with rvida) - its obvious they are doing a better job with a similar model... no wonder it is up more than OCA is today.

But at least OCA's NPAT is up.

[winner69]

Call me soft-hearted, but share price demand & supply is about more than just the numbers, though I love that sustainable dividend. Most of all I love the BRAND of Oceania, "Earl is a real people person and people pleaser. He's running it for the residents and staff". That BRAND is what attracted me to Oceania, as a place my dear old Mum would've been happy in, along with the happy & professional staff taking care of them.
That BRAND is gold to me and many others, value it correctly, stick that in the accounts and carry on forward from there. Converted long term holder!

Agree Dave with your general sentiments - particularly your comments about brand

Most Trusted Brand in this sector generally is Ryman (2019 Trusted Brand Report). They've lead the way for many years now. In 2019 Summerset and Bupa got a Highly Commended

So maybe Brand does count for something in share valuations

[Davexl]

Agree Dave with your general sentiments - particularly your comments about brand

Most Trusted Brand in this sector generally is Ryman (2019 Trusted Brand Report). They've lead the way for many years now. In 2019 Summerset and Bupa got a Highly Commended

So maybe Brand does count for something in share valuations

We don't do Brand valuation particularly well in NZ, goes back to our "bricks and mortar" mentality. Need to mature a bit more on this aspect IMHO.

[percy]

We don't do Brand valuation particularly well in NZ, goes back to our "bricks and mortar" mentality. Need to mature a bit more on this aspect IMHO.

Please no.
Bad enough with goodwill and intangibles valuations.
Think we are best to make our own "valuations" of brands.

[Davexl]

Please no.
Bad enough with goodwill and intangibles valuations.
Think we are best to make our own "valuations" of brands.

On that basis Percy Coca-Cola would be worth next to nothing. Brands are definitely valuable, they just need to be done right...Just sayin'

[Beagle]

Underlying Net Profit after tax 2018 $52.1m
Underlying Net Profit after tax 2019 $49.7m
Underlying Net Profit after tax 2020 $54.0m* *My estimate if they can do about $30m in the second half this year

It occurs to me that all the bells and whistles they ring about how they're changing their business model amount to ostensibly nothing as the increased costs of operations eat up all the gains. The real worry is the easy gains from sales of prime units with stunning views at the Sands and Meadowbank have already been booked and now they're into the secondary units with poor or no views which will be a much harder sell.

Growth company or just a good honest stable care service provider that's doing a good job looking after elderly residents ?, you be the judge.

Please don't start me off on the intangible asset valuation debate...oh okay I will go there just for others amusement...all I will say is as a bean counter I have never seen a value put on intangible assets that I believe in and the value has a truly remarkable habit of simply disappearing if you try and realise it. The other curious thing about intangible assets is that if you don't keep advertising to support your brand asset the brand value goes down. So yes they're an asset or sorts, but they're also a liability because intrinsically if you don't support the brand value asset with extensive amounts of expensive advertising it loses value. So that's settled then, and its clear as mud, they're an asset that confers upon the owner a liability to spend huge sums of money on a regular basis so they're both an asset and a liability... therefore what seems like a good idea is to actually net the asset off against the liability and we've come full circle and there is no value at all lol... and with that remarkable exercise in double entry accounting and offsets its time for another drink :)

In conclusion, be VERY CAUTIOUS of any company who's balance sheet is made up predominantly of intangible assets.

[value_investor]

My thoughts on the result:

- Overall a mixed result, obviously a 17% gain in underlying profit is not a bad thing. It shows the company has promise but kinks that need to be sorted out.

- A core competency is care, and the care segment has really been hampered by a staff cost that is increasing faster than the revenue on a percentage basis. Not something that you want to see, considering the care side has dipped in FY19 and FY18. The conversion of standard beds to care suites is not going to be lucrative at all for the company in a few years time I feel.

- The biggest driver for growth then falls on the development side, and the margins. The company has done unbelievably well to deliver so many projects concurrently and on time, with such 88% gain in realised margins (perhaps this is their real core competency). While, sales of new units aren't as strong as some might have hoped I understand why. A new unit in Meadowbank or Browns Bay is not accessibly to I'd say 90% of retirees. We've seen a similar thing with SUM committing to increasing their build rate and dropping it back again. The market might be a bit too saturated right now.

- Operating cash flow is up by 21% as per the cash flow statement which is very positive, supports paying a dividend a bit more which I wasn't a fan of previously considering all the spending. I'm not a fan of straddling more debt but its lesser of a factor when you can borrow at a rate with a 2 infront of it and you need it. I'm just not sure when you plan to build 265 units in the FY, and only sell 84 in the half year and you have unsold units as per the above. Its not a time to accelerate building to me but doubling down on selling them.

If you assume a YE gain of 17% underlying profit, that gives you $58.1m underlying profit. Which gives me a EPS of $0.094 and a forward PE of 14 (rounded). At the current climate, its a solid buy for the future if you see it through. The equation is if they can sell units and realise development margin faster to cover the falling care profits.

Disc: Continue to hold a small position

[trader_jackson]

Oceania has mentioned how their development margin is about 30% in Auckland... along with seeing how this margins continues to track (and among several other things) it will be interesting to see how 2 key Auckland developments (also both higher priced complexes) are going:

I will be interested in how sales are going at The Sands (64 apartments and 44 care - completed May 19)
It seemed to me this morning there were at least several units still not occupied... given it has been several months since the facility re-opened and the previous talk about "strong demand", it would be (for me) a bit of a disappointment to still see, say, over a quarter of them not yet settled

Will also be interesting to see how Meadowbank stage 4 (64 apartments and 44 care - completed May 19) sales are going, and stage 5 (26 apartments - due this FY20) is progressing

seems sales in both of these premium areas are indeed a bit slow... development margins okay at least

[Blue Skies]

Beagle ...."The real worry is the easy gains from sales of prime units with stunning views at the Sands and Meadowbank have already been booked and now they're into the secondary units with poor or no views which will be a much harder sell. "

Much as I hesitate to disagree with you Beagle, on this point I don't see this as an issue.
Whether it's St Marys Bay or Parnell or Remuera etc, not all properties have sea views, yet we know there is always strong demand & never any bargains because location is everything & not everyone can afford to buy premium.

Both the Sands & Meadowbank are top locations, & to put it crudely will be v attractive to those wanting to be with 'their sort of people' even if they can't afford the prime units with sea views, and also to those wanting to treat themselves to a brand spanking new unit.

[Jay]

Some of the St Heliers Units will have amazing views - and a premium price to go with I imagine, while other not so much.

Disc: Sold out on the latest increase and into sum other share plus HLG with about 7% divi, better than the 2 odd % from here while we wait

[Beagle]

Much as I hesitate to disagree with you Beagle, on this point I don't see this as an issue.
Whether it's St Marys Bay or Parnell or Remuera etc, not all properties have sea views, yet we know there is always strong demand & never any bargains because location is everything & not everyone can afford to buy premium.

Both the Sands & Meadowbank are top locations, & to put it crudely will be v attractive to those wanting to be with 'their sort of people' even if they can't afford the prime units with sea views, and also to those wanting to treat themselves to a brand spanking new unit.


The main factor was the sales at The Sands are much slower now than when they first started. They sold only 4 in the last 3 months , while they sold 18 in the first 3 months. Maverick


Blue Skies - What developers typically find is that there is money set aside from the wealthy waiting fore the premium units and we see evidence of that with Mavericks quoted figures wherein old money had money set aside for when the premium units became available and they got snapped up very quickly. These weren't cheap with talk that one buyer bought two of the premium units and asked for them to be reconfigured into one large one. The sales evidence above is a worry because the Auckland market has been noticeably stronger in the final quarter and yet they only sold 4.

Absolutely there's a big price difference between units with stunning sea views and those without but developers typically find the premium units a much easier sell and the numbers above very much support my contention that the remaining units will be much more difficult to shift as well as being much lower value so realised development margin on remaining units will be both slower and a lot lower.

Agree 100%, birds of a feather like to flock together :) Has always been this way and always will be.

I really don't like how the ongoing deterioration in care profitability is impacting this company and even as the new units steadily get rolled out under the new occupation right agreement model over the next few years the ongoing deterioration in care profitability looks likely to squander a lot of the gains. I think this company continues to materially underperform the sector.

[BlackPeter]

Blue Skies - What developers typically find is that there is money set aside from the wealthy waiting fore the premium units and we see evidence of that with Mavericks quoted figures wherein old money had money set aside for when the premium units became available. These weren't cheap with talk that one buyers bought two of the premium units and asked for them to be reconfigured into one large one. The sales evidence above is a worry because the Auckland market has been noticeably stronger in the final quarter and yet they only sold 4.

Absolutely there's a big price difference between units with stunning sea views and those without but developers typically find the premium units a much easier sell and the numbers above very much support my contention that the remaining units will be much more difficult to shift as well as being much lower value so realised development margin on remaining units will be both slower and a lot lower.

Agree 100%, birds of a feather like to flock together :)

I really don't like how the ongoing deterioration in care profitability is impacting this company and even as the new units steadily get rolled out under the new occupation right agreement model over the next few years the ongoing deterioration in care profitability looks likely to squander a lot of the gains.

Beagle, just wondering, how would you see the development of the age care market in NZ? It sounds like that (in your view) even companies like OCA won't be able to recover the high cost for caring for people despite them looking after the better off part of the population?

Lets face it - the only reason SUM looks better in your books is because it hardly provides any care. In a scenario where old people care becomes fast uneconomical investors will quickly pull out of this market. Does this mean that in your view there will be no market for private care, but the state will have to chip in to look after a rapidly increasing old population?

I think we all know how state care for everybody would look like. Is this what you envisage for New Zealand or will there be still a lucrative market for well off people in need of care, which OCA would be well placed to occupy?

[trader_jackson]

Beagle, just wondering, how would you see the development of the age care market in NZ if (in your view) even companies like OCA who are (at least with their new offers) caring for the better off part of the population would not be able to make a sufficient buck due to high salaries without a chance for the provider to recover their cost?

Lets face it - the only reason SUM looks better in your books is because it hardly provides any care. In a scenario where old people care becomes fast uneconomical and at the same time the number of people needing care skyrocketing due to demographic and health related reasons (obesity epidemics and similar) this could only mean that investors quickly pull out of this market, and the state having to chip, unless we expect the old people in need for care sleeping under the bridges of Auckland.

I think we all know how the alternative (state care for everybody) would look like. Is this what you envisage for New Zealand or will there be a lucrative market for well off people in need for care, which OCA would be well placed to occupy?

My very brief take on it: those that don't have a decent continuum of care will almost certainly do better in the short run, but their days are numbered in the long run
(who would want to go somewhere that has a nice apartment but little, no, or poor quality care options for when you can't be in that apartment anymore?)

[winner69]

That big tax credit gives a clue as to how much Oceania lose from non-property activities

I reckon those loses were at least $15m in H1 .....probably losses from looking after old people

In contrast it appears Arvida and Ryman make quite a lot from non-property activities while Summerset make a little.

Reading between the lines of Beagles posts losses from Oceania’s care activities might continue for some time.

[winner69]

Maybe this person with amazing credentials is going to sort out care and make it more efficient (ie not so costly)

Chief Nurse appointment
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/341073/307805.pdf

[couta1]

Maybe this person with amazing credentials is going to sort out care and make it more efficient (ie not so costly)

Chief Nurse appointment
https://quoteapi.com/resources/da9866271f9d0071/announcements/oca.nzx/341073/OCA_Dr_Frances_Hughes_appointed_as_GM_Nursing_Clin ical_Strategy.pdf I'm afraid to say it's going to be exactly the opposite but Mum's the word from me.

[Blue Skies]

Maybe time to bring this up again. Japans R&D of robotics being driven by demographics, the rapidly ageing population. Japan's govt keen & residents seem happy too.

https://www.latimes.com/world-nation/story/2019-07-25/desperate-for-workers-aging-japan-turns-to-robots-for-healthcare

[Beagle]

Beagle, just wondering, how would you see the development of the age care market in NZ? It sounds like that (in your view) even companies like OCA won't be able to recover the high cost for caring for people despite them looking after the better off part of the population?

Lets face it - the only reason SUM looks better in your books is because it hardly provides any care. In a scenario where old people care becomes fast uneconomical investors will quickly pull out of this market. Does this mean that in your view there will be no market for private care, but the state will have to chip in to look after a rapidly increasing old population?

I think we all know how state care for everybody would look like. Is this what you envisage for New Zealand or will there be still a lucrative market for well off people in need of care, which OCA would be well placed to occupy?

Hi BP,

There's no question aged care is under funded and the traditional model that still comprises the bulk of OCA's business model does not give an acceptable return on capital invested. Earl has admitted as much and said that no new facilities are being built relying solely on Govt funding as the returns are inadequate. I don't think this problem is going to improve in the years ahead with a rapidly aging population. My contention is that companies that focus on late stage intense care as their core business model, no matter how its funded whether through Govt funding, occupation right agreement or a combination thereof will underperform the sector in general due to the natural disadvantage they have with high level's of staff. OCA will be viable but will underperform the sector over time in my opinion.

Your contention that SUM hardly provide any care is quite incorrect. The vast majority of their villages provide high level's of care through to hospital level but they don't focus on this as their primary business model, its simply a balanced part of their continuum of care model. They don't make much money out of care, never have and probably never will but because its a balanced part of what they do there's plenty of profit elsewhere. https://www.summerset.co.nz/living-at-summerset/care-and-support/overview/
Their business model really works, the proof is in the ongoing strong earnings growth over many years.https://www.summerset.co.nz/why-choose-us/what-makes-summerset-different/ The acid test for me is their growth rate. You can debate this whole thing for ever and a day but SUM's results speak for themselves.
They have two senior well respected doctor's on the board and believe me they are fully cognisant of the need to provide advanced care as a balanced part of what they do.

Ryman set the benchmark for the continuum of care model and their model works very well and they're priced for absolute perfection and growing quite slowly now.
MET have found that focusing on independent living doesn't work very well as residents expect more and are changing their business model more toward that of SUM.

I will leave trader Jackson to comment on where Arvida's model fits into all this but I note their single digit underlying earnings growth and PE in the very late teens and those are not metrics that get me especially enthusiastic.

Late stage care is not lucrative for anyone no matter how you slice and dice it, that's how I see it.

With MET soon to disappear there are only 3 left that have a balanced product offer.

ARV on a forward PE of about 19 growing on average in the late single digits eps per annum
RYM on a forward PE of about 31 growing on average at about 14% per annum
SUM on a forward PE of about 14.5 growing on average at 37% per annum. (Perfectly obvious that I favour these metrics)

My contention is than any of the above is a better choice because they don't face the inherent disadvantage of having their entire business model focused on very late stage care with all the expensive wages and salaries that involves. Over time I expect all three above to continue to outperform OCA.

I acknowledge OCA sell independent living apartments but their focus is definitely toward the more elderly end of the retirement spectrum and meeting their needs and the cost of doing that is the handbrake on their earnings that hurts them on an ongoing systemic basis in my opinion.

Revenue and costs continue to deteriorate...most of the improvement in underlying profit is tax based and its a very poor quality result in that respect.
Honestly I think the current half year result is very disappointing and nothing in there makes me think its a good investment opportunity.

Originally there was a six year plan to change from the traditional Govt funded model to get to 60 / 40 new occupation right agreement v old model.
IIRC they're about 4 years away from getting to that. I think they need to move to a 100% ORA model and that may take them a decade. They could have a good business model then depending if they can get a lot more discipline around their costs.

[winner69]

Sad as it may be care of the old in care facilities will always be ‘underfunded’. That’s how governments think these days

For the likes of the big outfits it eventually will have to be a case of looking after those individuals who can afford what they wish to charge over and above any state subsidies (and they probably will become even more ‘means tested’).

As BP said this is no problem for the likes of the listed companies - there will always be enough customers for them if they balance demand (for the better off)/and supply.

[Baa_Baa]

Very interesting discussion, thanks all. Can't and won't dispute the expert analysis of the present and probable short-medium term fundamentals.

For me who has some SUM already at $5.44 and $5.70 buying the recent doldrums, I think it's over cooked on-market now and am positioning for a relax/exit if SP weakness creeps in. Despite the compelling fundamentals explained in detail here, it's too much imo to have run up $3-4 in a few months and expect it to continue unabated, so for me it's a big winner already and hence I'll take those winnings at the first confirmed sign of weakness. I do TA, so timing is everything, whether getting in or out.

OCA on the other hand is a bona fide long play imo, probably my highest conviction 'long play' purely for a modest return on the journey on the DRP - an opportunity to buy early in quantity $1.00 - $1.03 and a new pile recently $1.3 - but the potential for a 2, 3 - 5 bagger in capital gains over the next five-ten years or so, hopefully more for longer. I can't see any other multi-bagger than OCA in this sector, except possibly ARV, so I've got a few of them as well, albeit much less than OCA. The earnings are just a bonus and go straight into DRP anyway.

GLTAH.

[Beagle]

I don't forsee the earnings growth to get your multibagger for all the reasons stated above especially with current management, but good luck. I am not surprised Macquarie want out.

[Beagle]

That big tax credit gives a clue as to how much Oceania lose from non-property activities

I reckon those loses were at least $15m in H1 .....probably losses from looking after old people

In contrast it appears Arvida and Ryman make quite a lot from non-property activities while Summerset make a little.

Reading between the lines of Beagles posts losses from Oceania’s care activities might continue for some time.

I think their losses from care will go from bad to worse.

[Snow Leopard]

So nobody has bothered to get to grips with the accounts yet then!

OCA is what it is, now trades at what I consider fair value.


England is currently 'dank', weather wise, according to the weather forecaster on TV the other day.
Apparently that means 'unpleasantly dark and cold'. Seems accurate to me. :)

[couta1]

So nobody has bothered to get to grips with the accounts yet then!

OCA is what it is, now trades at what I consider fair value.


England is currently 'dank', weather wise, according to the weather forecaster on TV the other day.
Apparently that means 'unpleasantly dark and cold'. Seems accurate to me. :) Going by the market reaction to the result it would seem about fair value. PS-I wonder if Macca ain't getting ready to spit out a few more truckloads of peanuts for the bargain price around $1.25 which will then be recycled until the cows come home.

[Beagle]

So nobody has bothered to get to grips with the accounts yet then!

OCA is what it is, now trades at what I consider fair value.
England is currently 'dank', weather wise, according to the weather forecaster on TV the other day.
Apparently that means 'unpleasantly dark and cold'. Seems accurate to me. :)
Choosing to be in England in the depth's of an English winter :eek2: Hope you've grown extra thick fur in advance :)

[winner69]

My thoughts on the result:



- Operating cash flow is up by 21% as per the cash flow statement which is very positive, supports paying a dividend a bit more which I wasn't a fan of previously considering all the spending.


Retirement s sector cash flow reporting doesn’t really tell the full story even though all tout how wonderful their Operating Cash Flow is

Sale proceeds in Operating Cash Flow but the spend on building things to sell (correctly) shown as Investments

Recast cash flows look like this -

Operating Cash Flow from day to day activities............. -$23m
Proceeds from sales of ORAs .......................................$80m
Buying and building things........................................ -$71m
Actual Free Cash Flow ............................................. -$14m

Paid Dividends .................................................. ...... -$14m

TOTAL CASH OUT .................................................. . -$28m
FUNDED BY INCREASED BORROWINGS ........................$20m and $8m less in Bank


That’s how I see the money go round anyway ...still say nice that a ‘growth’ company borrows to pay a divie.

[Beagle]

That "growth" company THL have been borrowing to pay dividends for a long time now...haven't looked in a while, how's that working out for them ?

[trader_jackson]

Ah yes, net debt... that is one area where OCA has experienced rapid growth. From $84.4m in FY17 to an expected $203.6m in FY19, and $283m in FY20... up 235% in 3 years, that is more rapid than any other listed operator.

That FY20 number would be nearly as much as the 'bad old days' (the days when Roger wouldn't touch OCA with a bargepole - those days were a mere 2 years ago) when OCA was riddled with debt... that was before the IPO where $173m of the $200m IPO proceeds were dedicated to paying off the $259.1m in debt OCA had as at FY16 - OCA did a good job however, and reduced debt all the way down to $84.4m.

With the housing market now slowing down, it will be come down to how good OCA's continuum of care really is to attract people to their villages - otherwise we'll find sum things won't be selling so fast and capital recycling won't be occurring as swiftly... and that 'enormous debt' OCA is forecast to soon be riddled with again, just might turn into dangerous debt.

I believe OCA can do it, especially if it is as good as their flashy preso's and tour days, but it has silently and certainly elevated the risk profile of OCA above that of a particular other listed operator with strong continuum of care offering who are nearly as cheap with similar yield.

Posted April 2019... Net debt was $84.4m as at May 2017, and now $288.1m as at November 2019, with a 'prudent' (they say) gearing level of 31.8% (net debt to debt plus equity), this is already ahead of where sum were picking debt to be at the end of FY20 less than a year ago... well OCA certainly does have stunning rates of growth when it comes to borrowing.

No worries cause the Share price and dividend are up and its a new decade

[winner69]

Tj - That gearing of 31.8% is 56% if you include what’s been borrowed from residents.

[forest]

Posted April 2019... Net debt was $84.4m as at May 2017, and now $288.1m as at November 2019, with a 'prudent' (they say) gearing level of 31.8% (net debt to debt plus equity), this is already ahead of where sum were picking debt to be at the end of FY20 less than a year ago... well OCA certainly does have stunning rates of growth when it comes to borrowing.

No worries cause the Share price and dividend are up and its a new decade

T-J, you right that debt has risen a lot from May 17 to Nov 19. It has risen by your calculation $204mil.
But total assets have risen as well, by $600mil.
So maybe it is a case of no worries.

[Beagle]

Posted April 2019... Net debt was $84.4m as at May 2017, and now $288.1m as at November 2019, with a 'prudent' (they say) gearing level of 31.8% (net debt to debt plus equity), this is already ahead of where sum were picking debt to be at the end of FY20 less than a year ago... well OCA certainly does have stunning rates of growth when it comes to borrowing.

No worries cause the Share price and dividend are up and its a new decade

Growth in debt is fine if its reasonable and generating meaningful earnings growth...unfortunately in this case...

[forest]

I think this is an interesting slide of OCA explaining the reduced care fees while changes are being made to their brownfield sites.

[winner69]

There was a pretty hefty increase in realised gains on new sales in H1 ....from more sales and importantly from a higher average

That’s good

Somebody had to say something as thread not on front page

[Beagle]

That fancy new hire they made late last year with decades of experience http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/341073/307805.pdf at a cost of many hundreds of thousands of dollars per annum, apparently has heaps of new idea's about how care standards can be lifted significantly higher yet and apparently according to a "little birdie" has been given free rein to make whatever changes she likes irrespective of cost and with no regard to getting an acceptable return on investment whatsoever. I would be thrilled if I was a resident and quite concerned if I was a shareholder.

As previously warned, with this company residents come first, second, third, fourth and fifth and then its management and staff and then shareholders come a long and distant last.

[BlackPeter]

As previously warned, with this company residents come first, second, third, fourth and fifth and then its management and staff and then shareholders come a long and distant last.

There are plenty of experts who will tell you that the key to outstanding profits is outstanding customer service.

Obviously any company first needs to make sure it stays profitable, but after that - I can't think about any successful and sustainable company which put shareholders before customers. Can you?

Good to see OCA looking after their clients, the profits will look after themselves.

And look at it that way - who in their right mind would after reading your post still buy into a Sum village where share holders seem to come first? As a client I would want the best service I can get and go into a village where clients come first ...

Reminder: need to sell those SUM shares ...

[Beagle]

There are plenty of experts who will tell you that the key to outstanding profits is outstanding customer service.Yeah, what's return on investment?, you'd be forgiven for thinking most of senior management have never heard of that :)

Obviously any company first needs to make sure it stays profitable, but after that - I can't think about any successful and sustainable company which put shareholders before customers. Can you? The list is very long that understand that there is no point in serving customers when the process loses you money, its a company not a charity !

Good to see OCA looking after their clients, the profits will look after themselves. Yeap, that is OCA's mantra and its not working very well

And look at it that way - who in their right mind would after reading your post still buy into a Sum village where share holders seem to come first? As a client I would want the best service I can get and go into a village where clients come first … 97% resident satisfaction survey's prove you can run a highly successful company that's growing earnings strongly and still have very happy residents.

Reminder: need to sell those SUM shares … Go for it ! Your capital is clearly wasted in a fast growing successful company lol

Do you work for OCA lol. You seem to have their company culture very well embedded in your thinking :)

[justakiwi]

Which is exactly as it should be (although I would argue that staff should be their next priority, ahead of management).



As previously warned, with this company residents come first, second, third, fourth and fifth and then its management and staff and then shareholders come a long and distant last.

[Beagle]

I don't think you guys get it that OCA HAS to change its business model because the old one isn't working. Plenty of charities, (yes ones that don't need to make a profit), have gone broke or stopped late stage care operations because they cannot afford to run at a substantial loss. The core problem for shareholders is that the old care model that relies on Govt funding still represents the vast bulk of their business model and this is a huge handbrake on profit growth...it really is this simple, you either choose a company with a massive handbrake on its growth going forward or one that doesn't. I can't make it any simpler than that.
Claims that OCA residents are happier than SUM others has no basis in fact or independent survey.

[justakiwi]

Nobody is saying OCA residents are happier than SUM others. I have no idea if they are or not. What do know, as I’ve said before, is​ that the future of elderly care in NZ will need to be focussed on exactly that - care. If companies forget that, and become focussed on independent living, they will be ill prepared for what the future brings. I can’t put a time frame on it, but at some point down the track, the number one need will be rest home, hospital and dementia level care. Independent living options will not be the primary need. I get that businesses need to make money. But one would seriously hope that any retirement village/care business, would not have started up only for the money. I would hope their motivation was much more than that, and I would like to think that people who invest in these businesses are also not motivated by money alone. Sadly, I am starting to believe this is not the case.





I don't think you guys get it that OCA HAS to change its business model because the old one isn't working. Plenty of charities, (yes ones that don't need to make a profit), have gone broke or stopped late stage care operations because they cannot afford to run at a substantial loss. The core problem for shareholders is that the old care model that relies on Govt funding still represents the vast bulk of their business model and this is a huge handbrake on profit growth...it really is this simple, you either choose a company with a massive handbrake on its growth going forward or one that doesn't. I can't make it any simpler than that.
Claims that OCA residents are happier than SUM others has no basis in fact or independent survey.

[BlackPeter]

I don't think you guys get it that OCA HAS to change its business model because the old one isn't working. Plenty of charities, (yes ones that don't need to make a profit), have gone broke or stopped late stage care operations because they cannot afford to run at a substantial loss. The core problem for shareholders is that the old care model that relies on Govt funding still represents the vast bulk of their business model and this is a huge handbrake on profit growth...it really is this simple, you either choose a company with a massive handbrake on its growth going forward or one that doesn't. I can't make it any simpler than that.
Claims that OCA residents are happier than SUM others has no basis in fact or independent survey.

You made your point. I am sure some will agree and some will disagree (well, I do).

Personally - while we both agree that companies need to be profitable, we might see different priorities. You seem to think share holder money comes first and customer care might follow, I would put it the other way around. Obviously - money needs to be used to good purpose and effect - wasting it is no good no matter on which priority level it sits.

And who knows, maybe this even turns out to be similar to the hen and egg discussion (which comes first)?

[Beagle]

Nobody is saying OCA residents are happier than SUM others. I have no idea if they are or not. What do know, as I’ve said before, is​ that the future of elderly care in NZ will need to be focussed on exactly that - care. If companies forget that, and become focussed on independent living, they will be ill prepared for what the future brings. I can’t put a time frame on it, but at some point down the track, the number one need will be rest home, hospital and dementia level care. Independent living options will not be the primary need. I get that businesses need to make money. But one would seriously hope that any retirement village/care business, would not have started up only for the money. I would hope their motivation was much more than that, and I would like to think that people who invest in these businesses are also not motivated by money alone. Sadly, I am starting to believe this is not the case.

All of which SUM provide. Dr Andrew Wong Director of SUM has been managing director of Mercy Ascot Hospitals and Healthcare holdings for over a decade. I have spoken with him after the last annual meeting and I am very impressed. Dr Marie Bismark Director of SUM is the chair of SUM's clinical governance committee. She holds degrees in law, medicine, bioethics and public health and has completed a Harkness fellowship in heathcare policy at Harvard University. Marie Bismark works as a psychiatry registrar with Melbourne Health and as an associate professor at Melbourne university. The rest of SUM's board bring a good depth of other business skills and is nicely balanced 50/50 male-female.

The CEO and CFO both have extensive financial skills. Julian was formerly an investment banker and Scott Scoullar recent won the CFO of the year award.

SUM's core ethos is "If its not good enough for my MUM its not good enough for our residents". RYM have the same ethos. Both companies have demonstrated very successfully that you can run a highly profitable and strongly growing company as well as providing first class standards of care for residents. How is this possible ?

1. Their business is not massively handicapped by concentrating on very late stage care and concentrating on an old care model that's significantly underfunded.
2. Management run an efficient tightly disciplined operation that minimises waste and overstaffing wherever possible and understand that they are not a charity and there is no point in providing services at a significant loss.

I don't mix my philanthropic activities with my investment activities. That doesn't make me a bad person, it gives me very clear focus on what I am trying to achieve.
I have no reservations whatsoever that SUM are not doing a first class job providing a very good standard of living for their residents.
A "little birdie" tells me SUM have been making some very good high level "care hires" just lately and they haven't finished yet and these senior staff come from, guess where ?...yes, OCA.

SUM are transparent with their customer satisfaction survey's and 97% is a very good score in my opinion. Do OCA conduct any customer satisfaction survey's to provide some evidence that their philanthropic services lead to more highly satisfied residents ? Some of OCA's villages were originally not for profit Presbyterian Support service facilities and I strongly suspect the not for profit culture runs pretty deep with the company...which is fine for people who wish to mix their charitable and investing activities.

[justakiwi]

1. Their business is not massively handicapped by concentrating on very late stage care and concentrating on an old care model that's significantly underfunded.

So are you saying, when residents get to the point where they need “late stage care” SUM, washes their hands of them and expects their families to move them elsewhere until they die? That is not continuum of care. That is putting “late stage care” into the too hard/too expensive basket. Would you not want your Mum or Dad to be able to be cared for right through if necessary - from independent living, to rest home level, to hospital or dementia level care - all within the same facility (their home)?


2. Management run an efficient tightly disciplined operation that minimises waste and overstaffing wherever possible and understand that they are not a charity and there is no point in providing services at a significant loss.


I challenge you to show me one rest home facility in NZ (or probably anywhere actually) that is over staffed. Unless you are referring to paper pushers, in which case you may be right. But if you are talking about hands on staff, like me, no facility is over staffed. We are all well and truly understaffed, and under paid. It is a world wide issue and I suspect that SUM is no different.

[Beagle]

Stick with OCA if you like it and good luck. Not my job to spoon feed anyone on what SUM does and they certainly don't need my defence on the excellent standard of their facitlities and advanced care they provide. Read there last couple of annual reports for goodness sake before you make any more statements like the one above. The credentials of their board are second to none and they are committed to providing first class care that's got to be good enough "FOR THEIR OWN MUM" Workers have seen significant increases in their wage rates in recent years.

I've done my bit to highlight the differences between OCA's business model and others and to explain why I see OCA continuing to underperform the sector in the foreseeable future. Some people will appreciate me taking the time and others not so much, it is what it is. Good luck to holders.

[winner69]

One of the most impressive and seductive presentations I’ve seen is one CBL did a couple of years ago. It impressively outlined how their business worked, how their business model makes money and the accounting treatment of some items.

It really was an impressive and seductive presentations

Every time I see an Oceania presentation certain parts of it remind me of that CBL presentation.

[percy]

One of the most impressive and seductive presentations I’ve seen is one CBL did a couple of years ago. It impressively outlined how their business worked, how their business model makes money and the accounting treatment of some items.

It really was an impressive and seductive presentations

Every time I see an Oceania presentation certain parts of it remind me of that CBL presentation.

We laughed at Methven's presentations,until they did what they said they would do,then we brought their shares, and made money.....[Will CVT's excite us?.Will they ever do what they say they will do?l]
Some companies do what they say they will do,others don't.
The secret is buying companies that do what they say they will do.
Always easy to compare results with previous presentations.
That said, I have never understood Insurance companies,their presentations,or their results.Beyond me,so I have avoided them.

[Brain]

The general opinion seems to be that the aged care part of the business cannot be profitable. For The Sands the care units are sub $300k for an ORA with fees of $1200/week. It is quite possible that an independent apartment could be sold to a 70 year old and he/she could live to 90. I would imagine that most entrants into care probably would not have long to live. I hope Couta or Justakiwi will comment on likely average term of residency for a person in a care unit.

The higher turnover of the ORAs for the care units may possibly underpin the profit.

It is also worth noting that the care units at The Sands are almost all sold.

[justakiwi]

Interesting question. I can only speak for the one I work in (Presbyterian Support home), of 30 permanent residents. Our oldest resident is 103 and has been there for 4-5 years I believe. Our youngest is 69 (note that’s 34 years difference between youngest and oldest!). The youngest residents could very possibly be with us for another 10 years at least. On the flip side, in the 16 months I have been there, 8 residents have died in the rest home, and another 4 have died after moving to either hospital or dementia level care. Sometimes we feel a particular resident doesn’t have long left, but they surprise us and are still with us a year later. Other times a resident dies completely unexpectedly.

I found this article from 2017, which sheds some light on the subject, and is quite interesting. Particularly interesting to see the length of stay for different geographical regions.

https://www.stuff.co.nz/national/health/108004835/median-length-of-stay-in-a-rest-home-for-someone-receiving-govt-funding-is-just-17-years


I would imagine that most entrants into care probably would not have long to live. I hope Couta or Justakiwi will comment on likely average term of residency for a person in a care unit.

The higher turnover of the ORAs for the care units may possibly underpin the profit.

It is also worth noting that the care units at The Sands are almost all sold.

[Snow Leopard]

Basically no increase in real underlying profit, (when you strip out the on-paper theoretical gain of the millions of dollars of deferred tax losses that might not get realised and therefore see any real value for a decade or more), so where on earth did these one off magnificent gains from the sale of most of the prime units at the Sands and Meadowbank go ?
....


The last time you made the no increase claim I suggested that you had not read the accounts carefully and you very kindly admitted that you had not.

Obviously you have not bothered to educate yourself in the meantime and your statement is [still] complete and utter rubbish.

[Beagle]

If we completely skip the tax debate and revert to the catch absolutely everything measure of earnings, how much did their Net Asset Value go up in the period, which includes more than just NTA movement, it only went up 1 cent ! Add 2.6 cps divvy paid and total catch everything gain was just 3.6 cps for the half year...surely that's not impressing anyone...

Any way you slice and dice this it was a very disappointing result especially in the context of the company selling down many of its premium units at the Sands and Meadowbank. Where did all those extra profits go from the sales of all those premium units ? That's the $64,000 question shareholders should be seeking answers too...

I don't have a stake in this and am not short the stock so I have no vested interest. I'm predisposed towards wanting to like this stock again but at this point I don't see any good reason to do so especially relative to other opportunities.

[Brain]

Interesting question. I can only speak for the one I work in (Presbyterian Support home), of 30 permanent residents. Our oldest resident is 103 and has been there for 4-5 years I believe. Our youngest is 69 (note that’s 34 years difference between youngest and oldest!). The youngest residents could very possibly be with us for another 10 years at least. On the flip side, in the 16 months I have been there, 8 residents have died in the rest home, and another 4 have died after moving to either hospital or dementia level care. Sometimes we feel a particular resident doesn’t have long left, but they surprise us and are still with us a year later. Other times a resident dies completely unexpectedly.

I found this article from 2017, which sheds some light on the subject, and is quite interesting. Particularly interesting to see the length of stay for different geographical regions.

https://www.stuff.co.nz/national/health/108004835/median-length-of-stay-in-a-rest-home-for-someone-receiving-govt-funding-is-just-17-years

Thanks for that Justakiwi. It would seem that from your experience with 12 residents dying in the space of 16 months and also the stuff article would indicate that the turnover of the care units will be very frequent which could support Oceania’s decision to concentrate on care suites.

[Snow Leopard]

....In my opinion due to the ongoing nature of the operations it is highly unlikely the company will derive any cash benefit against its current year tax in the foreseeable future therefore I stand by my comment that the result itself and the gain in underlying profit after tax is a very poor quality one, in that it was materially boosted by deferred tax benefits that may not be realised for many years.

I am happy with my interpretation of the result....

This is really the crux of the matter.

Despite you telling all and sundry that the important metric is underlying earnings and also stating that you are 'facts orientated' around various threads and myself twice pointing out that your statement with regard to no real increase in underlying earning is not backed up by the accounts you still try to ignore the fact that underlying earning (both before and after tax) are well up.

As for your complete twaddle about the deferred tax then the accounts give the lie to that as well.

As is often the case you can not see the true numbers for your biases.
Your opinion is worthless, but I hope that you enjoy living in your own little world.

Disc: Own a few OCA, consider it trading around fair value, not buying more but will hold and see what happens down the track.

[Beagle]

If I thought this company was going to perform (even in line with the sector), I would buy some as a diversification strategy. Happy trails pussy cat.

[davflaws]

The tone has deteriorated (on this and some other threads) in the last few days and good natured jousting has given way to slightly snarky putdowns.

Lets keep trying to treat one another well even as we disagree.

[Ggcc]

I am happy with my analysis of the accounts. You are of course free to interpret them whichever way you like. I have no bias, am sitting on considerable cash at present, do not hold any shares or a short position and have been an accountant for far too long. If I thought this company was going to perform (even in line with the sector), I would buy some as a diversification strategy. Happy trails pussy cat.
One thing I had been taught was always to follow the advice from your accountant. In saying that and it has happened to me. How come accountants can give two sets of answers that differ from the same books.

Plus my current accountant found loads of mistakes in my books from my old accountant on their first year they took over, the old accountant is a tax auditor........ Follow your gut instinct and I believe Couta uses this theory well.

[RTM]

[QUOTE=Ggcc;788060]How come accountants can give two sets of answers that differ from the same books.
/QUOTE]

You only have to take a quick look at American politics to see how the same set of “facts” can be interpreted in different/opposite ways !

[BlackPeter]

[QUOTE=Ggcc;788060]How come accountants can give two sets of answers that differ from the same books.
/QUOTE]

You only have to take a quick look at American politics to see how the same set of “facts” can be interpreted in different/opposite ways !

Not a great example. The Trumpistas in the US work with "alternative facts"- i.e. they are either dumb or plain liars. Would not expect the same low standard from most of our accountants (though, there are obviously as well either incompetent or crooked accountants in NZ).

[macduffy]

How come accountants can give two sets of answers that differ from the same books.


Because they're closely related to economists?

(How to lose a lot of my friends...……)

;)

[Ggcc]

[QUOTE=RTM;788097]

Not a great example. The Trumpistas in the US work with "alternative facts"- i.e. they are either dumb or plain liars. Would not expect the same low standard from most of our accountants (though, there are obviously as well either incompetent or crooked accountants in NZ).
Last I looked at what accountants earned I was shocked. Especially when working for an accountancy firm with a few years experience. A friend who has a vacancy in her accounting firm has had a vacancy for months and no interest. I asked her what they were offering and I was surprised that they get little over $20,000 over minimum wage.

[Beagle]

Perhaps it might help if I give a couple of illustrations.

Suppose you asked five different accountancy firms to value Oxford finance the finance division of Turners which contains, (lets just say for arguments sake), 50 millions dollars of receivables that are in various states of arrears and delinquency along with 50 million dollars of receivables that are current. Would anyone be surprised that there are five different answers to fairly valuing the total receivables book ?

Suppose you were diagnosed with a potentially very serious illness by your Doctor, might he refer you to a specialist for a second opinion and might that specialist confer with his colleagues about your condition and best prognosis for treatment ? Might his collogues not always concur with the specialists diagnosis or the original doctor's diagnosis ?

Welcome to the reality of professional judgement and interpretation...anyway I think we're off on a very acute tangent to the thread topic...

[BlackPeter]

[QUOTE=BlackPeter;788102]
Last I looked at what accountants earned I was shocked. Especially when working for an accountancy firm with a few years experience. A friend who has a vacancy in her accounting firm has had a vacancy for months and no interest. I asked her what they were offering and I was surprised that they get little over $20,000 over minimum wage.

Not a specialist for accountant pay rates ... but I am pretty sure that the people who sign off the numbers are more than satisfactory paid.

But whatever it is - a low salary might be a valid reason to change the job, but not to provide substandard work ...

[winner69]

Bit of a sell off today and back to $1.25

Disappointment at results? Or just virus panic?

[black knat]

Bit of a sell off today and back to $1.25

Disappointment at results? Or just virus panic?

Big placement at a discount.

[Brain]

[QUOTE=BlackPeter;788102]
Last I looked at what accountants earned I was shocked. Especially when working for an accountancy firm with a few years experience. A friend who has a vacancy in her accounting firm has had a vacancy for months and no interest. I asked her what they were offering and I was surprised that they get little over $20,000 over minimum wage.

I am not surprised there is no interest. Clearly the young accountants can get better pay elsewhere. Maybe her firm needs to pay better.

[BlackPeter]

[QUOTE=Ggcc;788107]

I am not surprised there is no interest. Clearly the young accountants can get better pay elsewhere. Maybe her firm needs to pay better.

Just to clarify - the quote you posted with my name in it and replied to is not mine .... You probably edited my post and Ggcc's post and deleted on the way a handful of back-slashes too many ...

[Beagle]

Bit of a sell off today and back to $1.25

Disappointment at results? Or just virus panic?

Most people would be back from their holiday now and have had a chance to review the result.

[winner69]

Most people would be back from their holiday now and have had a chance to review the result.

The volume (twice average) would suggest probably a lot to do with results.

Value traded not much less than Ryman and heaps more than SUM ..hmmm

[Ggcc]

Bit of a sell off today and back to $1.25

Disappointment at results? Or just virus panic?
It’s a panic situation. Just about everything got hammered today. It will correct itself within 3-6 months

[Brain]

[QUOTE=Brain;788143]

Just to clarify - the quote you posted with my name in it and replied to is not mine .... You probably edited my post and Ggcc's post and deleted on the way a handful of back-slashes too many ...

my apologies BlackPeter

[Beagle]

It’s a panic situation. Just about everything got hammered today. It will correct itself within 3-6 months

NZX50 was down 1.0%, OCA was down 3.1%, just saying...

[winner69]

NZX50 was down 1.0%, OCA was down 3.1%, just saying...


..........and Ryman was UP

[couta1]

..........and Ryman was UP RYM was also down just over 1% at one point but being best of breed the punters often turn it around quickly.

[dreamcatcher]

SUM also down 3.0% last couple days

[Blue Skies]

SUM also down 3.0% last couple days

Well spotted, SUM was 9.27 last Friday & finished at 8.93 on Tuesday down over 3.5%.

And RYM hit 16.65 before dropping as low as 16.23 before recovering somewhat to finish 16.41.

I feel sure market seemed happy on Friday with OCA half year result, never takes long to react if any real surprises.

Personally would think retirement sector might be a safe haven for a bit of money coming out of AIR, AIA, THL, CVT etc over coming weeks & hopefully see a healthy bounce back.

[winner69]

Last 18 months Oceania has reported negative free cash flows of $80m (spent more than got in) and also paid out $40m in divies

All funded by $120m of added borrowings

Talk in last week’s announcement of a bond offer coming soon

One way to keep the money go round going round

used rounded numbers

[winner69]

Mention of money go rounds the Kinks had a cool song The Moneygoround from the Lola v Powerman album.

https://www.azlyrics.com/lyrics/kinks/themoneygoround.html

[Beagle]

Well spotted, SUM was 9.27 last Friday & finished at 8.93 on Tuesday down over 3.5%.

And RYM hit 16.65 before dropping as low as 16.23 before recovering somewhat to finish 16.41.

I feel sure market seemed happy on Friday with OCA half year result, never takes long to react if any real surprises.

Personally would think retirement sector might be a safe haven for a bit of money coming out of AIR, AIA, THL, CVT etc over coming weeks & hopefully see a healthy bounce back.

I am not so sure. A lot of wealthy movers and shakers were still away on holiday last week and on Monday the market was closed with Auckland anniversary day and the Australian market with Australia day. I think its telling that the first day back for many of those people the shares are down from $1.32 before the result to $1.25, down 5.4%, more than the rest of the sector. Time will tell. One point I do agree with you on is that there are a lot more risky stocks including the ones you mentioned, than the retirement sector which by and large is a needs or lifestyle based business.

Just on the lifestyle v needs thing, much is made that OCA is more a needs based decision but I can't help wondering with loneliness being so prevalent with old folks, especially those who have lost their partners, whether many people who buy an independent living unit at one of the other retirement companies aren't in effect trying to meet their core need of companionship and camaraderie. What do you folks think ? This might be an interesting point of debate ?

Anyway...getting back to OCA, couple of interesting other points of difference between OCA and the others that might interest some of you.
When Earl presented at the N.Z. shareholders association Auckland branch meeting he made it clear that OCA are quite different to the others in that they're not running a "cruise ship" style resort. I was reminded of this the other day when I got a glossy flyer with the Herald marketing Everill Orr so I decided to have a look at what they do offer https://www.oceaniahealthcare.co.nz/find-a-place/aged-care/everil-orr-care

Notably absent from a lifestyle perspective is what you typically find at many of the competing villages, a swimming pool and spa area and a bowling green.
No 90 day guaranteed free look, so if you move in and don't like it, you're stuck and they are very coy about mentioning their 30% DMF fee which I understand is incurred at 10% per year or part year thereof, which I believe is the fastest in the industry. Just thought others might be interested in the difference with their business model...not bashing OCA. I think it is a very nice thing that they have a Chaplin available there. I think RYM also have small Churches within many of their villages too. SUM other companies need to lift their game in that regard.

[Ggcc]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/347635/315838.pdf

This could get interesting

[winner69]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/347635/315838.pdf

This could get interesting

Either Oceania caught the virus ..or Macca unloading another pile of shares

Be funny if a takeover offer from Summerset :):):t_up::t_down:

[Dlownz]

Wonder what it could be.

[Joshuatree]

Trading halt in Oceania Healthcare Limited shares (http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/347636/315836.pdf)

Underwritten selldown of up to all OHHL(41 odd%)shares in oceania

[Dlownz]

Think we knew that could be happening. Question is how it will affect the share price

[winner69]

Trading halt in Oceania Healthcare Limited shares (http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/347636/315836.pdf)

Underwritten selldown of up to all OHHL(41 odd%)shares in oceania

The overhang to go ...whoopee

The big end of town to get first dibs at the cheap (?) shares

[winner69]

Think we knew that could be happening. Question is how it will affect the share price

What do you think will happen diownz

[King1212]

Who is OHHL winner?

[winner69]

Who is OHHL winner?

They not Billie Eilish’s manager are they?

Holding company for Macquarie interests in OHHL

[King1212]

Ah..big macca.. offloading it...ok.. thanks

Will take a while to recover again...

[Dlownz]

What do you think will happen diownz
Hopefully getting rid of macca will have a positive effect on the share price at long last he will stop off loading them onto the share market.

[couta1]

Well it looks like Macca has decided to spit all those peanuts out and head to a better food source, I wonder what price they are getting per truckload, could it be below $1.20?

[Ggcc]

Well it looks like Macca has decided to spit all those peanuts out and head to a better food source, I wonder what price they are getting per truckload, could it be below $1.20?
There goes that overhang. It will put a dampener on the share prices for the short term I would think

[Beagle]

Well it looks like Macca has decided to spit all those peanuts out and head to a better food source, I wonder what price they are getting per truckload, could it be below $1.20?

As noted in my comments since the result I am not at all surprised they want out, I would if I was them. I would think it will be about $1.15 which is all I think the shares are worth but I would not be a buyer even at that level as I believe that long term the business model is far too heavily exposed to rampant human resources cost increases and long term that substantial systemic weakness will see them underperform the sector. I think Macca's know this and that's why they want out completely.

I'm not impressed with management's ability to run the business on an "efficient AND effective basis" either and I am sure that's another reason Macquarie want out.

[BlackPeter]

As noted in my comments since the result I am not at all surprised they want out, I would if I was them. I would think it will be about $1.15 which is all I think the shares are worth but I would not be a buyer even at that level as I believe that long term the business model is far too heavily exposed to rampant human resources cost increases and long term that substantial systemic weakness will see them underperform the sector. I think Macca's know this and that's why they want out completely.

Looks like you forced their hand ... they won't need anymore their own analysts, just need to read this forum and run ... :p;

[Beagle]

Looks like you forced their hand ... they won't need anymore their own analysts, just need to read this forum and run ... :p;

LOL - Actually Coutts also did well to say at $1.39 they were a SELL and anyone who listened at that time must be very happy. Some cats might be licking their wounds when they see the placement price and effect on the market price :eek2: It speaks VOLUMES that Macquarie want to sell their entire remaining stake AT ONCE even with this new market fear of Coronavirus. Caveat Emptor, let the buyer beware !!

[winner69]

Wonder what instos will be selling to mop up the $300m flood.

Hope they don’t sell Summerset

[Beagle]

Wonder what instos will be selling to mop up the $300m flood.

Hope they don’t sell Summerset

Many have sold their MET already and are primed up with cash all set to go. 249m shares at $1.15 = $286m, if they can get $1.15 that is...

Wonder if Maverick would put his hand up for more at ~ $1.15 ?

[BlackPeter]

Many have sold their MET already and are primed up with cash all set to go. 249m shares at $1.15 = $286m, if they can get $1.15 that is...

Wonder if Maverick will put his hand up for more at $1.15 ?

But let face it - given that this is according to beagle analytics such a terrible stock, why would they want to buy at $1.15 - or at whatever price? Something does not compute ...

[Beagle]

But let face it - given that this is according to beagle analytics such a terrible stock, why would they want to buy at $1.15 - or at whatever price? Something does not compute ...

Maybe you should ask them but here's a possible theory. Maybe they will figure because it'll be the only stock left in the sector shortly trading at NAV (with MET about to disappear) ? What could possibly go wrong buying a retirement stock at net assessed value :D...or could it be the yield in this ultra low interest rate environment...who knows what institutions and others might be thinking or whether they're thinking at all and just reallocating MET money within the same sector ?

[Joshuatree]

Been offered at $1.20 .No thanks.

[stoploss]

Been offered at $1.20 .No thanks.

It's fully underwritten @ $ 1.20 so that's the floor , bids from there up in 1 cent increments.

[couta1]

Been offered at $1.20 .No thanks. I value the stock at $1.18 currently and Beagle $1.15 so let's cut down the middle and say fair value is $1.165.

[Beagle]

It's fully underwritten @ $ 1.20 so that's the floor , bids from there up in 1 cent increments.

Hope the underwriter has deep pockets.

[winner69]

Hope the underwriter has deep pockets.

Underwriter not worried

They’ll go like sausages at a Bunnnngs BBQ at $1.20

Jeez - nearly 15% off recent highs ..cheap as

[couta1]

Interesting timing for Craigs to increase Target Price from $1.11 to $1.26 today. I do think it is good very value at $1.20 but patience will be required for earnings to grow as still in the chrysalis stage of OCA life cycle. Pump and dump exercise?

[winner69]

Interesting timing for Craigs to increase Target Price from $1.11 to $1.26 today. I do think it is good very value at $1.20 but patience will be required for earnings to grow as still in the chrysalis stage of OCA life cycle.

Yep things do move in ‘interesting’ ways at the big end of town eh

Craig’s must have been impressed with the half year report.

[Davexl]

Do minority shareholders have ANY rights in a share placement scenario, or do we have to just bend over and take it...

[Balance]

Yep things do move in ‘interesting’ ways at the big end of town eh

Craig’s must have been impressed with the half year report.

Macquarie Bank selldown?

Based upon their track frecord of milking every cent out of their investments and using 'creative' accounting when selling down, they can keep the stock imo.

[winner69]

Do minority shareholders have ANY rights in a share placement scenario, or do we have to just bend over and take it...

...if you are well connected (like Joshuatree) you’ll get offered some at $1.20

This really is a case of somebody with heaps of shares selling out and using a broker or two to sell them in an orderly way. Institutions / Fund Managers will probably take most.

If they don’t all sell the Underwriter has guaranteed to buy those left over.

So it’s really a matter of anybody having any rights or whatever you were alluding to.

[peat]

89 million in Craigs hands temporarily. Thats a lot of shares to hold even if you've raised your target price ;+)

[Davexl]

...if you are well connected (like Joshuatree) you’ll get offered some at $1.20

This really is a case of somebody with heaps of shares selling out and using a broker or two to sell them in an orderly way. Institutions / Fund Managers will probably take most.

If they don’t all sell the Underwriter has guaranteed to buy those left over.

So it’s really a matter of anybody having any rights or whatever you were alluding to.


Wish I was well connected like JT - could have been handy - thanks for the info winner69

[Beagle]

Interesting timing for Craigs to increase Target Price from $1.11 to $1.26 today. I do think it is good very value at $1.20 but patience will be required for earnings to grow as still in the chrysalis stage of OCA life cycle.
No vested interest in doing that is there :D http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/347676/315877.pdf Even for those that are naïve enough to accept this new theoretical target at $1.26 at face value as a 12 month price target, its hardly a compelling proposition for $1.20 on the table now is it ! Pretty sure a lot of that stock will find its way into various brokers "full client discretionary" managed funds, not just because there's a fat brokerage and underwriting fee... of course not lol


Macquarie Bank selldown?

Based upon their track frecord of milking every cent out of their investments and using 'creative' accounting when selling down, they can keep the stock imo.

I couldn't agree more. Further, they will be well aware of how sales at the various villages have gone in just over 8 weeks of the key selling period of summer since the half year report date of 30 November 2019 but are "rather conveniently" keeping that information to themselves. This dog is definitely not getting on the other side of a transaction and swimming with that big shark, once bitten twice shy and I'm staying well clear !

[Davexl]

89 million in Craigs hands temporarily. Thats a lot of shares to hold even if you've raised your target price ;+)

Curious where you get the Craigs info from Peat? How does raising the target price work in this situation?

Sorry - just seen the SPH notice.

[winner69]

Wish I was well connected like JT - could have been handy - thanks for the info winner69

Just use a full broking service like Craig’s (as opposed to the online ones) and you too can become well connected like Joshuatree

[winner69]

A ‘target price’ of $1.26 implies who set that target only values it $1.12/$1.15 today

[trader_jackson]

89 million in Craigs hands temporarily. Thats a lot of shares to hold even if you've raised your target price ;+)

eh gonna need to increase that target price now...
big selldown now gonna be great for share price in the long run they say.

[BlackPeter]

Wish I was well connected like JT - could have been handy - thanks for the info winner69

If Maccas last share dump gives any guidance, then don't worry about not getting an offer now - you might get in a couple of weeks the opportunity to buy the shares cheaper on market than the "well connected" people buy them now :);

From memory - SP dropped after the last dump roughly 10% below the offer price, i.e. there might be some bargains floating around at $1.10 come next month or so ...

Discl: holding (though I did some "portfolio management" around 130). Might buy some more back if & when above happens ..

[Davexl]

A ‘target price’ of $1.26 implies who set that target only values it $1.12/$1.15 today

How do you come up with the $1.12/$1.15 figure?

[Davexl]

If Maccas last share dump gives any guidance, then don't worry about not getting an offer now - you might get in a couple of weeks the opportunity to buy the shares cheaper on market than the "well connected" people buy them now :);

From memory - SP dropped after the last dump roughly 10% below the offer price, i.e. there might be some bargains floating around at $1.10 come next month or so ...

Discl: holding (though I did some "portfolio management" around 130). Might buy some more back if & when above happens ..

Thanks for the heads up BP...

[Beagle]

How do you come up with the $1.12/$1.15 figure?

Most equity investors are chasing annual returns of at least 12% on risk capital. $1.26 - 12% = $1.11 plus 4-5 cents in divvies, fair value is about $1.15 now, which coincidentally is where I see it. $1.20 looks like an exceptionally good deal...for Macquirie...probably just as well they fudged the books with tax credits to make it look like 17% earnings growth and do all this at a time of year when people are just getting back from holiday and hope most don't notice the creative accounting. It certainly went right over the head of Snow Leopard so if he's your average investor no wonder Macquarie can do a creative sale job on most others.

[Davexl]

Most equity investors are chasing annual returns of at least 12% on risk capital. $1.26 - 12% = $1.11 plus 4-5 cents in divvies, fair value is about $1.15 now, which coincidentally is where I see it. $1.20 looks like an exceptionally good deal...for Macquirie...probably just as well they fudged the books with tax credits to make it look like 17% earnings growth and do all this at a time of year when people are just getting back from holiday and hope most don't notice the creative accounting. It certainly went right over the head of Snow Leopard so if he's your average investor no wonder Macquarie can do a creative sale job on most others.

Thanks Beagle - appreciate the insight...

[winner69]

How do you come up with the $1.12/$1.15 figure?

Usually analysts ‘targets’ are what they expect the share price to be in say 12 months time.

So assuming they expect say a 10% return that implies $1.14 today

Haven’t seen this particular report yet ...so can’t say what their actual valuation is.

[Balance]

I couldn't agree more. Further, they will be well aware of how sales at the various villages have gone in just over 8 weeks of the key selling period of summer since the half year report date of 30 November 2019 but are "rather conveniently" keeping that information to themselves. This dog is definitely not getting on the other side of a transaction and swimming with that big shark, once bitten twice shy and I'm staying well clear !

Macquarie Bank is dumping as they know the MET takeover euphoria will not last for OCA.

OCA is a typical Macquarie structured investment - buy a few unrelated assets in an industry, put in heavily incentivized management (as in millionaires' factory), load the investment vehicle up with debt, put in some 'creative' accounting and then, sell down to the eager punters out there.

[Davexl]

Macquarie Bank is dumping as they know the MET takeover euphoria will not last for OCA.

OCA is a typical Macquarie structured investment - buy a few unrelated assets in an industry, put in heavily incentivized management (as in millionaires' factory), load the investment vehicle up with debt, put in some 'creative' accounting and then, sell down to the eager punters out there.


Do you think the heavily incentivised management comment applies to OCA in this case, it appears cost control may not have been their strong suit?
Macquarie sounds like another 'backer' to totally avoid at this point. Thanks W69 & Balance for your comments. Am trying not to make 'mistakes' but failing badly ATM.

[winner69]

Do you think the heavily incentivised management comment applies to OCA in this case, it appears cost control may not have been their strong suit?
Macquarie sounds like another 'backer' to totally avoid at this point. Thanks W69 & Balance for your comments. Am trying not to make 'mistakes' but failing badly ATM.

ATM might be the stock for you seeing your mentioned it.....good omen

[Davexl]

ATM might be the stock for you seeing your mentioned it.....good omen

You're kidding right? with Coronavirus hanging over the market? ATM as in 'at the moment'. Would've thought FPH would make more sense, but I need the divvies.

[Beagle]

Macquarie Bank is dumping as they know the MET takeover euphoria will not last for OCA.

OCA is a typical Macquarie structured investment - buy a few unrelated assets in an industry, put in heavily incentivized management (as in millionaires' factory), load the investment vehicle up with debt, put in some 'creative' accounting and then, sell down to the eager punters out there.

Rinse and repeat.

[couta1]

You're kidding right? with Coronavirus hanging over the market? ATM as in 'at the moment'. Would've thought FPH would make more sense Actually ATM is one of the only stocks worth buying on the NZX currently and I'm in up to my neck and still buying.

[winner69]

You're kidding right? with Coronavirus hanging over the market? ATM as in 'at the moment'. Would've thought FPH would make more sense, but I need the divvies.

Divies eh ....go with HLG

Even a sick world needs clothes

[nizzy]

forget retirement homes, we should all be buying shares in Macquarie,MCG the millionaires factory.
Its a top pick for 2020 on the Livewire investor page.
Disc: hold OCA

[couta1]

Divies eh ....go with HLG

Even a sick world needs clothes Yep I'm there too, also up to the neck, well actually I only own 3 main board listed stocks and only HLG is a no touch.

[Balance]

forget retirement homes, we should all be buying shares in Macquarie,MCG the millionaires factory.
Its a top pick for 2020 on the Livewire investor page.
Disc: hold OCA

Yup - buy the company which supplies the crap, not the crap. Seriously!

[Davexl]

Actually ATM is one of the only stocks worth buying on the NZX currently and I'm in up to my neck and still buying.

Good luck with that - Cash is King in my books at the moment but would have liked to go after FPH with the subsequent NZ$ downgrade and health needs.

HLG is definately one of the very best companies, not much to choose from atm on the market, except power companies expected upward re-rating...

[greater fool]

Trash taken out.

[couta1]

Good luck with that - Cash is King in my books at the moment but would have liked to go after FPH with the subsequent NZ$ downgrade and health needs.

HLG is definately one of the very best companies, not much to choose from atm on the market, except power companies expected upward re-rating... Its not about luck it's about following your well tuned Gutometer which is far more accurate than these so called broking company experts.

[Davexl]

Its not about luck it's about following your well tuned Gutometer which is far more accurate than these so called broking company experts.

Guess my Gutometer needs work. Beagle has analysed the hell out of OCA and ZEL which were 2 of my conviction picks. One for the full-range care offering and the other for the dividend. Clearly need to dig under the hood a bit more and avoid Macquarie anything and try to identify the dividend traps better.

Today's price action looks mostly like a half-hearted bounce from yesterdays strong down-leg. Especially in Aust with the headline Iron-ore stocks. Watch out below is my gut response...

[winner69]

Guess my Gutometer needs work. Beagle has analysed the hell out of OCA and ZEL which were 2 of my conviction picks. One for the full-range care offering and the other for the dividend. Clearly need to dig under the hood a bit more and avoid Macquarie anything and try to identify the dividend traps better.

Some reckon doing the opposite to beagle is a good strategy

[wilco]

Macquarie Bank is dumping as they know the MET takeover euphoria will not last for OCA.

OCA is a typical Macquarie structured investment - buy a few unrelated assets in an industry, put in heavily incentivized management (as in millionaires' factory), load the investment vehicle up with debt, put in some 'creative' accounting and then, sell down to the eager punters out there.

First time contributor but long time appreciator of all of this forums many informed contributors!

I totally agree with your sentiments re Macquarie (burned by Feltex and observed many similar instance since), Balance. So, I was very hesitant, when I bought into SUM, some years ago, when there was still the Macquarie overhang with SUM.

I did buy - and it's gone very well. Can anyone tell me (honest question) how this situation is any different - except for the obvious that they are different companies? Thanks.

Disc; Own just a few - that owe me about $1.15.

[Davexl]

Some reckon doing the opposite to beagle is a good strategy

Except he seems to generate a bit of momentum on here, can't exactly avoid him and his well analysed opinions.

[couta1]

Guess my Gutometer needs work. Beagle has analysed the hell out of OCA and ZEL which were 2 of my conviction picks. One for the full-range care offering and the other for the dividend. Clearly need to dig under the hood a bit more and avoid Macquarie anything and try to identify the dividend traps better. We never arrive, we are always learning but at the end of the day you must follow your own convictions not someone else's. Long term OCA will do okay for those patient enough to hold and collect a small divvy along the way, ZEL ain't going away in a hurry and as long as you bought it at the right price then I cant see why it cant be a long term divvy hold.

[Davexl]

We never arrive, we are always learning but at the end of the day you must follow your own convictions not someone else's. Long term OCA will do okay for those patient enough to hold and collect a small divvy along the way, ZEL ain't going away in a hurry and as long as you bought it at the right price then I cant see why it cant be a long term divvy hold.

Stuck with OCA for a while now and ZEL has near term CAPEX challenges and I am recycling capital for dividends to live off month to month. Not quite well enough off yet to hold for divs over the long term except in Aust. Problem in NZ is no liquidity so always a challenge to recycle capital. But do enjoy a punt once in a while, wish I had liquidated my OCA at $1.36 as you mentioned but missed the boat...Still - always new opportunities coming up, always plenty more to learn...

[macduffy]

Any guesses as to the strike price? $1.20 is only the underwritten number and the underwriters will be looking for a bit more to avoid their commitment

NB. OCA deniers needn't participate!

;)

[percy]

Any guesses as to the strike price? $1.20 is only the underwritten number and the underwriters will be looking for a bit more to avoid their commitment

NB. OCA deniers needn't participate!

;)

Brokers are charging their normal brokerage.

[Balance]

First time contributor but long time appreciator of all of this forums many informed contributors!

I totally agree with your sentiments re Macquarie (burned by Feltex and observed many similar instance since), Balance. So, I was very hesitant, when I bought into SUM, some years ago, when there was still the Macquarie overhang with SUM.

I did buy - and it's gone very well. Can anyone tell me (honest question) how this situation is any different - except for the obvious that they are different companies? Thanks.

Disc; Own just a few - that owe me about $1.15.

Summerset had nothing to do with Macquarie - Quadrant PE fund was the principal shareholder.

[whatsup]

Always wondered who and why the S P was pushed up from early Dec when it was in the low $1.05's ( IMHO where it still belongs) and from the old BIL share play book now can be bought @ $1.20ish, now is that a wise bet in this market ?

[wilco]

Summerset had nothing to do with Macquarie - Quadrant PE fund was the principal shareholder.

Thanks. Yes - my bad (memory). Stiil, I think al PE's have the same MO.

[Beagle]

Thanks. Yes - my bad (memory). Stiil, I think al PE's have the same MO.

Welcome to the forum. I think its pretty clear that Quadrant lost big time when they floated and sold down SUM.

[King1212]

Well....done..n dusted...$1.20...not even offered to all of u guys!

[winner69]

Last time Macquarie sold down the share price jumped more than 10 cents

Probably happen again

The big over hang gone ...good stuff

Might see 150 by Easter

[couta1]

Last time Macquarie sold down the share price jumped more than 10 cents

Probably happen again

The big over hang gone ...good stuff

Might see 150 by Easter Nice upramping winner or is it just wishful thinking, Maccas gone but the cost control issues remain. Lol

[Onion]

Last time Macquarie sold down the share price jumped more than 10 cents

Probably happen again

The big over hang gone ...good stuff

Might see 150 by Easter

At the very least it should put a firm SP floor at the $1.20+ level. That is a nice lift from the $1.00 to $1.10 channel it was stuck in for so long.

In contrast to the opinion of many on this forum that the SP ought be be much lower, the successful book build has demonstrated that there is demand for the shares at $1.20+.

The market has decided.

[Valiant]

Nice upramping winner or is it just wishful thinking, Maccas gone but the cost control issues remain. Lol


With all this chat around cost control issues, predominantly related to the care side of OCA's business, does anyone know how they stack up against the others in the Sector who provide the same level of care services (ARV or RYM?) The rhetoric seems that OCA spend $1.5 for every $1 that the others do on care services.

[Balance]

Well....done..n dusted...$1.20...not even offered to all of u guys!

Read the announcements - I suspect that the underwriters have been left with stock.

[Beagle]

Good morning folks,

Please accept my sincere apology. I misinterpreted the treatment of deferred tax in the accounts, a simple mistake, (not that anything to do with this matter is simple), but I was rushed and have concerns about the coronavirus and have made a number of adjustments to my portfolio. When I finally got a chance to have a decent look at the accounts yesterday I realised that the deferred tax had been taken out of underlying profit and underlying profit has indeed gone up 17% for the half year.

Winner pointed this out nicely to me the other day but I hadn't had the time to look at it myself and he also said the accounts are not easy to understand because they use 7 different terms for describing profit for the period. I'll take his word on that one. I was adjusting deferred tax from total comprehensive income to get to $15.8m.

I have edited quite a number of my posts since the result announcement to correct them but I still hold a number of reservations regarding OCA and have left those in the posts for anyone that's interested to go back and have a look.

The market has spoken and $1.20 is where its at. I am not a buyer at that level but good luck to holders and I will leave you in peace.

[winner69]

With all this chat around cost control issues, predominantly related to the care side of OCA's business, does anyone know how they stack up against the others in the Sector who provide the same level of care services (ARV or RYM?) The rhetoric seems that OCA spend $1.5 for every $1 that the others do on care services.

No tax is paid on property gains. Tax is paid on profits arising from running villages and care services. Tax not that straight forward but gives a feel for how profitable or not villages/care are.

So look at the reported tax expense to get a rough idea

ARV paid $0.7m tax in H1 sort of saying they made a few million from villages/care
RYM paid $7.4m tax in H1 - maybe $25m profit from villages/care
SUM got a small tax credit in H1 suggesting they sort of break even on villages / care
OCA got a $8m tax credit in H1. Looking at their tax reconciliation it looks like they LOST $15m in six months on day to day running of villages and care facilities.

Rough and ready way of looking at it but I reckon a pretty good way

[BlackPeter]

Good morning folks,

Please accept my sincere apology. I misinterpreted the treatment of deferred tax in the accounts, a simple mistake, (not that anything to do with this matter is simple), but I was rushed and have concerns about the coronavirus and have made a number of adjustments to my portfolio. When I finally got a chance to have a decent look at the accounts yesterday I realised that the deferred tax had been taken out of underlying profit and underlying profit has indeed gone up 17% for the half year.

Winner pointed this out nicely to me the other day but I hadn't had the time to look at it myself and he also said the accounts are not easy to understand because they use 7 different terms for describing profit for the period. I'll take his word on that one. I was adjusting deferred tax from total comprehensive income to get to $15.8m.

I have edited quite a number of my posts since the result announcement to correct them but I still hold a number of reservations regarding OCA and have left those in the posts for anyone that's interested to go back and have a look.

The market has spoken and $1.20 is where its at. I am not a buyer at that level but good luck to holders and I will leave you in peace.

Thanks for coming out and eating some humble pie.

Never easy, but always appreciated - and hey, let he who is without fault throw the first stone.

[Ggcc]

Good morning folks,

Please accept my sincere apology. I misinterpreted the treatment of deferred tax in the accounts, a simple mistake, (not that anything to do with this matter is simple), but I was rushed and have concerns about the coronavirus and have made a number of adjustments to my portfolio. When I finally got a chance to have a decent look at the accounts yesterday I realised that the deferred tax had been taken out of underlying profit and underlying profit has indeed gone up 17% for the half year.

Winner pointed this out nicely to me the other day but I hadn't had the time to look at it myself and he also said the accounts are not easy to understand because they use 7 different terms for describing profit for the period. I'll take his word on that one. I was adjusting deferred tax from total comprehensive income to get to $15.8m.

I have edited quite a number of my posts since the result announcement to correct them but I still hold a number of reservations regarding OCA and have left those in the posts for anyone that's interested to go back and have a look.

The market has spoken and $1.20 is where its at. I am not a buyer at that level but good luck to holders and I will leave you in peace.
Your opinion is always appreciated anyway and great when your are incorrect to admit it.

Thanks Mr Beagle

[Bjauck]

...
I have edited quite a number of my posts since the result announcement to correct them but I still hold a number of reservations regarding OCA and have left those in the posts for anyone that's interested to go back and have a look.... Chapeau! Not many posters would do as you have done. And thanks for taking the trouble to retrospectively edit.

[Beagle]

No tax is paid on property gains. Tax is paid on profits arising from running villages and care services. Tax not that straight forward but gives a feel for how profitable or not villages/care are.

So look at the reported tax expense to get a rough idea

ARV paid $0.7m tax in H1 sort of saying they made a few million from villages/care
RYM paid $7.4m tax in H1 - maybe $25m profit from villages/care
SUM got a small tax credit in H1 suggesting they sort of break even on villages / care
OCA got a $8m tax credit in H1. Looking at their tax reconciliation it looks like they LOST $15m in six months on day to day running of villages and care facilities.

Rough and ready way of looking at it but I reckon a pretty good way

Its turns out the rough and ready, what has the NAV gone up by does sort the wheat out from the chaff. NAV, (which is not NTA to be clear but includes other matters detailed in the accounts) captures absolutely everything in the way of gains for the period. It went up 1 cent after paying 2.6 cents in dividends so their total gain for the half year inclusive of all property revaluations, gain from recognizing deferred tax losses as an asset, absolutely everything is 1 cent plus 2.6 cents = total gain of 3.6 cents for the 6 month period. If we're kind and said they will make 4.4 cents total gain in the second half we get total comprehensive income of 8 cents per share.

By way of comparison:-
Using the same approach in 2018 according to total income reporting (IFRS) SUM made 97 cents per share and in 2017 $1.10 per share.

[Balance]

Hmmmm - watching the underwriters work the market to get rid of stock?

[winner69]

Oca report So many different profit numbers no wonder beagle is confused

The new man will probably add a few more .....maybe a plan to make things hard to understand.

That new CFO was at Jardens the time OCA was floated and seemed to have play a major role in getting it done.

Several years piloting the ship he once floated

[percy]

[QUOTE=winner69;788540]Oca report So many different profit numbers no wonder beagle is confused

Luckily for us you and Snow Leopard understood them,straight away...

[LAC]

Last time Macquarie sold down the share price jumped more than 10 cents

Might see 150 by Easter

**rolling eyes ....Sigh**

[Beagle]

NAV up just 1 cent, add back dividend paid during the period and you get total comprehensive change in value of just 3.5 cents per share. Ouch !!
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/347503/315683.pdf

Underlying earnings are nowhere near what Mav was hoping for and even undershot my more conservative estimate.

Sales at Sands and Meadowbank are only just meeting expectations by the look of it. (Those without sea views will be much harder to sell at the Sands in my opinion).
Care earnings from their established business model continue to deteriorate as I predicted due to increased labour costs.

First impressions, I am really quite underwhelmed. Costs keep rising at a fast rate and I continue to believe this is a company that has at best, very average discipline when it comes to internal control systems around cost.

Disc: Don't own and not intending to buy.
Good luck to holders.


[QUOTE=788540]

Luckily for us you and Snow Leopard understood them,straight away...

To be fair, First impressions, clearly marked as "At First Glance" posted before the market opened and before anyone else had commented on the result summed the overall situation up very well.

[Valiant]

Its turns out the rough and ready, what has the NAV gone up by does sort the wheat out from the chaff. NAV, (which is not NTA to be clear but includes other matters detailed in the accounts) captures absolutely everything in the way of gains for the period. It went up 1 cent after paying 2.6 cents in dividends so their total gain for the half year inclusive of all property revaluations, gain from recognizing deferred tax losses as an asset, absolutely everything is 1 cent plus 2.6 cents = total gain of 3.6 cents for the 6 month period. If we're kind and said they will make 4.4 cents total gain in the second half we get total comprehensive income of 8 cents per share.

By way of comparison:-
Using the same approach in 2018 according to total income reporting (IFRS) SUM made 97 cents per share and in 2017 $1.10 per share.

Thanks Winner & Beagle for the responses. I'm trying to understand why OCA's costs are so much higher than other companies who are in arguably the same game as most people are referring to this lack of cost control as the reason why they're not performing well. OCA have one of, if not the highest development margin at the moment (did I read 36%) so they're performing pretty well in this respect.

Based on Winner's research it looks like no ones really making money from providing care services and its just the rest of the business (property revaluation gains) that drive profit. If so, and OCA want to continue onto the 70/30 split it doesn't appear much is going to change.

[forest]

Thanks Winner & Beagle for the responses. I'm trying to understand why OCA's costs are so much higher than other companies who are in arguably the same game as most people are referring to this lack of cost control as the reason why they're not performing well. OCA have one of, if not the highest development margin at the moment (did I read 36%) so they're performing pretty well in this respect.

Based on Winner's research it looks like no ones really making money from providing care services and its just the rest of the business (property revaluation gains) that drive profit. If so, and OCA want to continue onto the 70/30 split it doesn't appear much is going to change.

I think you find in time to come that OCA will be making profits on their care services. But what is confusing is that in time to come care service fees are close to break even. However the profit component will likely be captured in the deferred management fees of the caresuite. That how understand their model.

[Snow Leopard]

To be fair, First impressions, clearly marked as "At First Glance" posted before the market opened and before anyone else had commented on the result summed the overall situation up very well.

I wss going to post a picture of a Snow Leopard laughing itself silly but here is todays Calvin & Hobbes (https://www.gocomics.com/calvinandhobbes/2020/01/30) instead:
https://assets.amuniversal.com/a799683009ac0138da33005056a9545d

[Beagle]

Thanks Winner & Beagle for the responses. I'm trying to understand why OCA's costs are so much higher than other companies who are in arguably the same game as most people are referring to this lack of cost control as the reason why they're not performing well. OCA have one of, if not the highest development margin at the moment (did I read 36%) so they're performing pretty well in this respect.

Based on Winner's research it looks like no ones really making money from providing care services and its just the rest of the business (property revaluation gains) that drive profit. If so, and OCA want to continue onto the 70/30 split it doesn't appear much is going to change.

WARNING - Contains speculative far reaching thoughts about the very distant future for this company. DYOR.

If they make circa $55m in underlying profit for FY20 (requires $31m in the second half which will be a tough ask considering the way sales of the Sands appear to have slowed down) that's not much of an increase from FY18 two years earlier when they made $52.1m.

Shareholders might be interested to note that although the underlying profit is up 17% in the period compared to the previous comparable one the rate at which NAV has increased has slowed from the last interim result of 2 cents increase http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/329805/294060.pdf to 1 cent increase in the current period.

This indicates to me that total catch everything value accretion during the current half just gone has slowed, despite the creation of just on $8m of deferred tax credits, itself worth 1.3 cents per share.
Without the creation of this deferred tax credit it is important to note that NAV would have in fact gone backwards in the period just reported. All this despite selling many of the premium and most expensive units at two of the most premium facilities during the period at the Sands and Meadowbank. Go figure and work that out ???

Talking to Couta1 yesterday the multi year caregiver wage settlement still has some way to go with staggered and significant annual caregiver increases still to come.

What is clear (to me anyway), is the lions share of the gains from the gradual transformation of their business model are being eaten by staff. To the best of my knowledge there's about another 4 years to go before they finish their transformation program announced at the time of listing to getting this to 60/40 new occupation right agreement model v old care model.

The best analogy I can come up with is being invested in this company is analogous to driving a car with the handbrake on, (with that handbrake quite clearly being the intensity of the care services provided and the rapidly increasing cost of doing so). Eventually the very gradual transformation to the new model will reap dividends. I think we start to see this in a meaningful way, (and this is just a guess, in FY22 or FY23) After the initial six year transformation to 60/40 is achieved, about FY24 I would then expect them to push on with gradually converting the rest of their facilities to ORA model, or those that can't will be disposed of. This might take another 4-5 years, or approx 8-9 years hence.

There's no question in my mind that the services OCA provide are going to be in extremely high demand in the years ahead so in the very long run, provided the charges are levied in an appropriate manner, (and it may be with ongoing rampant human resource cost increases over the next decade that their 10% per annum with a maximum of 30% change against the occupation licence purchase price needs to go up, perhaps to as much as 12.5% per year and a maximum of 50%), OCA are well positioned to have a very viable business. (This would require commercially minded directors and management who realise that they have a very strong obligation to shareholders to deliver an appropriate return on risk capital...probably a new CEO would be required as Earl Gasparich is simply too nice).

In the meantime in the near term however, I expect staff to continue eat up the lions share of any gains the company makes from its very gradual transformation program.

Investors can either invest in a company that specialises in very late stage care, (with all the implications about costs that has) or choose a company with a balanced business model that's considerably less care intensive. Plenty have chosen this one at $1.20 so maybe they foresee something I don't...who knows...

[BeeBop]

Thanks Winner & Beagle for the responses. I'm trying to understand why OCA's costs are so much higher than other companies who are in arguably the same game as most people are referring to this lack of cost control as the reason why they're not performing well. OCA have one of, if not the highest development margin at the moment (did I read 36%) so they're performing pretty well in this respect.

Based on Winner's research it looks like no ones really making money from providing care services and its just the rest of the business (property revaluation gains) that drive profit. If so, and OCA want to continue onto the 70/30 split it doesn't appear much is going to change.


OCA's developers margin: 2017, 2018, 2019 was 33% 26% and 16% respectively
Ryman seem to be moving around 25% (down to 19% due to the Malvina Major development, however, if that were removed they would have achieved 25%)
Summerset (I only calculated one year) was 28% for 1st half 2019.

OCA do seem to have issues in their construction side.

[BeeBop]

Development margin for half year is 36%, not 16%.

Mogul - how did you get that for 2019? I have rechecked and have misquoted but it is still not high....1HY19 Margin 9.9m 2HY19 19.3 vs the Capex of 65.6m and 69.6m respectively. - which works to be a combined 21.5% unless I am miscalculating - and I shouldn't be using the capex as my denominator? I went into their investor presentation to work it out vs Ryman's.

Note: I did not include the deferred management fees as I was looking at the developers margin so i could compare (to an extent) across a wider pool.

[BeeBop]

It looks like you are working off figures in slide 10 of presentation. However there are a couple of reasons you won’t get a good read from this. Firstly, Capex includes PPE which is retained as an asset (not sold under ORA), therefore there is no corresponding margin on the right hand graph. Any gains on PPE are non cash adjustments that are only recognised in Comprehensive Income (not in Underlying Profit or Reported Profit). Secondly, the Development Margins are based on units sold in period whereas Capex is money spent on building new units and PPE during period; so apples and oranges. Simpler to look at Development Margin on units sold on slides 30 and 33 which is 36.1% for half year.

Thank-you....

[peat]

there is a massive amount of volume being bid and offered right at 1.21/.22 ?

I guess I thought everyone would be sated at $1.20.

[Dlownz]

I've been watching market depth the last few days and some weird numbers pop up value wise. Can anyone explain. I took a screen shot but cant post it on here. Selling at 1.15 49000. But buyer at 1.28 1.26 etc. If anyone's interested I could email the pic

[BlackPeter]

I've been watching market depth the last few days and some weird numbers pop up value wise. Can anyone explain. I took a screen shot but cant post it on here. Selling at 1.15 49000. But buyer at 1.28 1.26 etc. If anyone's interested I could email the pic

Just the normal opening and closing auctions ...

https://www.nzx.com/investing/nzx-trading-hours/anatomy-of-a-trading-day

[winner69]

I've been watching market depth the last few days and some weird numbers pop up value wise. Can anyone explain. I took a screen shot but cant post it on here. Selling at 1.15 49000. But buyer at 1.28 1.26 etc. If anyone's interested I could email the pic

Watching market depth is bad for your health mate

[Dlownz]

I hear ya.

[Food4Thought]

there is a massive amount of volume being bid and offered right at 1.21/.22 ?

I guess I thought everyone would be sated at $1.20.

Hi Peat*.

Could it be, working in the up an coming dividend? 2.3c to be paid 24th Feb? Record date Feb 10th. DRP in full swing.

Info from "Half Year Results" posted Friday 24th Jan.

Disc. Happy L.T holder

[couta1]

Watching market depth is bad for your health mate No I find the opposite, not watching it produces separation anxiety unless it's a Black swan week.

[bull....]

i wouldnt want to own a retirement stock at the moment , if the virus got into one and infected everyone then no ones going to want to buy one going forward.

[winner69]

No I find the opposite, not watching it produces separation anxiety unless it's a Black swan week.

Really meant to say ‘watching depth is bad for your health unless you are a Couta’

I’ve assumed diownz isn’t a trader per se

[Dlownz]

Really meant to say ‘watching depth is bad for your health unless you are a Couta’

I’ve assumed diownz isn’t a trader per se
We all have to start somewhere winner69. I haven't been doing it long so learning alot as I go. 🙂. I appreciate all the help and insight but still try to do as much research as I can. Gutometers still not perfect though lol

[winner69]

We all have to start somewhere winner69. I haven't been doing it long so learning alot as I go. 🙂. I appreciate all the help and insight but still try to do as much research as I can. Gutometers still not perfect though lol

Fair enough diownz

I’m told depth doesn’t tell the full story as somehow bigger orders get traded fast and are often not seen on the depth........was a bit much to take in when explained to me.

So don’t look at depth much these days ...or even prices during the day that often ...that’s my choice anyway

[Davexl]

Fair enough diownz

I’m told depth doesn’t tell the full story as somehow bigger orders get traded fast and are often not seen on the depth........was a bit much to take in when explained to me.

So don’t look at depth much these days ...or even prices during the day that often ...that’s my choice anyway

The online brokers in the States used to provide something called 2nd level depth where you could see the sizes of the individual orders, much more useful.

Wonder if the brokers here have access to 2nd level depth but the punters don't?

Also large orders sometimes go through without seeming to display first if exactly matching volume.

[Xerof]

Depth always goes wonky late in day. I think from around 4:40 pm? Doesn’t mean anything and market is effectively closed until next day.
Factually incorrect. This is the closing auction where no trades occur until near, at or just after 5pm. Bidders bid, offerers offer, and through this price discovery mechanism, a price is determined, at which all intersecting interests are matched at a single price. Same happens prior to the open every day too.

[Davexl]

Depth always goes wonky late in day. I think from around 4:40 pm? Doesn’t mean anything and market is effectively closed until next day.

Ive noticed the same on ASB, but the trades themselves execute correctly, even though the display is scrambled sometimes till closing.

[Beagle]

See post #1 here. https://www.sharetrader.co.nz/showthread.php?4951-NZX-Trading-Times
Same match process thing happens in pre-trade. Any orders placed before market open are matched off based on price and depth to effect an opening volume weighted price at which the market starts trading for the day. All matched offers and bids in that matching process are executed at 10.00 a.m. for opening match and 5.00 p.m. for closing match.
Closing match is the one to watch and often a fair percentage of the days trade gets done by institutions in that process.

[Jerry]

i wouldnt want to own a retirement stock at the moment , if the virus got into one and infected everyone then no ones going to want to buy one going forward.

Looking at the other side of that, the retirement villages would be able to capitalise on many previously occupied apartments etc. that were bought much more cheaply and can now be sold at a profit. It might also reduce the amount spent on care.
While we are being cheerful, we might also reflect that the 1918 Flu virus took out the young healthy (shareholders :() not the elderly.

[Baa_Baa]

i wouldnt want to own a retirement stock at the moment , if the virus got into one and infected everyone then no ones going to want to buy one going forward.

Good grief, are you short OCA? Imagine this, imagine that .. no thanks - the world isn't ending and you should get some good trades buying back in when things settle, which they will, but it's not necessary to spew cr@p messages like this BS.

[bull....]

Looking at the other side of that, the retirement villages would be able to capitalise on many previously occupied apartments etc. that were bought much more cheaply and can now be sold at a profit. It might also reduce the amount spent on care.
While we are being cheerful, we might also reflect that the 1918 Flu virus took out the young healthy (shareholders :() not the elderly.

correct about the re -sales be good for them , 1918 we really hope it dont mutate to that senario

[bull....]

Good grief, are you short OCA? Imagine this, imagine that .. no thanks - the world isn't ending and you should get some good trades buying back in when things settle, which they will, but it's not necessary to spew cr@p messages like this BS.

lol seriously people in virus times will avoid anywhere where a large group of people are so not to increase there risk of infection. therefore some people die in a retirement village and everyone start thinking. probably unlikely senario just like the govt belief in it never happen here in nz

[Blue Skies]

i wouldnt want to own a retirement stock at the moment , if the virus got into one and infected everyone then no ones going to want to buy one going forward.

Sorry but can't agree with that.
Retirement villages are one of the safest & least likely places to worry about.
Unlike most organisations & businesses, Retirement villages/homes already have extremely strong protocols & staff training around avoiding cross infections both from visitors and residents & to be fair there's probably not a lot of international visitors coming and going.

On the other hand, several organisations I know of have just had staff returning from mainland China last week & they are much more likely to be impacted, however, tbh none seem too worried.

With more & more reasons for people wanting to retire to NZ
retirement villages = sound long term defensive stock

[Beagle]

As usual Macquarie have impeccable timing with their selling. OCA despite all the hype of new developments might struggle to even match 2019's underlying profit.

[Dlownz]

As usual Macquarie have impeccable timing with their selling. OCA despite all the hype of new developments might struggle to even match 2019's underlying profit.

What other pies does Macquarie have his fingers in. Think we have all learnt a lesson.

[winner69]

What other pies does Macquarie have his fingers in. Think we have all learnt a lesson.

Don’t be too harsh on Macquarie diownz

After all they did hand out $200m worth of shares at 79 cents in May 17

Two and half years later those shares are worth over $300m

That’s 53% return in those two years

[RTM]

As usual Macquarie have impeccable timing with their selling. OCA despite all the hype of new developments might struggle to even match 2019's underlying profit.

I thought you were going to leave us in peace now Beagle !

[Blue Skies]

Don’t be too harsh on Macquarie diownz

After all they did hand out $200m worth of shares at 79 cents in May 17

Two and half years later those shares are worth over $300m

That’s 53% return in those two years


That's a great return, and if you add the dividends in even better, it's more like 63% gain over 2.5 years, (despite Earl not being ruthless enough )

Why would anyone be disappointed with that !

[Beagle]

I thought you were going to leave us in peace now Beagle !

I hear ya..."get that muzzle on and back in your kennel you naughty dog" lol

[Baa_Baa]

What other pies does Macquarie have his fingers in. Think we have all learnt a lesson.

I haven't, what lesson have you learned? I must be missing something, I bought a small truckload of shares and they're about 20% up, after the Macquarie sell-out, plus a dividend not so long ago. TBH I not really all that fussed about the share price in the short term, these are a long play for me.

I never feared the Macquarie sell down/out and still don't, I'm glad they're gone though and I don't give a fig how long these 'loose' shares circulate the market. It might be that they actually mainly went to strong hands who can also see a long term bright future for OCA at an excellent entry point.

GLTAH

[King1212]

Well...macca gone...SP will be moving forward nowas investors have nothing to worry about the sell down anymore...good luck holders!

[winner69]

See the Directors joined the big end of town and had first dibs at the cheap shares on offer the other day

Good sign is Directors buying in

[peat]

See the Directors joined the big end of town and had first dibs at the cheap shares on offer the other day

Good sign is Directors buying in

they've gone full in!

[winner69]

they've gone full in!

Were heavily discounted and they can see value (where some can’t :p)

[percy]

Were heavily discounted and they can see value (where some can’t :p)

Gregg Tomlinson added 5mil shares to his holding.

[Onion]

they've gone full in!

$6m for Gregory Tomlinson! I reckon that is a meaningful commitment.

Did he have to sell a deck to pay for them?

[King1212]

Well... their money better in OCA than the bank... with 4%return plus capital gain vs 2.7% at the bank

[peat]

$6m for Gregory Tomlinson! I reckon that is a meaningful commitment.

Did he have to sell a deck to pay for them?

or did he put a lien-to on it.

[SCOTTY]

or did he put a lien-to on it.

He probably paid for them with his HGH divi :)

[Maverick]

After 2 weeks of ENORMOUS effort to figure out what went wrong between my estimate and actual HY results I've made it to the end of the rainbow. In my defence I always stated my prediction seemed too good to be true but I couldn't see where my workings might be wrong... well now I have.
There where 3 key mistakes/ assumptions I made which may be of interest to others here;
1. The emptying of beds at Lady allum has started ( I thought it was programmed further out). This obviously hurts revenue while maintaining staff costs. This is not a problem per se , just my own anticipated timing of it.
2. Here is the biggie …..I thought ILU new sales would be linear. In fact new ILU sales happen mostly in HY2. I've learned old clients don't venture out in the cold. This explains why the HY2 result is always MUCH stronger. ( I assumed it was always just a delivery, timing thing)So the large Sands and Meadowbank new sales margins ( and large DMFs thereafter)won't really show until the upcoming HY2.
3. On the negative side, “Depreciation” is rapidly rising and will get much greater as they deliver more new stuff. At least this is a non cash expense.

I have spent several weeks on it now and projected out the full pipeline development to completion and FWIW I see care profit declining substantially further for one more year before swinging back upwards as care suits exponentially fill up. These new care suit sales , then DMFs, will increasingly overcompensate for future care beds being decommissioned.


IMO is that OCA’ s reconstruction model is too complex for anyone with a real day job to apply the required focus to fully understand it ( those in meaningful employment can always just take Earls word that things are hunky dory, or otherwise follow the directors lead who are substantially buying up lately). OCAs current overhaul programme is just a beast with many moving parts and with many combinations of deconstruction,revamping, rebuilding methods which all take a lot of separate consideration.
It's not possible to communicate how this complex model works in a chat room using only a few paragraphs at a time, even this post is too long.
One really needs visuals, laser pointers and a break for morning tea to get how this will most likely play out.
For anybody less than “advanced “ in NZ retirement stocks I recommend studying SUM instead. It's much easier to understand buying a paddock and building “monopoly” type units. They are obviously proving an extremely successful model too with lots of history.


So with what ever credibility I have left, my revised prediction for FY20 is underlying 60-61m.
And beyond that it just goes from strength to strength so I'm a very happy long term holder. I wish I had more moola to buy even more in the current opportunity Maccas has just presented us.

[Grimy]

Thanks Maverick. Appreciate the time you put into this. I am a holder and always look forwards to your thoughts.
Cheers.

[winner69]

Good post Maverick. No doubt you are heaps wiser for the in-depth stuff.

Professor Aswath Damodaran known as ‘The King of Valuation) has a saying - Values don't come from models, but from stories (good or bad).

That mantra seems to apply here in that ‘the story’ is far important and a better guide to what Oceania might be worth than those fandangled things like short term earnings growth, PE ratios, PB ratios etc etc.q

Not one of my better investments but I still hold ...for the story

[Snow Leopard]

I would not beat yourself up too much over the slight :mellow: mismatch between your prediction and the reality on the day.

In many ways making correct short term predictions is harder than making long term predictions partly because precise timing of events can affect results significantly but mostly because everybody forgets what you said 3 years ago :).

Oceania is a company, that to a large degree, is transforming itself from a less profitable to a more profitable care model and in the longer term is currently looking good. [Wait 3 years before condemning that statement], but in the short term that does come at a cost.

The question that we will start need to ask, and finding the answers to is where does OCA go once the current transformation is complete?
If the decision makers get that right then this is not [slightly under] fair value so much as cheap as.

[Beagle]

Hi Mav, Don't sweat it mate, predicting the future is always fraught with risk. For what its worth I think underlying profit will only match or just exceed FY19...my best guess is about $50-55m.

Growth will happen in the years ahead but it will be slow and hampered by ongoing significant increases in the cost of providing intensive care services. I prefer the business model of SUM which as mentioned before has the tremendous natural advantage in that it is much less dependent on human resources.

Don't put all your eggs in one basket mate as it does turn out, you can have too many. My view is that very late stage care is not going to give the best return on capital no matter what pricing model one uses. So many have closed due to the very steeply rising cost of providing services.
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12306121&utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Saturday+8+ February+2020
I think these guys are going to have to take a haircut on their thinking of what their facility is really worth.

[Snoopy]

I would not beat yourself up too much over the slight :mellow: mismatch between your prediction and the reality on the day.

In many ways making correct short term predictions is harder than making long term predictions partly because precise timing of events can affect results significantly.

The question that we will start need to ask, and finding the answers to is where does OCA go once the current transformation is complete?




After 2 weeks of ENORMOUS effort to figure out what went wrong between my estimate and actual HY results I've made it to the end of the rainbow. In my defence I always stated my prediction seemed too good to be true but I couldn't see where my workings might be wrong... well now I have.

There were 3 key mistakes/ assumptions I made <snip>

IMO is that OCA’ s reconstruction model is too complex for anyone with a real day job to apply the required focus to fully understand it ( those in meaningful employment can always just take Earls word that things are hunky dory, or otherwise follow the directors lead who are substantially buying up lately).

OCAs current overhaul programme is just a beast with many moving parts and with many combinations of deconstruction,revamping, rebuilding methods which all take a lot of separate consideration.
It's not possible to communicate how this complex model works in a chat room using only a few paragraphs at a time, even this post is too long.
One really needs visuals, laser pointers and a break for morning tea to get how this will most likely play out.
For anybody less than “advanced “ in NZ retirement stocks I recommend studying SUM instead. It's much easier to understand buying a paddock and building “monopoly” type units. They are obviously proving an extremely successful model too with lots of history.

So with what ever credibility I have left, <snip>


Hey Mav your credibility has just gone sky high. Real credibility is not gained by constantly explaining how right you are or how complex your modelling is. Real credibility is being able to learn from mistakes which often only appear as mistakes with the benefit of hindsight. And of course we all make mistakes even if some are more forthcoming at admitting that than others.

Good words of wisdom too from the wise old Snow Leopard, except I would go further. It is much easier to predict the long term future of a company than the short term future. That is why I treat broker reports, that tend to focus on the next twelve months by nature with a healthy degree of scepticism. The timing of one off developments, and sometimes even those developments themselves when considered as part of the bigger picture can end up being long term irrelevant.

I am glad you have shared what you have done with this community. The education of the 'Oceania Ignorant' of which I count my self one, has been greatly enriched by your work. Sorry it ended up costing you your job, but we all make sacrifices eh!

SNOOPY

[petty]

Thanks Mav, as someone with a busy day job and limited accountanting nous I appreciate your time to research and willingness to share. I’m looking to accumulate more over the next year where opportunity presents.

[value_investor]

Re: Maverick

It happens to everyone, I know that once you get passionate about something it gets hard for others to pull you out and there's no shame in that. A lot of analysis was done from you and you weren't the only one that was led astray from the difficulty of the care side of the business.

I'm still holding my position and not accumulated from the report, I still think that the care side of the business will take years to adjust and there will be even more transitional pain for a longer time than originally anticipated. While still a excellent long term hold, I think its going to be longer than the current FY and the next one too. Then in future, I'm not sure that the side of the business will even guarantee the desired returns. Unfunded government wage costs is not a term you want to be associated with.

The real core competency for me is actually the development side of higher end ILU's imo. The fact that the timelines of these projects have not slipped, like we have seen in other companies is excellent. The acquisition of land in desirable areas and the ability to execute is hard. They've obviously got a very good team of project managers and development team.

I see a underlying profit in the range of $55-60m. The discrepancy is range is due to the unknown of the care business and the cost creeping up. At $60m is still gives a 20% gain in underlying profit and a forward PE of 12.2 which is excellent. I'm just not seeing enough to see them executing this FY but I've been wrong before on plenty of things.

[Baa_Baa]

So with what ever credibility I have left, my revised prediction for FY20 is underlying 60-61m. And beyond that it just goes from strength to strength so I'm a very happy long term holder. I wish I had more moola to buy even more in the current opportunity Maccas has just presented us.

Thanks for posting Mav, if I could give another Rep I would but it says I have to share it around. So in the open, thank you for your analysis and honesty. My OCA enjoyed a 2.3c ex-divi (unimputed) on Friday which will DRP into my holdings on 24 Feb.

Happy as :)

[Beagle]

Re: Maverick

It happens to everyone, I know that once you get passionate about something it gets hard for others to pull you out and there's no shame in that. A lot of analysis was done from you and you weren't the only one that was led astray from the difficulty of the care side of the business.

I'm still holding my position and not accumulated from the report, I still think that the care side of the business will take years to adjust and there will be even more transitional pain for a longer time than originally anticipated. While still a excellent long term hold, I think its going to be longer than the current FY and the next one too. Then in future, I'm not sure that the side of the business will even guarantee the desired returns. Unfunded government wage costs is not a term you want to be associated with.

The real core competency for me is actually the development side of higher end ILU's imo. The fact that the timelines of these projects have not slipped, like we have seen in other companies is excellent. The acquisition of land in desirable areas and the ability to execute is hard. They've obviously got a very good team of project managers and development team.

I see a underlying profit in the range of $55-60m. The discrepancy is range is due to the unknown of the care business and the cost creeping up. At $60m is still gives a 20% gain in underlying profit and a forward PE of 12.2 which is excellent. I'm just not seeing enough to see them executing this FY but I've been wrong before on plenty of things.

Good post but I am south of your underlying profit so see the PE differently. Fact is OCA are 4 years away from being 60/40 new model v old model, probably 5 years away because its one thing to build new model facilities and another to sell them down. So in the 2026 financial year we should see the real effects of the change in business model make their presence felt by which stage my thinking it will be perfectly obvious that returns on old Govt funded model beds will be so bad they'll simply have to roll out their new development model throughout the rest of their facilities.

Therefore the complete transition of their business plan could drag on very late into this decade. In all that time profit growth is being handicapped by the exceptionally high costs of providing late stage care, albeit this is being recovered slightly better as each year rolls by.

My long range radar suggests they underperform the sector (for the next decade) until their business model is fully transitioned to an occupation right agreement model. Only then will be see if their model is more effective than SUM others.