OCA - Oceania Group - retirement villages

[winner69]

In the nearly 16 years ( 'anniversary' is 15-Jul, that will be a better excuse to share a bottle of wine than 610 years since The Battle of Grunwald (https://www.onthisday.com/photos/battle-of-grunwald) ) that I have frequented this board the subject of how these healthcare/retirement village companies actually make (or don't make in MET's case) their money has come up on a pretty regular basis.

So, very generally:
You make a little money, or at least do not lose too much doing the care & added services bit:
You make a bit on money reselling (the right to occupy) an existing unit at a higher price than last time:
You make most money selling a new unit for more than it cost to build.

Each of these involves cash-flow and the value of the properties is related to the 'expected future cash-flow they will generate', but in reality means the state of the residential property market.

Underlying all this the value is dependent upon the premise that in the long run they company can build more and more new units every year ( on a long term basis ) which leads one to consider the possible parallels with the 'Shoe Event Horizon'. [If necessary Google It, Think About It & DO NOT Dismiss It]

Should you think you have all that sorted before I get back from the wine cellar then you can ponder the industries insistence that the "underlying profit" thing is a better measure of performance than the old NPAT/Comprehensive Income.

Anyway good night or good morning or whatever to you depending on your time-zone.

Disc: Mostly harmless

One of your better posts snowie ...good to get reminded about the shoes.

[Waltzing]

"House Price will hold" whoops ... does that mean this is a long term hold after all? Can MAV run that through his model? seems he is the only one who has one for this stock.

[winner69]

Lady from Tommy’s real estate in Wellington said unprecedented demand from returning Kiwis ...like their global internet site is ‘burning hot’

[Bjauck]

Lady from Tommy’s real estate in Wellington said unprecedented demand from returning Kiwis ...like their global internet site is ‘burning hot’
The rest of us paid for their quarantine as a result of their returning to NZ during a pandemic, so that they have extra to outbid us for housing.

[Brain]

Lady from Tommy’s real estate in Wellington said unprecedented demand from returning Kiwis ...like their global internet site is ‘burning hot’

I am always sceptical about what a real estate agent tells me either as a buyer or seller.

The loss of jobs in the tourism industry and the structural change our economy will have to undergo puts me firmly in the camp of believing that cash earning low interest rates is a way better deal than being invested in assets which will drop in value.

I could be wrong of course and from memory have been on many occasions

[mfd]

https://www.scoop.co.nz/stories/BU2006/S00424/mum-and-dad-investors-return-to-property-market.htm?utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Thursday+25 +June+2020

House Price will hold

Time will tell whether that makes up for the economic damage coming our way and the turning off off the immigration taps. I am not so optimistic.

I'm still happy invested in OCA, bought in during the fire sale and it's as good a place as anywhere to sit out whatever's coming. I expect them to do quite nicely in the long term.

[Waltzing]

In a crisis time starts to slow DOOOOWN... we are only 3 months into this and the next 12 - 24 months is the time to buy. As interest rates stay low buying will start in prehaps 24 months and kick on from there. Its just that right now 24 months seems like an eternity.. its not..go and get that real estate license if you are natural seller and people person... or become a sales rep for OCA , SUM or ARV...every DOW sell off is just wonderful trading...sadly it wont last... it never does..

[bull....]

eih braw bull....that was 2017...

but keep shaking though...maybe we see 50c soon....keep it up braw

got your in. is it 50c or 60c

[Entrep]

Where I am watching

11704

Looking for 7Xc initially if market weakness continues. 80c would be an OK buy to start DCA in.

[Waltzing]

honestly - less than IPO? market panic , i will have to change to a trading stock if this keeps up in our BSSB portfolio buy the seller and sell to the buyer. A buying opportunity according to MR B below in the long term portfolios. DISC: we hold in multiple portfolio's.

[Beagle]

This correction will get rid of some of the reef fish and shake out the weak holders. I see it as a healthy thing.

[dabsman]

This correction will get rid of some of the reef fish and shake out the weak holders. I see it as a healthy thing.

Grabbed a few more at 89c. Brings my average up a little but I think this is a 1.20c share all day long so happy to buy at these levels

[Waltzing]

You may get more chances down here as it dumps up and down based on the wild fires around the globe... only just started burning..They havnt replaced security at hotels with the Army but may just be a matter of time. Army deployed in Victoria just announced.

[bottomfeeder]

Just sitting on the fence at the moment, waiting for 85, before I accumulate any more.

[Waltzing]

yes waiting ... for some more ...

[Beagle]

Grabbed a few more at 89c. Brings my average up a little but I think this is a 1.20c share all day long so happy to buy at these levels

Beagle is doing a very good impression of a possum stuck in the headlights at present. Mind you, that would be a very well fed and contented possum :) I have plenty already.

[Waltzing]

They are not falling for it buyers increasing as usual...no we dont have enough but as stated its a battle between the few sellers and the public who understand the value of a roof over peoples head... was there ever a doubt...

[Snoopy]

We all know how a rental works, you might be lucky to get 2-4% return , plus any capital gain.
Where as a standard RV villa ORA will return 30% over an average of 7 years occupancy ..therefore about 4% p/a (30%/7yrs). plus any capital gain.


OK the 30% retention, is 30% of the original purchase price. That seems to be standard for 'right to occupy' properties.



Then add a weekly villa fee ,say, $130
Already your unabused RV villa is looking significantly better.


That $130 isn't profit though. That is money spent around the village and also the resident's share of council rates.



Now this is the point I don't quite think you are getting Snoopy…..
Your house is , at best, returning 2 -4% on “your” capital whereas the Villa is paid up front, in full by the client, so you are making 4% on “their” money. You have now been fully reimbursed for your villa and can perpetuate the process limited only by time to build another one and demand . You are now making 4% on someone else's money.


A couple of points here. The 30% retention fee isn't a given. Sure OCA is a business and they can set this figure at 30%. But what if there are other retirement villages with lesser retentions that are therefore more attractive? OCA may end up having to discount this fee at some point in the future.

Next point. The refurbishment of the occupational rights villa must be paid for out of this 4% pa return.

Earning 4% on someone else's money is attractive. Effectively this is a leveraged property investment with no money put down by Oceania. But leverage backfires in a real downturn. If property values fall then Oceania must swallow the equity loss on all the capital it does not own) (the resident's capital). This 'borrowed capital from residents' no doubt dwarf's Oceania's own capital by a country mile. I guess this is why retirement villages revalue their assets each year (to act as a canary for such a disaster). In fairness this would only become a solvency issue if the property in the village went down in value by 30% and held there over a seven year period (the average occupation time). In that situation, seven years of profits could be wiped out. But even a fall in property values of say 15% would cause a fall in underlying customer equity value of 20% or more (because we have to add on the running costs that could no longer be taken out of property profits). And such a fall could absolutely decimate Oceania's own equity. Don't think a property downturn could last for seven years? With property prices at all time highs and Auckland being the ninth least affordable city in the world in which to live (median house price/median household income = 8.6), think again.

Reference https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12193684



OCAs real point of difference from its peers, is that it can churn a care suit over every 3 yrs rather than the standard 7 for a villa . So that's effectively a 10% return p/a, again entirely on some else's money.


Getting a 30% retention after three years is 10% per year I get that. But a care suite will generally be worth substantially less than a villa. You will find that 10% of $250,000 ($25,000) is less than 4% of $680,000 ($27,200). So the annual return per resident looks to be less in dollar terms, plus you have to add on the extra care costs incurred by Oceania that are not covered by the government. Put this way, the myth of a 'highly profitable care model' disappears.



OCA have deliberately targeted care suits as the coming excessive demand will not be met by other competitors...perhaps an opposing example is SUM who have targeted villas until now and now having to curb their build rates.

I especially like the term recently coined by BaaBaa for the care side of the business as a “loss leader” and especially “COGS”...that's just brilliant!
……..got to get those customers coming into the store somehow.


Care for vulnerable elderly is the core service. If your core service is a 'loss leader', then IMO you don't have a business model.

SNOOPY

[winner69]

honestly - less than IPO? market panic , i will have to change to a trading stock if this keeps up in our BSSB portfolio buy the seller and sell to the buyer. A buying opportunity according to MR B below in the long term portfolios. DISC: we hold in multiple portfolio's.


They are not falling for it buyers increasing as usual...no we dont have enough but as stated its a battle between the few sellers and the public who understand the value of a roof over peoples head... was there ever a doubt...

So at the end of today the public won out?

[Beagle]

Snoopy,

Do not forget with your rental property to only budget for about 45 weeks average annual income if you are lucky, to allow for about 3 hours of your time on average each week per property to manage it, (I did not pull this figure out of thin air, highly experienced rental property owners with multiple units tell me there's about 150 hours of their time per unit end to end each year in the whole process), to allow for rates, repairs and maintenance, body corp fees for apartments and ever increasing insurance premiums and last but certainly not least and something almost no rental property investor I have ever acted for or met actually does budget for, a complete repaint and redecoration outside and inside every 7-8 years. When you actually allow for the deep cycle refurbishment costs which typically run to somewhere in the order of $20,000 - $25,000 for a typical 3 bedroom rental property you will find the average net return after all costs is somewhere around 2% per annum.

This paltry return is only if everything works out okay and you don't get done in by malicious damage costing tens of thousands of dollars extra or methamphetamine contamination costing even more like several of my clients have and all that assumes you don't get lumbered with an even bigger massive leaky building repair for your apartment complex like most of the apartment owners I know have.

I could write pages on the drama's Mrs B and I had to endure with our 2 rental properties and a whole book on the drama's I have seen clients endure. Fortunately we sold our 2 apartments before the next owner got caught with a massive leaky building repair. Now days we have the Government chiming in and making is less attractive with no depreciation on houses, (even though I can assure you they do wear out), no loss offsets to other income and tenancy laws increasingly heavily stacked in the tenants favour to such an extent you'd be forgiven for now wondering who actually has ownership rights of the property !

Its a mugs game that involves substantial amounts of your time, effort, heaps of stress and drama and at the end of it all unless you get substantial capital gain, you're on a hiding to nothing. NEVER AGAIN as far as I am concerned. Don't believe me ? Fill ya boots my friend and buy a couple of rental properties and see how you go and come back and tell me all about it a decade from now. You will say, Beagle, you were spot on, I wish I has listened to you.

Not sure why I bothered with this because I know there is nothing I can say that will change your mind...maybe someone else will get some value out of this post or maybe its just good therapy for me to vent one more time about the drama's I had with rental's.

OCA churn is going to be a lot more than the other retirement companies...think of them clipping the ticket with 30% every 3 years instead of every 9-10 years. If you can't understand that...

[RTM]

Just sitting on the fence at the moment, waiting for 85, before I accumulate any more.

Put an order in @75c and forget about it for a month.
Good luck.

[Maverick]

Hi Snoopy,
I've tried to think about your response from your point of view as much as it doesn't suit with what I want to hear , I accept your points are all true.I do agree that OCA are:
A.using leverage to grow.
B.are susceptible to large property price drops
C. Their pricing is influenced by there competitors.

I don't however agree that 10% return on a care suit (on the clients funding) is an subpar when compared to 4% on a more expensive villa...OCA just upscale the C/S volume.

the risks you outline are real so what now?
A. Developments -therefore more leverage-are done in accordance with demand , are predictable , and are easily throttled up/ down to suit. (SUM,MET and ARV have slowed villa development back accordingly).
B. Hard to see a large property fall happening in NZ with what I'm seeing and hearing travelling NZ right now, that includes Wtgn, Chch(yes, of course I visited Windermere), Westcoast,Queenstown(visited ARV new Villas) So Let's not worry about proprety crashes for now in this current environment.
C.they have niched themselves into care suites and very high end catchments out of direct line of competition.

I reckon OCA have mitigated, and have also been lucky, of all the risks you mention very well.

The biggest mistake I see almost everyone making is not "risking enough."
When I say "risk" , I don't mean "gambling", I mean the "risk" that can be mitigated by personal effort and research.

[Snoopy]

Snoopy,

I could write pages on the drama's Mrs B and I had to endure with our 2 rental properties and a whole book on the drama's I have seen clients endure.

Its a mugs game that involves substantial amounts of your time, effort, heaps of stress and drama and at the end of it all unless you get substantial capital gain, you're on a hiding to nothing. NEVER AGAIN as far as I am concerned. Don't believe me ? Fill ya boots my friend and buy a couple of rental properties and see how you go and come back and tell me all about it a decade from now. You will say, Beagle, you were spot on, I wish I has listened to you.


No need to convince me Beagle. I don't live in Auckland so have never been seduced to run a rental property to plug into those 'mega capital gains'. Seeing myself as a New Zealander, rather than a global property citizen, I never understood why anyone would sell up from another part of NZ and move to Auckland. The higher salaries available in some corporate work always seemed to be balanced out by higher direct (housing) and indirect costs (like excessive commuting). Of course not living there, I wasn't on the spot to see the huge increase in immigrants and the associated housing demand, coupled with those with borrowing headroom, racing to get on the property bandwagon. Over the last twenty years in particular, those factors saw Auckland house values skyrocket from what I had perceived as very expensive levels. But Auckland is now severely unaffordable not only in NZ terms, but on a global basis.

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12193684

Look at the global cities that are now relatively cheaper (and some significantly so) in price to household earnings ratio than Auckland: London, New York, Amsterdam, Paris, Brisbane, Perth, Tokyo, and San Francisco for starters. It does make me wonder how far the NZ property boom can drive prices. It will take over twenty years of wage increases for Aucklanders for Auckland house prices to go from 'severely unaffordable' to simply 'unaffordable', provided Auckland house prices flat line for twenty years. That last bit seems very unlikely. So the only solution I can see to this affordability dilemma is at least one, and probably a series of house price crashes. Given that likelihood, in my view, I think all of those retirement village operators with a strong Auckland base are sitting on a disappearing equity time bomb. The leverage in making up themselves the losses from their leveraged loaned (by the resident occupiers) equity coupled with the loss of their development portfolio at the same time will likely cause them to collapse. And given how overvalued house prices are in Auckland on a global basis, I can't see a way out of this 'ultimate fate'.



Not sure why I bothered with this because I know there is nothing I can say that will change your mind...

OCA churn is going to be a lot more than the other retirement companies...think of them clipping the ticket with 30% every 3 years instead of every 9-10 years. If you can't understand that...


Oh I get that. But you left out Winner's observation on the 'other half of the business' where he dissects the half yearly cashflow, separating the running costs from the development margins.



Follow the cash

From the Operating Cash Flow (the $57.0m) leave out the $80.0m net they got for ORA sales you get negative $23.0m

This is Receipts from residents for village and care fees less employees and suppliers less rent less interest ...to me that’s the cash cost of looking after and caring for residents. The rest of the cash flow statements are all property related

So following the money $23m cash gone in H1 ....last year it was ~$4m ...big difference.


It looks like Oceania is inherently loss making and only being saved by property development. It is a bit of a problem where your core main activity, looking after the elderly, is a loss making business, don't you think?

SNOOPY

[Beagle]

No Snoopy its not a concern because one swallow does not a summer make.

[winner69]

honestly - less than IPO? market panic , i will have to change to a trading stock if this keeps up in our BSSB portfolio buy the seller and sell to the buyer. A buying opportunity according to MR B below in the long term portfolios. DISC: we hold in multiple portfolio's.


No Snoopy its not a concern because one swallow does not a summer make.


Saw a flock of swallows yesterday ...must be summer :t_up:

[Beagle]

Saw a flock of swallows yesterday ...must be summer :t_up:

It will be in due course. Just hold and wait and see :t_up:

[winner69]

Going to be strong end to the week I reckon

[peat]

Going to be strong end to the week I reckon

This is where I reference the Black Monday thread ;+)

I'm quite nervous/excited that something big is going to happen soon.
Its more than a feeling (ask Boston!) and is based on those magic shapes (harmonic patterns) I see that dont work all the time (but when they do!)

[Paradox]

Agree. A pattern of neglect is different to an isolated incident and it depends what systems and check have been put in place since 2017.

More than one incident is concerning!

I’m in for the long haul if the management are on top of this now. If not...

This from the CEO's report in 2017:

"Caring for the safety of our team is just as important to us as caring for our residents. We understand our risk profile and with operating safely at the forefront of our minds we track a range of indicators. During 2017 we redesigned our moving and handling training programme, introduced new regional safety representatives and trialled a new injury management process that will now be delivered nationally"

[Waltzing]

I would not be surprised to see losses in OCA for up to the next 2 years or even longer.

M2 surging to its highest levels in the US (not sure what its at here now) will likely lead to money firing asset prices higher long term occurring to the latest graphs.

Off topic, i really do enjoy the contributions of MR B and have followed him and MR Percy over many many years. I am please to say i am often too slow to the sell when they are long gone and taken all the profits! I would also like to say that as a young guy the ACA accountants in rural new zealand in the early to late 1980's were very very innovate in there use of technologies for very sophisticate financial reporting considering the limitation of the technologies but the reporting today i consider is not as sophisticated considering the CPU power available on the desktop now connected to central server CPU's over Http. I think those accountants from that time deserve some credit . Prehaps i just met the cream of the crop. Dont underestimate your ACA's its just the system today means that have to spent more time on compliance and not so much time on using there creative reporting talents. Thank you MR B.

[Beagle]

You are far too kind mate. Everyone needs a bit of luck in their life and I came from a family of very modest means with four kids who could only afford to send one of their children to University. I have always been interested in investment so on a hunch as an optional paper late in my Bachelor of Commerce degree I took investment analysis which was a level three advanced paper and it was the only one of my degree I got an A pass in which I suppose speaks for itself as to where my interests were at an early age.

I remember starting out with a small firm of accountants in Auckland in 1981 and I thought I knew everything. I suppose that's the natural arrogance of youth or perhaps it was just me ? 39 years later I wonder if I really knew anything at all. Back then there was no internet, no email, no forums, nothing. A friend of mine used to keep paper charts on mathematical grid paper and laboured over this every weekend much to the consternation of his girlfriend.
I took quite an interest in those charts, (but wish I had taken more of an interest) because I never really appreciated how valuable technical analysis was until I came on here about a decade ago and thanks to wise words from Hoop and others learned a lot.

I worry a heck of a lot about the disconnect between the markets and the underlying economy. I have never seen anything like it and nobody else has either, (because nobody investing now was investing the last time this happened...yes there was a last time). There is no text book for what's happening here, the size of the stimulus, driving interest rates down to 100 year lows...the market seems to think its a foregone conclusion that we will have a vaccine that's available by 2021. But what if this doesn't happen ?

Overnight the IMF has revised down its global growth for the next year to minus 4.9%...this is the stuff of the making of a depression if we don't get that vaccine.
Coming back to this huge bounce over the last three months after an unprecedented bull market for 11 years to March 2020. Disturbingly there is one precedent for the size of this bounce when the market was so diametrically different to the underlying economy and that was 1929, just before the great depression. Massive stimulus back then pumped the market back up in a very similar way and on a percentage basis even slightly further than what we're experiencing now...before heading dramatically lower over the ensuring several years. There's a very good chance history will repeat if we don't get that vaccine next year so I am extremely cautious of this market.

There are very few stocks I like and I restrict my investments to those that I think will do okay in a recession and can be resilient in a depression. I hope I am wrong, (I will never be so pleased to be) and that we get the vaccine the world desperately needs sooner rather than later or not at all.

OCA will do okay, (much better than okay if we get a vaccine and the world sort of goes back to the way it was, albeit riddled with far more central bank debt). Its a needs based business and those needs are not going away but will only increase as the numbers of old folks needing care steadily increase in the years ahead. The valuation is compelling and is probably still trading at a ~ 25% discount to 2020 NAV, (NAV is different to NTA and includes things such as developments in progress, IP and some other stuff I forget).

We all make mistakes, I am certainly NOT brilliant. At times on this forum I have been far too dogmatic and belligerent...hopefully I have learned a little bit from those mistakes. As little as a couple of weeks ago I thought this wouldn't go under $1 again and topped up some more at that price and yet here we are at 90 cents. My sense is if the market as a whole is choppy and essentially goes sideways from here until we get a resolution to Covid 19, that would be a very satisfactory outcome. I bought OCA for yield which is close to 7% at my average price of around 70 cents. I think OCA can continue to pay ~ 5 cents per share in dividends so its probably one of the best places to hide in this market and is my largest investment position on the NZX.

I have learned a heck of a lot from other contributors to this forum in the last decade.
Finally a note of caution regarding underlying profit for OCA for the year ended 31/5/20. There is no question they have incurred significant extra direct costs running into many millions as a result of Covid 19. There's also the slowdown in their development plans and their inability to sell independent living apartments during the lockdown. I think its best to have really realistic expectations about this years underlying profit. If I have to pick a number I will and I'll estimate $40m underlying profit impacted by about $10-20m (no apologies for such a wide range) Covid 19 effect, i.e. would have been $50-60m without Covid 19.

I'll probably be wrong by a long way...Covid 19 effect could be worse than what I am estimating. Importantly as has been demonstrated by the market's response to RYM's result, the market seems happy to look through what is hopefully a one-off Covid 19 impact and hope for brighter days tomorrow.
I think OCA's business model is far more needs based and therefore resilient than the other retirement companies. Their dividend yield is the best and based on adjusted underlying profit for Covid effect their valuation is comfortably the most compelling. MET are cheap too but who knows how that will play out ? I flipped a coin on that one a while back, (probably just as likely to be correct as any other guess) and the coin said the takeover won't happen and MET should just get back to running their business.

[Panda-NZ-]

We have already averted a depression I think, the second in 20 years. I think emotions play an important role in this. the only thing to fear is fear itself.

As for retirement stocks I'm not really interested anymore since you're dealing with something that uniquely targets the elderly and there is the added risk that property prices will go down in some places as others have said. They are holding up well now though and we may become a desirable place to live.. maybe too desirable as other places don't take action on climate change and have water shortages as a result.

[Bjauck]

No Snoopy its not a concern because one swallow does not a summer make. Interestingly our Warou - the native self-introduced Welcome Swallow - is non-migratory*. Small flocks often form at the end Summer to feed on insects above the late Summer gossamer on long grasses. So perhaps seeing a small flock of swallows signals the end of the golden weather :)

*Here in Auckland at least. They may fly further North from more southerly parts in Autumn though.

[winner69]

High mortality rates good for this sector ....wonder what esteemed poster ‘old guy’ or was it ‘newguy’ who did a lot of work on this subject is doing these days ...probably still modelling demographics and turnover of clients in villages.

[Paradox]

The dog is exceptionally highly motivated to get his snout really deep into the financial statements. Just as well seeing as they're so complicated.


Just day 2 of looking into the statements and I already see what you mean. Even getting the number of care beds, suites, and units for the last 4-years is hard as it keeps changing in every report - divesting & restating.....and don't get me started on the other income that appears multiple times, even though some of it is operating income....

[Bjauck]

Auckland house prices are unaffordable. However for many it is the most tax-efficient investment/pension scheme available. So in a low interest environment and with investor housing and owner-occupied housing being the investment/pension vehicle of primary choice for NZers, this severe unaffordability may well continue in my opinion. For many people too the retirement company listings such as OCA could be a more manageable, easier and convenient proxy for direct property ownership.

The NZX listings are few. So many NZ listed companies have shifted to Australia or been taken over by overseas companies. KiwiSaver has no tax advantages. There is little incentive to accumulate a large KiwiSaver balance in preference to investor housing, the annual credit notwithstanding.

[winner69]

Just day 2 of looking into the statements and I already see what you mean. Even getting the number of care beds, suites, and units for the last 4-years is hard as it keeps changing in every report - divesting & restating.....and don't get me started on the other income that appears multiple times, even though some of it is operating income....

Magnificent set of accounts though eh paradox...a thing of beauty

Just do what Beagle does .....’profit’ is change in book value plus dividends...or something like that

But more important forget the financials .....understand the story

[Beagle]

Maybe the new CFO will make the financials' more easily comprehensible this time ?... we live in hope ;)

[Paradox]

Magnificent set of accounts though eh paradox...a thing of beauty

Just do what Beagle does .....’profit’ is change in book value plus dividends...or something like that

But more important forget the financials .....understand the story

I'm trying to do it the hard way and develop my skills in the valuation model based on residual income.

[Paradox]

Maybe the new CFO will make the financials' more easily comprehensible this time ?... we live in hope ;)

CFO was the lead adviser for OCA's IPO and with his investment banking experience in Jarden & Forysth Barr, one could hope he'll deliver what the markets look for...

[Baa_Baa]

I think what the market looks for is to not have to be a forensic accountant firstly, just a recurring growth in Underlying profits and a decent dividend will do just fine.

[Beagle]

I still maintain, (although you'll not see this in any accounting textbook) This years NAV or NTA less last year's NAV or NTA and add back dividends paid during the year is a great way to cut through masses of paperwork to work out how much the company really made during the year. Multiply that figure by 15 (for this ultra low interest rate environment) and that's not too bad of a valuation tool either :) NAV better go up otherwise I'll have to invent another new theory...might even have to resort to asking Couta1 for a relativity theory :)

[winner69]

I see nobody has responded to Snow Leopard - Should you think you have all that sorted before I get back from the wine cellar then you can ponder the industries insistence that the "underlying profit" thing is a better measure of performance than the old NPAT/Comprehensive Income.

[winner69]

I'm trying to do it the hard way and develop my skills in the valuation model based on residual income.

Good stuff ...how did day 2 go.

Is a good approach.

What will you do if the exercise shows negative residual income (depends on assumed cost of equity of course) .....valuation below book value eh.

Keep us up to date.

[Paradox]

if valuation is below book value, a simple view would be to put your $ elsewhere? you're right about cost of equity. and of course, we've to take a position on the required rate of return.

My day 1 was fine - Loaded 4-years of income and balance sheets, reformulated them to split operating revenue/expense from financial revenue/liability, added the dirty surplus (eg property revaluation);

Day 2: got the latest population forecasts for the next 30 years with breakdown of 65+ to 80+ age group so it'd help my sales projections.
I've also reconciled the number of care beds, suits, hybrids, and units OCA will have by FY2020.

Next step is to focus on the revenue each stream within the operating segment has returned. this is where I'll have difficulty as OCA has inter-segment pricing, their statements aren't flash (compared to RYM) - so I'll have to make some assumptions.

Next weekend: I'll reformulate the statements with 5-year projections and look at the graphs.

mid-July: I'll complete the valuation, just in time before the annual report (is it 20th that we expect to see it?)

[Paradox]

I still maintain, (although you'll not see this in any accounting textbook) This years NAV or NTA less last year's NAV or NTA and add back dividends paid during the year is a great way to cut through masses of paperwork to work out how much the company really made during the year. Multiply that figure by 15 (for this ultra low interest rate environment) and that's not too bad of a valuation tool either :)

would you include property revaluation gains in this consideration?

[bottomfeeder]

Ahh we shouldn't forget future potential of increased earnings, and future increases in NTA, NAV and ability to cope with inflation increases, ability to cope with recession, depression, movement in interest rates, etc, etc,etc. So not just quantitative measurements, but qualitative measurements as well. Just so much goes into the valuation of an investment.

[Paradox]

lot of those measures will be absorbed in the industry beta, required rate of return, likely interest rates etc. and support the valuation.

I agree any valuation model is just one lens into the company - in this case, it is viewing through operational/economic profitability rather than accounting profitability.

[winner69]

lot of those measures will be absorbed in the industry beta, required rate of return, likely interest rates etc. and support the valuation.

I agree any valuation model is just one lens into the company - in this case, it is viewing through operational/economic profitability rather than accounting profitability.

Good work here paradox ... I think it’s a very good approach

Mind you I’ve found that residual income / economic profit seem to be dirty words on this site. Don’t let that put you off as many real investment managers take this approach rather than the cheats way that broker analysts take.

[Beagle]

Beagle’s short cut methodology is essentially the same as using Comprehensive Income and applying a P/E of 15 to value. It includes property revaluation changes.

Cheats way to cut through all the paperwork and useful as a starting point for consideration. Of course what it doesn't encapsulate is the transformational journey the company is on of transforming old style rooms where OCA are getting a very poor return on investment through old style govt funded care into care suites which will generate a substantially better ROI going forward.

The age old problem with comprehensive income reporting that is required by international financial reporting standards (IFRS) for all property companies is you will get substantial swings in reported IFRS income depending upon the state of the property market.

I still think underlying profit is a better starting point as the focus shifts to what profit was actually realised from previous gains in the property cycle and encapsulates the age old accounting convention that a profit is not really a profit unless its realised. I think that's why the industry has always focused on underlying profit as this foundational GAAP (generally accepted accounting principle) has been around for hundreds of years and predates IFRS comprehensive income reporting by a similar very substantial timeframe.

Nevertheless IFRS reporting is worth considering in the mix as underlying realised profits come from historical IFRS valuation increases, (the difference is known in this industry as embedded value) Embedded value is the difference between the current valuation of all units and what the residents originally paid for their occupation right agreement licences.

[winner69]

Hope this long term story is a beaut.

NAV forecasts $54m for F20 underlying earnings while beagle has said something less than last year.

So underlying earnings declining 2 years in a row ...not what BaaBaa and his recurring growth in underlying would like to see.

Suppose we got sucked in that 35% pa growth from 2017 that Earl needed to get his bonus ....going to be a long way short of that

But be patient ...it’s a long game......only hope we not saying that in 2025

[Beagle]

Underlying profit would have been up but for Covid 19 so no worries. Underlying profit after adjusting for C19 impact is what's important.

[winner69]

Underlying profit would have been up but for Covid 19 so no worries. Underlying profit after adjusting for C19 impact is what's important.


Hope they make a decent number up for impact of C19 so we can normalise things ...unless this the new normal.

Greencross Health were a bit dumb the other day — they said C19 had NO impact — you would have thought they would have a number up and said that $Xm was the impact.

[Paradox]

thanks winner69.

Does anyone know how much OCA on average charge for a new village unit (or) a resale? For 2019, the new sales count was 76 and resales was 83 (so, 159 in total). The revenue from all village operations was $24m. That brings the average to $151k. (excludes DMF);

is $151k close enough? it seems a bit low; am i missing something?

cheers

[winner69]

thanks winner69.

Does anyone know how much OCA on average charge for a new village unit (or) a resale? For 2019, the new sales count was 76 and resales was 83 (so, 159 in total). The revenue from all village operations was $24m. That brings the average to $151k. (excludes DMF);

is $151k close enough? it seems a bit low; am i missing something?h

cheers

Lots of sale prices of different things in this presentation.

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

[Beagle]

The last paragraph on page 34 is more than a little bit interesting. My rough guess of $40m underlying for the year could be miles out depending on how many units they have sold. Anyone's guess what the underlying profit for the year will be eh Winner. What we know though is NAV was $1.15 inclusive of work in progress as at 30 November 2019.

I feel well positioned :t_up:

[King1212]

Average brokers ..$1.19

Mcewan broker... recommend hold.

U are so close master Beagle

[winner69]

The last paragraph on page 34 is more than a little bit interesting. My rough guess of $40m underlying for the year could be miles out depending on how many units they have sold. Anyone's guess what the underlying profit for the year will be eh Winner. What we know though is NAV was $1.15 inclusive of work in progress as at 30 November 2019.

I feel well positioned :t_up:

I reckon $71m

Bit shy of $84m where Earl said it would be a couple of years — but at least an improvement on last year

They’ve got to break this habit of selling heaps more stuff and making stuff all more ....$71m will do that

[Beagle]

Good point King1212

https://www.marketscreener.com/OCEANIA-HEALTHCARE-LIMITE-103506268/financials/

Average broker forecast is eps of 12 cps up 50% on last years 8 cps ! That would put them on a current year PE of 7.5 which is stupidly cheap.

I better buy some more, you can't have too many :t_up: :t_up:

[Paradox]

The last paragraph on page 34 is more than a little bit interesting. My rough guess of $40m underlying for the year could be miles out depending on how many units they have sold. Anyone's guess what the underlying profit for the year will be eh Winner. What we know though is NAV was $1.15 inclusive of work in progress as at 30 November 2019.

I feel well positioned :t_up:

For the first 6-months, they had sold new/resold 186 units & suites.

[Paradox]

Lots of sale prices of different things in this presentation.

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

thanks. Slide #30 helps a tad.

[Paradox]

They’ve got to break this habit of selling heaps more stuff and making stuff all more ....

After they exhaust their land bank of 2000 units in 6-years, what then? where is the perpetual growth coming from?

[BlackPeter]

After they exhaust their land bank of 2000 units in 6-years, what then? where is the perpetual growth coming from?

Maybe they can take over SUM at the cheap ;)? Plenty of growth potential around ...

But seriously - OCA's strategy is to recycle cheap existing care units and turn them into up market care units. I think they could still go some time doing that.

[Bjauck]

After they exhaust their land bank of 2000 units in 6-years, what then? where is the perpetual growth coming from?
There could be potential to open new villages to younger age groups by dropping minimum ages to 65, 60 or 55. The ORA system could be adapted for younger minimum age villages, including a shared capital gain/loss on disposal - Perhaps also a prepaid leasehold system for some villages?

[Paradox]

Population forecast (Source: Stats NZ)
============================================


2020
2028
2038
2048
2058


Population 65+
792
1048
1315
1452
1695


Total population (in 000s)
5,002
5,511
6,087
6,592
7,061


65+ as % of total population
15.83%
19.02%
21.60%
22.03%
24.01%


============================================

How many will go to village units? and what would OCA's market share be in 10/20 years' time?

[Beagle]

The problem with DCF valuation models, (if that's what you are attempting to build), is at least to some extent they rely on answers to questions like that where people make estimates, (total guesswork ?), about things far into the future.

All we know with some sense of certainty is that the retirement village model has been gaining growing acceptance and penetration rates have been going up steadily over time as have the number of old folks reaching the average age of late 70's when about 15% of them choose to move into an independent living unit and mid 80's is I believe the average age where people move into a care suite.

[King1212]

https://i.stuff.co.nz/life-style/homed/real-estate/300041329/whats-really-going-to-happen-with-new-zealands-house-prices?cid=facebook.post

Forecast average house price 10% down.

Brokers average $1.19....take off 10%....that bring OCA to $1...

Current SP .90c...cheapest n discounted at the sector

[Paradox]

thanks & yes - all valuation models do require assumptions that you keep validating and adjusting over time. Number of units/residents/sales - and gross margin need constant tweaking every 6-months to reflect what is happening in reality.

Other parameters are slightly easy - interest rates, market premium, industry beta etc. to aid in pegging the cost of equity.

I'm building a model based on residual income and for the terminal value that DCF requires, book value is used instead.

If I have the time, I'd use all the models for the same set of parameters & compare the value.

[Baa_Baa]

Gee I just think they’re a good company for the long term and under priced compared to NTA, so buy some more whenever my chart says so. That’s close to philistinism compared to you analysts!

Thanks for sharing your analysis. 👨🏼*🎓😁

[Paradox]

Gee I just think they’re a good company for the long term and under priced compared to NTA, so buy some more whenever my chart says so. That’s close to philistinism compared to you analysts!

Thanks for sharing your analysis. *

Disc: I'm neither an accountant nor an experienced analyst; as stated before, I'm developing my skills and feel comfortable in the RI model.

All I'm hoping to do is - prepare the model with a set of assumptions, await OCA's annual report to adjust some numbers, form a view on the valuation, visit a few OCA premises and then only buy. But this time around, I'll hold it for a few years (noted OCA is no RYM)

[Baa_Baa]

Disc: I'm neither an accountant nor an experienced analyst; as stated before, I'm developing my skills and feel comfortable in the RI model.

All I'm hoping to do is - prepare the model with a set of assumptions, await OCA's annual report to adjust some numbers, form a view on the valuation, visit a few OCA premises and then only buy. But this time around, I'll hold it for a few years (noted OCA is no RYM)

PM @maverick and compare notes. Might save you a heap of time than building it from scratch, good guy that maverick, pretty clued up about OCA fundamentals.

[winner69]

“Imagination will often carry us to places that never were. But without imagination Oceania share price will go nowhere”

Good guy that Carl Sagan ....he’s onto it

[Beagle]

Hey Winner - There's over a million Kiwi's living overseas...you think more than a few might want to come home to our relatively safe little Island ?

[Paradox]

PM @maverick and compare notes. Might save you a heap of time than building it from scratch, good guy that maverick, pretty clued up about OCA fundamentals.

Thanks. I’ve completed all my reformulation and projections last night. Ratios and profitability analysis are painting a good picture now; over the next couple of days I’ll go through them to ensure there are no calc or referencing errors. And then compare them with OCA’s recent investor presentations....will reach out to Maverick after that..hopeful of getting to a valuation by this weekend.

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12343718
House prices holding up very well and don't forget were very strong in January and February 2020. Prices in Auckland by my calculations are about 3% higher now than they were on 31/12/2019.

[dobby41]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12343718
House prices holding up very well and don't forget were very strong in January and February 2020. Prices in Auckland by my calculations are about 3% higher now than they were on 31/12/2019.

I would have said around 1% from the graphic.

[Waltzing]

off topic ,"There's over a million Kiwi's living overseas...you think more than a few might want to come home to our relatively safe little Island ?"

wonder how they are all doing... most in AUS?

As express ways develop through the golden triangle house prices in the upper north island must surely hold up; property continues to become the GOLD of the new digital currency age.. and has a better return then GOLD.

Traffic here over the last 2 weeks has been increasing putting increasing pressure on the golden triangles arterial routes.

[winner69]

Hey Winner - There's over a million Kiwi's living overseas...you think more than a few might want to come home to our relatively safe little Island ?

Apparently coming home in droves ...real estate agent said they’re running out of the quarantine stations to buy a house

Hope they’re good with the shovel to get a bit of cash to spend

[thegreatestben]

Real estate agents are so full of ****. I work quite closely with them in my job and I can tell you they're only there for one thing and take the path of least resistance to get to it every single time.

[dobby41]

Apparently coming home in droves ...real estate agent said they’re running out of the quarantine stations to buy a house

Hope they’re good with the shovel to get a bit of cash to spend

The ones you speak of must have money (to be running out to buy a house) so why are they coming back in the 1st place?
I would have thought it was people without jobs coming back because they can't get a payout in Aus.
Doesn't add up to me.

[bullfrog]

It all depends on whether we’ll keep our safe little island Covid free, fingers crossed but v unlikely imo :( human error vs virus hmmmm. if it takes off, then the kiwi advantage is lost and the returners may boomerang, back to a place with herd immunity, and maybe to a country where house prices have plummeted. The returners may only put a short term stress on housing. OCA model is less connected to house prices than SUM, so imo has a lower long term risk.

[Waltzing]

check out the AIR NZ flight pre cautions or lax of them..

[winner69]

That guy Sagan also said this “When you make the finding of what Oceania is worth yourself - even if you're the last person on Earth to see the light - you'll never forget it.”

[Maverick]

Hey Winner , I'm thinking my prediction of 54m underlying profit you often refer to will prove a bit optimistic.
I've been fiddling away on the good old spreadsheets and have revised it down a little to 52-53m...BUT…. on top of this I still need to add Covid costs. I'm not talking about lost sales etc, that's factored in. What I haven't allowed for is the extra cost of doing business such as sick staff,security and PPE etc.
I've gone through recent ARV and RYM accounts and I can't find any clues what to expect. No point in contacting OCA directly at this ”blackout” stage.
Previously the Govt had said they would compensate providers for this expense but RYM have just said it will only be around 26m to fill a 80m hole(across the whole sector) and what does that even include? So looks like a sizeable allowance might be required.
My best guess , and that's all it is, is maybe around 3m.( RYM stated 54m shortfall divided by OCA market share)

If anyone out there does have an idea on this important missing piece, It would love to hear it.

So whatever the underlying profit might end up,it is very unlikely to have much growth YOY if any.(the last 2 yrs were about 51m).

While I consider a flat result will be an outstanding achievement for any company weathering the full timeline of the storm I still have a suspicion Mr market may remain unimpressed. The facts will read to many as 3 years of growth disappointment.

Reality is that the costs are one of and historical, cashflow will continue to afford a dividend and the delayed sales will still exist but will divert to appear in FY21.

Surely the share price has to sit around $1.20 if OCA can pull of a seemingly ho-hum result under these circumstances.

Again, if anyone can shed some light on what the OCA covid costs of operation might be, I'd be very grateful.

[Beagle]

Hi Maverick,
I have it on good industry insider authority that front line care staff were all paid $2 an hour extra for the 4 weeks of lockdown level 4.
Add to that there will have been extra staff required for security to each facility around the clock, 24/7 during lockdown level's 2, 3 and 4. Allow one security guard per care facility for 3 shifts per 24 hours for however many weeks the full lockdown range went for times say $28 hour and crunch those numbers and see what that figure comes too for security. On top of that will be extra PPE gear. Those are the direct costs that I am aware of.

My gut feel is direct costs and indirect loss of profit due to delay's in construction and settlement of some apartments will run to $10-15 million in total. (This is just a guess on my part as I do not have the patience to labour over spreadsheets for many hours and days trying to firm up any validity behind that) so its just a rough gut feel estimate. Some of this will be recovered from the Govt and some of it recovered in FY21 when delayed settlements are effected.

Positive factors resulting. OCA has considerable external bank debt which is priced based on the wholesale interbank bill rate plus a modest margin, they don't disclose this margin as it would be commercially sensitive information. From the half year report interest rates resulting to OCA on their debt facilities were circa 2.3- 2.8%. Since then the wholesale interbank bill rate has collapsed to unprecedented lows, (90 day rate was as low as 0.18% the other day) so I foresee their cost of debt being at an extraordinary low rate for the foreseeable future, perhaps even less than 2.0% ? You might want to revise down their finance costs for FY21 in your spreadsheet and other near term years going forward from there as I think we will have ultra low interest rates for quite some years to come.

[Snow Leopard]

That guy Sagan also said this “When you make the finding of what Oceania is worth yourself - even if you're the last person on Earth to see the light - you'll never forget it.”

I will never forgot the night he first said that. Mind you he had too many pints of creme de menthe and kept sneaking up to the fridge and then yanking the door open with a look of amazement then appearing on his face.

[Waltzing]

"I have it on good industry insider authority that front line care staff were all paid $2 an hour extra for the 4 weeks of lockdown level 4."

hang on....

no wonder Mr B and Mr P are always down the road with the money and the rest of us are only just pressing the buy or sell!!!!

[Beagle]

Its good to have a friend who works as a village manager at OCA ;)

Estimate of weekly security costs. 44 sites to man using one security guard at each site for all 168 hours a week at an average of $28 per hour = $207K per week for security.
How many weeks were we in level 4, 3 and 2 I forget. 9 - 10 weeks in total ? Maybe $2m total for security costs ?

[Waltzing]

"Its good to have a friend who works as a village manager at OCA "


Well... i am hoping to pic up some more in the MID 70's but i wont hold my breath...

commercial not residential... but .... we moved into ARG recently ..

https://www.interest.co.nz/property/105753/two-thirds-commercial-properties-offered-bayleys-auckland-auction-didnt-receive-any

[tommy_d]

Well... i am hoping to pic up some more in the MID 70's but i wont hold my breath...
none of my buying has been above 80cents yet, but i'm about ready to change that

[justakiwi]

Wow. Not sure I understand why professional security guards were needed. I realise our rest home is small, but we simply locked the doors, and put signs out saying nobody would be admitted. If a contractor had to come for an emergency such as plumbing/electrical, we escorted them in, checked that they had no known symptoms, ensured they sanitised their hands, and signed them in and out.

Why would anywhere need a major security presence if these measures were taken?


Its good to have a friend who works as a village manager at OCA ;)

Estimate of weekly security costs. 44 sites to man using one security guard at each site for all 168 hours a week at an average of $28 per hour = $207K per week for security.
How many weeks were we in level 4, 3 and 2 I forget. 9 - 10 weeks in total ? Maybe $2m total for security costs ?

[Beagle]

Wow. Not sure I understand why professional security guards were needed. I realise our rest home is small, but we simply locked the doors, and put signs out saying nobody would be admitted. If a contractor had to come for an emergency such as plumbing/electrical, we escorted them in, checked that they had no known symptoms, ensured they sanitised their hands, and signed them in and out.

Why would anywhere need a major security presence if these measures were taken?

Younger people turning up even during lockdown 4 rules expecting to visit their aging and sometimes sick relatives. Some simply wouldn't take no for an answer. Despite the presence of security, police had to be called 4 times in one week at one village. Sounds crazy...but from personal experience I know some very weird stuff happened during lockdown 4.

[justakiwi]

That’s crazy! We didn’t have any problems at all. Everyone understood why we were in lockdown and fully supported what we were doing to protect their loved ones.

I sometimes forget I live in a little town far removed from the rest of the country. Maybe we are fortunate to have a greater sense of community down here?


Younger people turning up even during lockdown 4 rules expecting to visit their aging and sometimes sick relatives. Some simply wouldn't take no for an answer. Despite the presence of security, police had to be called 4 times in one week at one village. Sounds crazy...but from personal experience I know some very weird stuff happened during lockdown 4.

[Waltzing]

Auckland is worth a visit to understand the huge development this city has undergone in the last decade. Although i now reside back in small town NZ im in auckland every few weeks for the last 15 years and the changes have been huge.

[Beagle]

That’s crazy! We didn’t have any problems at all. Everyone understood why we were in lockdown and fully supported what we were doing to protect their loved ones.

I sometimes forget I live in a little town far removed from the rest of the country. Maybe we are fortunate to have a greater sense of community down here?

Yes you are.

[bull....]

23rd july to report , have to remember most of the figures are outdated pre covid numbers so just like ryman nedd to look thru them for long term analysis

[Bjauck]

Younger people turning up even during lockdown 4 rules expecting to visit their aging and sometimes sick relatives. Some simply wouldn't take no for an answer. Despite the presence of security, police had to be called 4 times in one week at one village. Sounds crazy...but from personal experience I know some very weird stuff happened during lockdown 4.

The angst felt by some by being denied a visit to a very sick loved one would be terrible. Whether in "small town NZ" or "metropolitan Auckland", It is completely understandable that they would be upset when denied a visit, despite wearing PPE.

Not here in NZ, but I know of several people who were denied visits to dying relatives. They have had a difficult time mourning.

We pay for Kiwis, who choose to travel and return, to quarantine. At the least, we should compensate those who have been denied visits to dying and very ill family members.

[winner69]

Some stories say villages needed security to keep restless residents in ....so they couldn’t escape and go and see their friends and family

[Beagle]

Nobody in N.Z. wants to talk about the large numbers of people who simply thought they were above the law. My understanding is the general level of illness and flu's within retirement villages has been at record lows because of quarantine measures and yet many people simply flouted the rules and expected they could visit their relative because they thought they were entitled to be above the law. The situation is not helped at all by a truly appalling lack of leadership and example set by David Clark. (Really he should go as he is a complete embarrassment to the Govt).

[Bjauck]

If people had insisted on maintaining their regular visits, that is one thing. However, if the law prevents you from visiting a very sick or dying family member, then you may well become emotional and upset. Law-abiding citizens follow whatever are the current laws of the land, but it is hardly surprising that security could need to be summoned to restrain and eject people in such circumstances.

[macduffy]

We pay for Kiwis, who choose to travel and return, to quarantine. At the least, we should compensate those who have been denied visits to dying and very ill family members.

What "compensation" would you suggest, Bj ?

[nevchev]

[QUOTE=macduffy;825840]What "compensation" would you suggest, Bj ?[/QUO

[Baa_Baa]

Is this still the Oceania thread? You wouldn't think so. On topic please!

[Maverick]

23rd july to report , have to remember most of the figures are outdated pre covid numbers so just like ryman nedd to look thru them for long term analysis
What makes this report particularly interesting is that this is the first report in the sector that covers all levels of lockdown up then right back to normal operations.

[peat]

[QUOTE=macduffy;825840]What "compensation" would you suggest, Bj ?[/QUO

a lot of people would be happy with that

[dabsman]

[QUOTE=nevchev;825844]

a lot of people would be happy with that

I'd prefer money

[Bjauck]

Is this still the Oceania thread? You wouldn't think so. On topic please! OCA's security costs had been raised. Some of those costs may have been incurred in preventing dying patients receiving visitors.

Did contracts for care give rest home/retirement villages the ability to deny visits from family or those holding powers of attorney to very ill or dying patients/residents?

If the Covid regulations over-rode the contracts for care, should an apology or compensation be offered to surviving family members or executors of the patients estates? Should the government or the care company provide the apology or compensation? I don't know what compo would be appropriate.

[justakiwi]

I have no idea how other facilities managed this, but our policy for end of life situations was - each case would be given consideration at the time and if it could be managed safely, family would be permitted to visit/sit with their loved one. We had one lovely lady die during lockdown. Her immediate family were allowed in to sit with her over the two days before she died. We admitted them through a back door so they could avoid main areas, they were questioned re any potential symptoms (and yes, we trusted them), they wore masks if they were outside of their mother’s room, and took all the other usual precautions as did everyone.


OCA's security costs had been raised. Some of those costs may have been incurred in preventing dying patients receiving visitors.

Did contracts for care give rest home/retirement villages the ability to deny visits from family or those holding powers of attorney to very ill or dying patients/residents?

If the Covid regulations over-rode the contracts for care, should an apology or compensation be offered to surviving family members or executors of the patients estates? Should the government or the care company provide the apology or compensation? I don't know what compo would be appropriate.

[moka]

OCA's security costs had been raised. Some of those costs may have been incurred in preventing dying patients receiving visitors.

Did contracts for care give rest home/retirement villages the ability to deny visits from family or those holding powers of attorney to very ill or dying patients/residents?

If the Covid regulations over-rode the contracts for care, should an apology or compensation be offered to surviving family members or executors of the patients estates? Should the government or the care company provide the apology or compensation? I don't know what compo would be appropriate.
There is nothing new about lockdowns. Every winter there are lockdowns in a few NZ rest homes because of norovirus. The safety of the residents overrides the rights of visitors to visit during an infection. Wouldn’t you be upset if your family member was infected by an unwell visitor?
The care centre at a Taranaki retirement village is in lockdown after a number of staff and residents became unwell in a suspected norovirus outbreak.
"The Care Centre is in lock down, which means no new residents or visitors can be admitted."
https://www.stuff.co.nz/taranaki-daily-news/news/95416588/norovirus-suspected-in-retirement-village-lockdown

[Beagle]

Anecdotal accounts on the MET thread of high end housing selling like hot cakes at a serious premium to pre covid prices auger well for OCA in the future as a lot of their units in Auckland are at the higher end, e.g. Meadowbank and the Sands).

Coutts tells me I might have overcooked my security cost estimate yesterday...generally didn't run security through the night.

The 30 June window for Australian Institutions keen to book tax losses for the Australian 2020 tax year on some / all of their stake they bought from Macquarie at $1.20 has now closed so hopefully we should see some easing of selling pressure from tomorrow onwards.

[fish]

Anecdotal accounts on the MET thread of high end housing selling like hot cakes at a serious premium to pre covid prices auger well for OCA in the future as a lot of their units in Auckland are at the higher end, e.g. Meadowbank and the Sands).

Coutts tells me I might have overcooked my security cost estimate yesterday...generally didn't run security through the night.

The 30 June window for Australian Institutions keen to book tax losses for the Australian 2020 tax year on some / all of their stake they bought from Macquarie at $1.20 has now closed so hopefully we should see some easing of selling pressure from tomorrow onwards.

Thanks for the explaination.
I can see lots of other positives for the SP-NZ population-5 million and rising,lower interest rates likely to be long-lasting,MET SP rising,Ryman result etc.
Feels oversold and like you looking forward to July .

[Paradox]

Some advice sought please. I've completed the first iteration of financial statement analysis to get the valuation and set the following parameters. is it too much/little? The outlook is for 5-years.

riskfree rate (T-Bill) - 3.5%
Market Risk premium - 7%
Equity Beta 1.2 (in 2019 it was 1.1)

So, cost of capital is 11.90%

[Bjauck]

There is nothing new about lockdowns. Every winter there are lockdowns in a few NZ rest homes because of norovirus. The safety of the residents overrides the rights of visitors to visit during an infection. Wouldn’t you be upset if your family member was infected by an unwell visitor?
...
I am referring to the rights of the resident patient and next of kin, not to the "right" of visitors to just pop in for a casual visit to a resident. Of course every facility should always minimise the risk of spreading infections and viruses.

Preventing next of kin and those holding power of attorney from access to the very ill and those at end of life is serious denial. Provided they use PPE and other precautions taken, I see no reason for such a denial.

[Beagle]

Some advice sought please. I've completed the first iteration of financial statement analysis to get the valuation and set the following parameters. is it too much/little? The outlook is for 5-years.

riskfree rate (T-Bill) - 3.5%
Market Risk premium - 7%
Equity Beta 1.2 (in 2019 it was 1.1)

So, cost of capital is 11.90%

Risk free rate is the 10 year Govt stock rate - I suggest you use 1%.
Market risk premium has traditionally been 6% as far back as Adam was a boy.

[winner69]

Bastardisation of a thread on the old twitter (bored analyst banter) -

is Value investing is buying what you think is $1.20 for 90 cents?

And then complaining why everyone else doesn’t think your 90 cents is worth $1.20

No value investing is buying what you think is worth $1.20 for 90 cents but it turns out you bought something worth 70 cents.

[winner69]

Risk free rate is the 10 year Govt stock rate - I suggest you use 1%.
Market risk premium has traditionally been 6% as far back as Adam was a boy.

MRP varies over time so saying it’s been 6% since Adam as a boy not quite right.

These days a lot of real investment managers and finance people are add an additional risk premium, especially in the short term, to take account of the inherent uncertainty in future outcomes. They keep this specific additional risk premium as a separate item so they can assess what impact it has.

[Waltzing]

im waiting for .65 then ... highly unlikely ... but then i would not have though this whole WWP was a likely.

[Beagle]

Likewise you could argue with interest rates at 200 year lows a market risk premium of 6% is no longer warranted especially given TRINA, (there really is no alternative to stocks).

What else are you going to do, buy corporate bonds or bank term deposits at 1.8% ?

Back to OCA, I wonder what EQT will offer for OCA when they have finished the MET takeover and look to combine these companies and reap maybe $10m per annum in synergies ? $1.30 ?

[Beagle]

im waiting for .65 then ... highly unlikely ... but then i would not have though this whole WWP was a likely.

I wouldn't hold your breath mate and I might be ahead of you in the queue :)

[Waltzing]

yes CNBC gave us TRINA about a month ago? well the burn from the virus in the states is out of control and we may see some big sells off that simple force the market down.

since the only stock we sold in the march sell off was AIR.. im sure you are ahead of us in the queue which we are not in yet. We only now have one portfolio holding a small amount. We sold most at 1.04.

[winner69]

Likewise you could argue with interest rates at 200 year lows a market risk premium of 6% is no longer warranted especially given TRINA, (there really is no alternative to stocks).

What else are you going to do, buy corporate bonds or bank term deposits at 1.8%?

That’s why these things are all rather subjective and there’s no right answer.

For each individual MRP is different as it’s related to what return they desire

I suppose 6% is about right for these days

Of course if one was interested one could work out the implied MRP as it is today.

[dibble]

Some advice sought please. I've completed the first iteration of financial statement analysis to get the valuation and set the following parameters. is it too much/little? The outlook is for 5-years.

riskfree rate (T-Bill) - 3.5%
Market Risk premium - 7%
Equity Beta 1.2 (in 2019 it was 1.1)

So, cost of capital is 11.90%

Cost of capital is the variable you twiddle to suit your agenda. Bit like discount rate (ie as an input rather than derived).

For OCA I suspect some investors are happy to hold a bit of money in a stock that pays a relatively stable 5-6% div on the macro basis the capital/business is more likely to grow than shrink over 5 years regardless of some calculation riddled with assumptions.

[bull....]

Cost of capital is the variable you twiddle to suit your agenda. Bit like discount rate (ie as an input rather than derived).

For OCA I suspect some investors are happy to hold a bit of money in a stock that pays a relatively stable 5-6% div on the macro basis the capital/business is more likely to grow than shrink over 5 years regardless of some calculation riddled with assumptions.

thats a mighty assumption that its a stable dividend

[Waltzing]

"stable Div" thats what we have wondered for a while now...we think its been paying out too high a Div.

[winner69]

thats a mighty assumption that its a stable dividend

Maybe a relationship exists between ‘assumptions’ and ‘wishful thinking’ / hope

[dibble]

thats a mighty assumption that its a stable dividend

...true but I did say 'relatively'. Likelihood of any div anywhere next year requires some level of the act of assuming. Bank deposit rates included...

[dubya]

.................................................. Back to OCA, I wonder what EQT will offer for OCA when they have finished the MET takeover and look to combine these companies and reap maybe $10m per annum in synergies ? $1.30 ?

$1.30 would be great :t_up:
Having said that, I've always wondered if OCA (or any of the other listed RV operators for that matter) ever considered buying MET for the 'instant' revaluation gains and synergies.
I guess I'll never find out the answer to that tho!

[Beagle]

$1.30 would be great :t_up:
Having said that, I've always wondered if OCA (or any of the other listed RV operators for that matter) ever considered buying MET for the 'instant' revaluation gains and synergies.
I guess I'll never find out the answer to that tho!

The dog might ask SUM hard questions at the forthcoming special meeting for MET about who the other two interested parties were and if they're still in the frame or was this just a load of "creative talk" to spur EQT along ?

Interesting situation developing with OCA...it seems the daily share price performance shows a fairly strong correlation with the number of new virus cases in N.Z.
Zero new cases the share price goes up a bit and when there's 2 or more new cases the share price goes down a bit. Is the market really this fickle or is this apparent share price reaction a figment of my sometimes over active imagination ?

[Joshuatree]

Dont know,but how about you and your pack going paws up and doing a possum covid symptom cluster; keep one eye open on the share price on a screen:D.

[Baa_Baa]

I thought that was an interesting question, but not sure whether this shows a correlation, if anything it was negatively correlated as the case counts rose, so was the share price rising. Then fell as the case counts declined, then rose as case counts went to zero. Now it's jumping around for no apparent reason related to case counts.

11735


Interesting situation developing with OCA...it seems the daily share price performance shows a fairly strong correlation with the number of new virus cases in N.Z.
Zero new cases the share price goes up a bit and when there's 2 or more new cases the share price goes down a bit. Is the market really this fickle or is this apparent share price reaction a figment of my sometimes over active imagination ?

[Beagle]

Probably all in my imagination. Should get back to doing some real work for a change.

[Leftfield]

...
Interesting situation developing with OCA...it seems the daily share price performance shows a fairly strong correlation with the number of new virus cases in N.Z.
Zero new cases the share price goes up a bit and when there's 2 or more new cases the share price goes down a bit. Is the market really this fickle or is this apparent share price reaction a figment of my sometimes over active imagination ?

Crikey Beagle what with your correlation theory around covid cases and mine around relativity to PLX, I think we both better get out a bit more. Shades of Cabin Fever methinks!

[Entrep]

Land stocks massacred overnight

11686



I've stated several times that OCA is absolutely correlated to these US property shares, let's see how they go this coming week


Pretty simple really

[Baa_Baa]

I need to let this go, but was intrigued to see whether Beagle had identified some correlation between OCA SP daily changes and the daily Covid cases.

So a re-look at the data from a different perspective shows that the SP damage was done before NZ covid cases started ramping up, and the cumulative OCA SP changes rose throughout the climb in covid cases and has continued after the cases declined and flatlined through to today.

That's looks like a classic market panic sell off on the global news of an epidemic/pandemic, then a slow realisation that NZ and OCA isn't as affected as the panic suggested and a relentless climb back to pre-covid SP levels. Wow, congrats to whomever bought the sub .40 and sub .50 SP, heck even the sub IPO and sub-NTA were and are great buying.

Had OCA succumbed to a local infection the figures might be much worse, but it hasn't, so I see the covid status quo as an eventual recovery to pre-covid SP and a realignment with OCA fundamental values and future prospects.

Check this out.

11738


I thought that was an interesting question, but not sure whether this shows a correlation, if anything it was negatively correlated as the case counts rose, so was the share price rising. Then fell as the case counts declined, then rose as case counts went to zero. Now it's jumping around for no apparent reason related to case counts.

11735

[winner69]

BaaBaa ...snowie says use log scale

[Baa_Baa]

BaaBaa ...snowie says use log scale

Ha ha, true he does say that, but this isn't a SP chart, it's a simple time based study of cumulative SP changes against number of daily covid cases. Log scale .. hmm, I'll send you the data and see what you come up with?

I think I've done enough, it shows that emotion smashed the SP before NZ experienced local covid cases, then recovered despite local covid cases and continues to recover.

What's your take on it, do you see a correlation or just a market doing its thing? Seems to me that OCA SP is disconnected from NZ actual covid cases.

[Waltzing]

ARV DIV " Our intention is to maintain our dividend policy with a payout ratio of 50% to 70% of underlying profit. Wewould hope there would be further clarity on the future economic environment when we report on thehalf year results in November.”

what is the policy for OCA?

[Beagle]

50-60% of annual underlying profit (source - see page 3 of their first annual report under the heading shareholder returns) http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/304591/262296.pdf

.

[Waltzing]

Thank you MR B!

[King1212]

Arvida took $5 m hit extra expy from the covid. $2m from government n extra $3m from the company.

[Waltzing]

Property prices .

https://www.interest.co.nz/property/105851/barfoot-thompson-sold-more-homes-june-it-did-june-last-year-auckland-property-market

[t.rexjr]

Property prices .

https://www.interest.co.nz/property/105851/barfoot-thompson-sold-more-homes-june-it-did-june-last-year-auckland-property-market

Is it not completely pointless to compare month to month when we effectively have 3 months worth of activity compressed into one?

[Waltzing]

DISC: Im not a property investor except for a few shares. The commentator says its pointless statistical data. I get the sense that this event is a very rare one and statistics arnt telling me much except there are people who havnt changed there intended behaviours. They are investing at a time of extreme shock or is this telling us that the events havnt had a behavioural changing effect on a large number of the property investing people who live in new zealand.

[Southern Lad]

Arvida took $5 m hit extra expy from the covid. $2m from government n extra $3m from the company.

Hope ARV, OCA and all other RV operators have their audit files ready to demonstrate that they had a reasonable basis for expecting their revenue to fall by at least 30% when they claimed the Government wage subsidy. I’m not aware that incurring additional costs due to COVID-19 disruptions to a business has any relevance to the eligibility criteria. Government will surely be active with their reviews of claims in the aged care sector.

[winner69]

But those sort of headlines are good for the Oceania shareprice

Positive stories (even if meaningless stats) = property going well = more confident punters = let’s buy some retirement sector shares

It’s all about confidence

[Maverick]

Arvida took $5 m hit extra expy from the covid. $2m from government n extra $3m from the company.

Awesome King1212,Can you let me know where you got that info. That`s exactly what I`ve been looking for, hopefully it also indicates the time frame the $3m cost covers as ARV`s annual result only covers the early few weeks of level 4.
Thanks Beagle for your recent post`s suggestions of extra covid expenses but there are still too many missing parts to be useful such as GOVT extra funding and cost actual of PPE etc.

On a different tangent, its interesting just how much the market dislikes OCA. When comparing with other listed RVs it still languishes buy a country mile.
The share price changes of all operators when compared to a pretty stable time a year ago are as follows.
ARV +7%
MET+21%
RYM 0%
SUM+16%
OCA-12%

OCA was pretty out of favour a year ago so its REALLY out of favour now. The upcoming result better be a real shocker to deserve this much disparagement. The market has this one way wrong.

[winner69]

Awesome King1212,Can you let me know where you got that info. That`s exactly what I`ve been looking for, hopefully it also indicates the time frame the $3m cost covers as ARV`s annual result only covers the early few weeks of level 4.
Thanks Beagle for your recent post`s suggestions of extra covid expenses but there are still too many missing parts to be useful such as GOVT extra funding and cost actual of PPE etc.

On a different tangent, its interesting just how much the market dislikes OCA. When comparing with other listed RVs it still languishes buy a country mile.
The share price changes of all operators when compared to a pretty stable time a year ago are as follows.
ARV +7%
MET+21%
RYM 0%
SUM+16%
OCA-12%

OCA was pretty out of favour a year ago so its REALLY out of favour now. The upcoming result better be a real shocker to deserve this much disparagement. The market has this one way wrong.

See Slide 9 ...the costs related to April to June (after financial year end) and something about back to normal now

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/355717/325770.pdf

[King1212]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12345228

[King1212]

I don't think it is about dislike OCA.

Overall...many bought when it collapsed to 40c...now cashing in.

Give it a week or two...will be back to $1.

Covid scared is easing up..that will help the sentiment

[Beagle]

OCA's care as a percentage of its business model is much higher than Arvida's and OCA reports for the period ended 31 May 2020 which encapsulates the full period of the lockdown and its effects in March, April and May, before we emerged from lockdown in early June. Importantly care suites were deemed an essential service throughout the lockdown.

Taking into account both direct costs and lost profit from inability to sell independent living units, I remain comfortable with my earlier assessment of overall effect $10-15m and nothing in the Arvida analysis has surprised me or caused me to amend my best guess. Importantly we did emerge to level 2 lockdown late in May which will have enabled some independent units to settle before balance date. What I have not accounted for is the slowdown in construction caused by Covid 19.

I remain very cautious about expectations regarding this years underlying profit but its this very thing of a high percentage of care that fills me with so much enthusiasm for the long run as they build heaps more care suites and they churn them every 2-3 years there is such excellent potential for profit growth down the track. This is a long term investment and my caution is those hoping for a quick buck could find themselves frustrated in the short term.

Disc: Holding long term for yield that will grow nicely over the long run.

[Maverick]

OCA's care as a percentage of its business model is much higher than Arvida's and OCA reports for the period ended 31 May 2020 which encapsulates the full period of the lockdown and its effects in March, April and May, before we emerged from lockdown in early June. Importantly care suites were deemed an essential service throughout the lockdown.

Taking into account both direct costs and lost profit from inability to sell independent living units, I remain comfortable with my earlier assessment of overall effect $10-15m and nothing in the Arvida analysis has surprised me or caused me to amend my best guess. Importantly we did emerge to level 2 lockdown late in May which will have enabled some independent units to settle before balance date. What I have not accounted for is the slowdown in construction caused by Covid 19.

I remain very cautious about expectations regarding this years underlying profit but its this very thing of a high percentage of care that fills me with so much enthusiasm for the long run as they build heaps more care suites and they churn them every 2-3 years there is such excellent potential for profit growth down the track. This is a long term investment and my caution is those hoping for a quick buck could find themselves frustrated in the short term.

Disc: Holding long term for yield that will grow nicely over the long run.
Thanks fellas for that info on ARV`s covid costs.
So to complete the puzzle from a few posts back I`m seeing an underlying profit of $53 minus covid costs (lets say 40% bigger than ARV because of all the PPE needed for the OCA care suits =4m ) , therefore an underlying of about $49 .
That`s ever slightly down on last year despite going through the full covid experience.

I`m more optimistic than you Beagle so well see soon enough who owes who a beer.

As far as construction holdup, I`m not seeing that as a biggie. We know it was 'tools down' for only 6 weeks. Without doubt some behind the scenes stuff still got done during lock down too. BTW OCA received about 2 million on the wage subsidy.

I fully agree with you though Beagle that this is no get rich quick thing. The Sharsies guys might get a bit bored with this one and have to keep playing with Cannasouth and AIR etc , but for the rest of us who actually "invest" then this is still looking a most fabulous company to me.

[Waltzing]

I look forward to hearing from MR B and other experts on OCA as the business of health care progresses and many thanks for there public spirit to communicate to investors.

[King1212]

On one news couple minutes ago...houses sold like a hot cake..kiwi expert returned home...all bought houses.

100k resident visa applications waiting list from riches Americans n English....wanting to move to NZ...bring thier wealth to start business n invest because NZ is a safe haven

So... expecting our assests n shares price kept going up....

[Joshuatree]

Maybe, maybe not

Read more » (https://sendy.tarawera.co.nz/l/QQMrKma8h6MjbHw96gBRew/763WQVKIFksJezlQ14ZrKZ0A/ybJ4AotD1kQL13I4PF0VQg)

[King1212]

Thats kiwis ehh JT....during property boom...they all increased thier loans....for holidays....new kitchen...spa pool...new cars...new toys...not sex toy....such as boats..caravans....

Now..they are in trouble. Well....let the experts buy thier house.

Or....the 100k wealthy Americans and UK will buy thier houses

[Paradox]

Good stuff ...how did day 2 go.

Is a good approach.

Keep us up to date.

OK, here it goes....I've completed my first iteration of valuation based on residual income.

Assuming:
- cost of capital (equity) at 10.7%
- cost of operations is 7.4%
- perpetual growth of residual income from 2025 at 2-3%
- Value per share is $1.77- $1.90

Total PV of the ReOI is $114m and PV of continuing value is $440m.

Once the full year results are out, I'll adjust it a tad.

Welcome any feedback.

thanks

Disc: I now hold a few shares and will be buying more.

[King1212]

No doubts..the SP will be double in the next couple years...

If it was not a covid around....SP would be $1.30 easily

[Waltzing]

"100k resident visa applications "

is this a fact and over what time period might this new expected horde arrive. A new migration from the north east and north west.

they wont get them processed this year.

Canada expecting immigration from Hong Kong. Some coming here?

[winner69]

Thats kiwis ehh JT....during property boom...they all increased thier loans....for holidays....new kitchen...spa pool...new cars...new toys...not sex toy....such as boats..caravans....

Now..they are in trouble. Well....let the experts buy thier house.

Or....the 100k wealthy Americans and UK will buy thier houses

Hey kingi. ...that 100k plus is in addition to the hundreds of thousands of rich kiwis coming back home ...good eh

Good for a year or so but big trouble ahead when they all realise NZ isn’t the promised land after all and they all sell up and leave

[King1212]

Short term...yes... assests will kept going up.

Regarding jobs.....the government needs to be smart.... close the overseas migrant tap.. concentrate to returning kiwis...

Saying that.....baby boomers are all starting to retire.....so.... job vacancy will be filled by these returning kiwis

[Waltzing]

what winner? They will leave? A buying or renting spike about to restart the housing bubble or they will buy at low interest rates and rejoin the global economy when the smoke clears renting out there new properties. All in all good for the over all property market. Boom in 10 year time? Average price in the golden T 1 million inside 10 years? SUM companies back in business big time?

[Beagle]

OK, here it goes....I've completed my first iteration of valuation based on residual income.

Assuming:
- cost of capital (equity) at 10.7%
- cost of operations is 7.4%
- perpetual growth of residual income from 2025 at 2-3%
- Value per share is $1.77- $1.90

Total PV of the ReOI is $114m and PV of continuing value is $440m.

Once the full year results are out, I'll adjust it a tad.

Welcome any feedback.

thanks

Disc: I now hold a few shares and will be buying more.

Independent valuation of MET had them on as much as 17 times underlying earnings and provided we don't go back into lockdown with more community transmission then N.Z. will be seen as a safe haven, real estate will continue to be well supported especially by ex pat's wanting to come home and in 2-3 years time OCA could be reporting around 12-14 cents a share in underlying earnings and the shares could easily be in the range you mentioned by applying a multiple of 17 times say 12 cents, ~ $2.

On the other hand if through the gross recklessness of someone like that woman who deliberately escaped from quarantine there is community transmission and we get a situation like they have in Victoria at the moment and have another extended period of lockdown then we have another scenario whereby earnings could suffer an even worse hit.

I think a prudent person keeps some dry powder for that second possible scenario.

[Paradox]

Independent valuation of MET had them on as much as 17 times underlying earnings and provided we don't go back into lockdown with more community transmission then N.Z. will be seen as a safe haven, real estate will continue to be well supported especially by ex pat's wanting to come home and in two years time OCA could be reporting around 11-13 cents a share in underlying earnings and the shares could easily be in the range you mentioned by applying a multiple of 17 times say 12 cents, ~ $2.

On the other hand if through the gross recklessness of someone like that woman who deliberately escaped from quarantine there is community transmission and we get a situation like they have in Victoria at the moment and have another extended period of lockdown then we have another scenario whereby earnings could suffer an even worse hit.

I think a prudent person keeps some dry powder for that second possible scenario.

Sure, I've got a conservative outlook on the numbers overall.

EPS is 14-16 cents a share and forward P/E of 15-17.

I'm keeping the powder dry - but will accumulate after the results are out.

Disc: Hold some

[Beagle]

Be quite a while before they have eps of 14-16 cents in my opinion. I am sure Maverick will have a different view but I think that's 3 years away, maybe 4.
Its good to be a realist / pessimist, you get disappointed less often :D 90 cents or thereabouts on next years 10 cps, (provided Covid 19 is kept out of the community, but will that happen ?) is really compelling value though !

Disc: I still have heaps of these in case anyone is wondering. I just want to take a more conservative view of possible outcomes and of the growth rate as that's good for me to think more conservatively and if I'm wrong and its better than I am expecting, that's great but I am not counting on it.

[Waltzing]

Think 20 years out. What will the price be then. Its a health sector investments and surely as MR B says a long term investment. If you are looking out 20 years then surely there is at least another 24 to 36 months to evaluate this as a long term investment play. Even if you only have say 100,000 a small investment in 20 years what would that look like? DISC: we moved most of our property into ARG over the last 6 months as GMT , PCT topped out. we think the retirement sector is a LONG TERM INVESTMENT.

[King1212]

expect OCA spikes up in the next couple weeks as all the MET holders are looking for a new place to park their money in this sector

[Beagle]

expect OCA spikes up in the next couple weeks as all the MET holders are looking for a new place to park their money in this sector

Bingo mate....more than a Billion dollars will be looking for a new home !

[Waltzing]

chart indicates and i would like to be corrected , a 1.10 retest? before sell off after release of the P&L. Underlying profit and loss seems to be how this sector is priced?

[winner69]

MET news seems to have helped OCA share price today

OCA needs all the good news in the sector it can get to get its shareprice moving ... and tag along with the others ......not much going for OCA otherwise

[King1212]

Nah.....it will soon be $1.20 once MET sales gone through

[Beagle]

MET news seems to have helped OCA share price today

OCA needs all the good news in the sector it can get to get its shareprice moving ... and tag along with the others ......not much going for OCA otherwise

86% of future developments already consented. An investment in OCA is an investment for substantial growth in the long run and investors are being paid very handsomely with a dividend yield of 5% in this needs based business in the meantime.

TRINA
.

[Waltzing]

"One bilion" "1.20" better set the sell at 1.19 then. And buy some more...

but what makes you think the offer will be accepted , yes read the comments but why would they just flick the funds here when they can prehaps just buy growth tech etf? Tech has just shown how powerful it is? Or are you saying that this money is conservative and looking for a defensive home.

[Beagle]

Most professional investors already have their desired asset allocation strategies well sorted with allocations within countries and sectors well structured. A takeover of a N.Z. retirement company is likely to see a material portion of that capital released reinvested into an alternative retirement company in N.Z. Those sitting with cash on the sidelines, of which there are many, will allocate additional funds in advance of this reallocation in an attempt, (which will probably be successful in my opinion), to gain a short period of market outperformance.

What makes me think the offer will be accepted is that there is very little appetite for a multi year multi jurisdictional legal battle costing a factor of tens of millions.
No-one wants to invest for years with that sort of uncertainty hanging over a stock.

[Waltzing]

Thank you MR B. $$$$$

[Waltzing]

"Nah.....it will soon be $1.20 once MET sales gone through"

anyone want to guess a timeline? or a bit much to ask?

[Paradox]

"Nah.....it will soon be $1.20 once MET sales gone through"

anyone want to guess a timeline? or a bit much to ask?

Unlikely to touch $1.20 before end of July.

[King1212]

Depend on the met settlement....$1.2 billion needs place to go eh?

N it will be back to retirement sector...

Current OCA is the cheapest in the sector....under NTA

[winner69]

"Nah.....it will soon be $1.20 once MET sales gone through"

anyone want to guess a timeline? or a bit much to ask?

Was nearly $1.40 not that long ago ...about last Xmas

Things look brighter now

So it’s back to 130/140 when MET money comes through

That’ll be good

[Beagle]

Once we get some more certainty around this MET situation I think that will be the catalyst for a (potentially), significant rerating of OCA.
Will the arbitrage funds that have an average cost of $6.88 be prepared to accept an amended negotiated offer, (such as $6.35) that involves them accepting a loss ? If the answer to that question is yes, then the scheme of arrangement appears to be ostensibly done and dusted and then finally it is my sincere hope we will see the back of this ever trading under $1 again. I'm a committed long term holder so whether it takes a few months or a year to get to $1.30-$1.40 doesn't really make any difference to me.

[Waltzing]

Thank you MR B.

[dobby41]

Once we get some more certainty around this MET situation I think that will be the catalyst for a (potentially), significant rerating of OCA..

Why would the money go into OCA rather than one of the others?
Is it because of all the operators, they have stayed down after the covid dip? (As per post #5896.)
Just trying to understand the thinking here.

[King1212]

Sector yah aw......

Some funds need to be allocated on healthcare, real estate, consumer staples, tech., Financial, sex toys products..lol

[winner69]

Why would the money go into OCA rather than one of the others?
Is it because of all the operators, they have stayed down after the covid dip? (As per post #5896.)
Just trying to understand the thinking here.

Might be as simple as ‘wishful thinking’ dobby ......as I run for cover

[Beagle]

Why would the money go into OCA rather than one of the others?
Is it because of all the operators, they have stayed down after the covid dip? (As per post #5896.)
Just trying to understand the thinking here.


#5923 Extract A takeover of a N.Z. retirement company is likely to see a material portion of that capital released reinvested into an alternative retirement company in N.Z.
I didn't say OCA would be favoured over the others BUT the fact of the matter is it will be the only retirement company left trading at under NTA, (although this may no longer be the case very shortly). The underlying PE, dividend yield and share price proximity to NTA is the best of the sector. Next best is ARV trading at a 17% premium to NTA and a dividend yield of 3.9%. I am sure some money will flow there and to SUM and RYM as well.

[dobby41]

I didn't say OCA would be favoured over the others BUT the fact of the matter is it will be the only retirement company left trading at under NTA, (although this may no longer be the case very shortly). The underlying PE, dividend yield and share price proximity to NTA is the best of the sector. Next best is ARV trading at a 17% premium to NTA and a dividend yield of 3.9%. I am sure some money will flow there and to SUM and RYM as well.

Thanks for that.

[Joshuatree]

Yes , a friends already indicated he will put his (big) gains into SUM, with quality and safety in mind, in this brave new world.

[winner69]

Yes , a friends already indicated he will put his (big) gains into SUM, with quality and safety in mind, in this brave new world.

Think I’ll be doing the same JT

At least you know what you getting with SUM ....in three years time OCA still might be the gunna to be great story

[Beagle]

Yes , a friends already indicated he will put his (big) gains into SUM, with quality and safety in mind, in this brave new world.

The one that can only sell SUM of the units they build and get SUM of the consents they apply for...but no worries, let's expand across the ditch, surely the grass is greener over there ;)

[Leftfield]

Crikey... both OCA and PLX at 97c when I checked this morning......Spooky!!

[bull....]

yea spooky took of last week why i was filling my boots for my trade

[Leftfield]

yea spooky took of last week why i was filling my boots for my trade

Crikey I'm in esteemed company...... what could possibly go wrong!?

Both OCA and PLX into Golden Cross territory...... you in both?

[bull....]

Crikey I'm in esteemed company...... what could possibly go wrong!?

Both OCA and PLX into Golden Cross territory...... you in both?

sorry i just sold out oca but im in plx

[Jantar]

sorry i just sold out oca but im in plx
I do not understand, but perhaps I can learn.

Why would you sell shares in a company that does make a profit, pays a dividend, and is currently selling for less than NTA, and is in a growing market; to buy shares in a company that is only breaking even, pays no dividend, is selling at many times its NTA, and is in a speculative and possibly short term market?

[bull....]

I do not understand, but perhaps I can learn.

Why would you sell shares in a company that does make a profit, pays a dividend, and is currently selling for less than NTA, and is in a growing market; to buy shares in a company that is only breaking even, pays no dividend, is selling at many times its NTA, and is in a speculative and possibly short term market?

chasing short term price moves , oca was of the support around 89 / 90. i have no interest in oca as a long term hold or buy but good luck to you if you do

[Leftfield]

I do not understand, but perhaps I can learn.

Why would you sell shares in a company that does make a profit, pays a dividend, and is currently selling for less than NTA, and is in a growing market; to buy shares in a company that is only breaking even, pays no dividend, is selling at many times its NTA, and is in a speculative and possibly short term market?

Maybe Bull is a more of a 'Trader' while I'm more into the long term 'Buy and Hold'. Maybe both of us don't necessarily care too much about dividends.

Maybe what seems to have happened here is that TA BUY signals have triggered our interests in both PLX and OCA and we are looking at SP gains (either short term or long term.)

Maybe for a moment our stars were aligned......spooky.

[bottomfeeder]

Loading up on OCA. When MET money gets into the market. Those comfortable with retirement assets will be spiking the price. Not a bad investment as well. Cant see real big gains, but hopefully a safe enough haven.

[King1212]

Summary of latest JLL report on NZ retirement sector. For those want a full one... Plz PM...will send u ...with koha donation ...lol

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12346593

Summerset Group has the biggest development pipeline after buying seven sites last year. It plans new 4726 new units.

Ryman Healthcare is second busiest planning 2816 units, Arvida Group plans 1484 units, Metlifecare plans 1348 units, Oceania Healthcare 1119 units and Bupa NZ 448 units. Around 70 per cent of Summerset, Ryman and Metlifecare plans are for new villages but 90 per cent of Oceania and Arvida's plans are to expand existing villages.

Bupa is split more evenly between new villages and expansion of existing villages, JLL found.

The key target population for operators is Kiwis aged 75+ and in 2019 there were estimated to be almost 325,000 residents in this group. By 2043, that population will have expanded by 460,000 to reach 784,000 people aged 75+.

"We expect that there will be demand for an estimated 17,788 new units by 2028. From our database we can identify that development has commenced on 7576 units across the country. Therefore, this means that there would be a total requirement of a further 10,200 units to meet the forecast demand to 2028," JLL

[King1212]

Early evidences... overseas rich migrants are moving to NZ.....our assests will be going up...n up....recent report from Sdny herald....said.....Kiwis flocking home..n buying houses.

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12346829


One house 16 offers

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12346852

[Bjauck]

Early evidences... overseas rich migrants are moving to NZ.....our assests will be going up...n up....recent report from Sdny herald....said.....Kiwis flocking home..n buying houses.

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12346829


One house 16 offers

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12346852

It would be interesting to know what percentage of returning Kiwis are buying houses, and what percentage are returning so that they can claim benefits and other government support.

[King1212]

Will get national MP to leak out the data eh....

[winner69]

Will get national MP to leak out the data eh....

Better to get Twyford to leak it ....it be a big % ...like 185%

[Maverick]

We've had a few results and comments come through now from other operaters to get a better feel for the Covid costs/impediments. Summerset's release yeatserday was the fullest so far and it was surprisingly good IMO.
One can assume OCAs expenses will be relatively higher than SUMs ( SUM being more villa focused....less PPE needed). I posted on that thread if any body isn't interested.

After going through their numbers I think there is very likely plenty of upside surprise for OCA in a few weeks time.

Its pretty likely I'll be selling a vehicle today so it's straight to OCA with those funds for a cheeky20% gain over the next month.

[RTM]

We've had a few results and comments come through now from other operaters to get a better feel for the Covid costs/impediments. Summerset's release yeatserday was the fullest so far and it was surprisingly good IMO.
One can assume OCAs expenses will be relatively higher than SUMs ( SUM being more villa focused....less PPE needed). I posted on that thread if any body isn't interested.

After going through their numbers I think there is very likely plenty of upside surprise for OCA in a few weeks time.

Its pretty likely I'll be selling a vehicle today so it's straight to OCA with those funds for a cheeky20% gain over the next month.

Be better if you popped down to Turners and replaced it Maverick.
Thanks for sharing your analysis and comments on the retirement villages. Appreciated .

[thegreatestben]

I snagged some more yesterday and the small amount at 94c this morning, looks like many are anticipating MET news!

[Beat the Bank]

It would be interesting to know what percentage of returning Kiwis are buying houses, and what percentage are returning so that they can claim benefits and other government support.
Remember that those coming "home" will need housing whether they are buying or renting. Both property investors and owners keep up property demand, and therefore help the retirement villages to sell new units.

[Waltzing]

If MAV is on the money than its time for him to disclose his real occupation in the retirement sector as having deep insider knowledge. :t_up: His one star on the shoulder will surely have to have some more added to it?

[winner69]

If MAV is on the money than its time for him to disclose his real occupation in the retirement sector as having deep insider knowledge. :t_up: His one star on the shoulder will surely have to have some more added to it?

I should leave it for MAV to respond but Mav is no insider - he'll probably tell us he's just a dedicated investor who has deeply researched Oceania and makes sure he keeps on top of things as things unfold - both sector and company wise. Mav has often told us of his site visits and discussions with anybody who'll talk to him.

We should be blessed he shares his thoughts.

[Waltzing]

Thank you winner we are blessed indeed. HSBC consider RBNZ the central bank of kitchen sinks. It appears there is a view that NZ is on track for a V recovery. Not sure the locals thinks so. If so and then prehaps MAV's is on the money in the mid term and onwards.

[Maverick]

I should leave it for MAV to respond but Mav is no insider - he'll probably tell us he's just a dedicated investor who has deeply researched Oceania and makes sure he keeps on top of things as things unfold - both sector and company wise. Mav has often told us of his site visits and discussions with anybody who'll talk to him.

We should be blessed he shares his thoughts.

That is very kind of you to say Winner, we are lucky to have your thoughts too!
This post is off topic but worth a little diversion .

Waltz...I am just another investor with no inside knowledge , I've just done a sh*t load of specific work over a few years which has built up.

To further answer your question, I post for 2 reasons,
Firstly, it is a great way of quantifying and congealing my own thoughts knowing minds far greater than my own will hold me to account if I`m wrong or crazy.
Secondly and mostly , it is out of deep respect for posters such as Winner, Beagle, Baabaa, Couta,Peat, black Peter ... etc etc (and many of the old timers here who don`t post prolifically but are definitely worth reading when they do). These posters offer their own insights/expertise on other sectors and companies of which I`m ignorant.
They have all helped me make $ in the past so I feel it is only fair to "pay back" if I have something of value to contribute.

These posters who freely give their time and valuable opinions collectively make up this website that any "Jo public" can peruse. Its a unique situation where absolutely anyone has free access to pick and choose from to suit their own investing styles.

Back to on-topic,
Bring on the OCA result...very confident now after SUM`s announcement yesterday that Beagle will be buying me the beer.

[dubya]

From todays Herald:

Swedes could go further than Metlife
Bupa is seen ripe for the picking, and Oceania Health also a possible target

The New Zealand Herald10 Jul 2020

Metlifecare’s on-then-offthen-on-again takeover by Swedish predator EQT has raised talk in the sector of further M&A activity involving the same business.

Once Metlife is hoovered up at the newly-lowered $6 a share, the Swedes could go even further, perhaps eyeing NZX-listed Oceania Healthcare and the unlisted Bupa NZ’s care home assets. Nothing has been said in public about this, but if that went ahead it could be a $2 billion-plus deal.

The Commerce Commission would be unlikely to look askance at the Swedes, the speculation has it, due to assets being widely held and a deep and evolving market with many operators housing the 43,000 Kiwis in retirement residences.

But due diligence might be tricky due to Covid-19.

The Swedes have around $50b under management and the only pushback could be if the limited partners in the funds say no to the general partner.

Bupa is seen to be ripe for the picking, with a good spread nationally and many large outdated properties giving opportunities to intensify accommodation. The Swedes could even partner with another investor, say Morgan Stanley, whose infrastructure fund is thought to have been interested in Metlife before this current takeover offer.

The industry is seen to have been focused on development, not mergers and acquisitions. Look out. If the talk results in any action, that could all change soon.

The right price?

The $6 per share offer for Metlife will be attractive for some but other shareholders want more, given that it is short of the underlying value of the assets.

Mark Brown, chief investment officer at Devon Funds Management, said there were clearly a lot of short term hedge fund investors looking to exit their positions.

“Many will be facing losses on this trade and will most likely be trying to minimise them in the shortest time possible. These investors have been clearly pushing Metlifecare management hard and will be very keen to accept a deal.” Brown said EQT’s current non-binding offer brings them back to the table within the range set by the valuers.

“I think a deal is very likely, albeit unfortunate for NZ capital markets.”

But Craig Tyson, head of Australasian property securities ANZ Investments, which has shares in Metlifecare, said while $6 was the right starting number it was a little light. “The range from the independent report is $5.80-$6.90, so we would be expecting a price north of the mid-point ($6.35).”

Tyson said EQT had emphasised that it was an investor with a longterm horizon and therefore shortterm house price headwinds should have little impact on the valuation of the business.

“Clearly New Zealand is a desirable place to invest for a bunch of reasons including our handling of the Covid crisis. Metlifecare is a good business with great assets and there would be few better places than NZ to invest so we have confidence in the board to negotiate the right outcome for investors.”

Private equity circling

EQT isn’t the only private equity player interested in New Zealand companies at the moment.

John Fisk, national leader of restructuring for PwC, told journalists this week that it was seeing a high level of interest from the PE sector.

“PEs are active at the moment. We are dealing with PEs that are looking at businesses I’m surprised they would be interested in.” Fisk said the interest included foreign PE investors from Australia.

“The Australians are interested in what we have got here.”

Last month the Government introduced temporary overseas investor changes so that the Overseas Investment Office must be notified of any investment in more than 25 per cent of a business or more than a quarter of a business’ assets, or increasing an existing shareholding.

Previously the OIO screened transactions over $100 million or involving sensitive land sales. The new rules will be reviewed every 90 days. Investors should find out within 10 working days if their transaction can go ahead while some may take longer to work through.

Fisk said the restrictions were something PE investors were aware of. “They can still take an interest in the company under 25 per cent.”

Fisk said investors were not focused on any particular sectors.

“It’s anywhere that is a better return than what they can get with money sitting in their bank.

“The part that I find interesting is that you have got very low interest rates, people that have got money to invest and yet we are walking into a storm of potential insolvencies.”

That could mean some PE investors pick up a good deal while others may get stung as they have in the past.

(More non relevant deleted)

[iceman]

I should leave it for MAV to respond but Mav is no insider - he'll probably tell us he's just a dedicated investor who has deeply researched Oceania and makes sure he keeps on top of things as things unfold - both sector and company wise. Mav has often told us of his site visits and discussions with anybody who'll talk to him.

We should be blessed he shares his thoughts.

Good post winner and thanks to MAV for his wisdom shared on here

[Baa_Baa]

Good post winner and thanks to MAV for his wisdom shared on here

Second that, Mav is an inspiration and so open and sharing such in depth research we are blessed to have his selfless contribution. My few charts are hardly payback for his insights, but nice to be cited.

OCA its one of those stocks that have been running under the radar for a long time, undervalued even against NTA. Then COVID comes along and smashes it into oblivion, giving some the opportunity to buy in at half NTA. Unbelievable, like the silver lining on an otherwise very grim market response. But it takes big cojones to buy a smashed share, however confident you are in its future.

A couple of months later.

OCA tends to creep away from you, a few days of a cent or two or three and you wonder WTF now it’s above IPO above NTA and still well below fair value, but bugger I’ve missed the two bagger already and still don’t know what to do.

Personally I’ve gone nuclear and am so over weight OCA the local investment advisor would have a coronary embolism! Couta would be proud of my disdain for a balanced portfolio! (I hope he comes back, he’s wasted at HC).

So now that I’m in so deep, it’s in my interest to keep a low profile in case I’ve really screwed up and destined to be ruined.

Hopefully not. Gltah,

[bottomfeeder]

Now the sweedes will be looking to get OCA at 70cents. Just dont trust them.

I too have got so many of these, that I dont feel comfortable especially with the viking raiders trying to part me with my rightful shares for under value. Im not looking to get rich quick, I just want a safe haven for my hard earned bucks, safe from inflation pressures to come and a decent return on my investment compared to what else is available today. No takeovers allowed at any price. MET should have got damages and kept the company. Why sell at all.

[tango]

I am heavily loaded up in the retirement sector. I have Summerset, Ryman, Arvida and Oceania

I wish I had topped up on Oceania when it was around $.70. I was going to but hesitated and then the price shot up. I bought into Oceania when it was a dollar so I should dollar cost down but money has been flying everywhere with all the buying opportunities!!!

[Waltzing]

what makes people think the swedes want OCA. It not even half way through it re model. They have enough retirement homes in the land of no winter sun and frozen lakes. There is no cap gain easy pickings in OCA yet. No OCA holder in there right mind would sell this stock for at least 10 years.

[Beagle]

I agree the SUM forecast gave a little bit of comfort about the net effect of Covid 19 and as Maverick astutely notes that forecasted result covers the full period of the Covid direct effect. I am not however as optimistic as you Mav, as you know, because of the substantial difference in their business model, SUM is care light second only to MET and their model is substantially different to OCA.

That being said perhaps I am a little too pessimistic with my forecast range of $40-45m underlying profit for the year. So much depends upon the amount of new unsold stock they held as at 30 November 2019 being sold as the valuers had a 25% discount on that which amounts to 8 cps. Sell most of it and the second half could be very good and if not, not so good. This makes any attempt to forecast anything more or less a guaranteed exercise it getting egg on one's face.

I hope I am pleasantly surprised and end up buying Mav his well deserved beer. Remind me mate what was that bet ? Are you over $50m and I am betting under $50m ?

Coutts kindly forwarded me the other day an email detailing the new weekly care rates the DHB's are paying by region which was sent by our very own very likeable director of heath Ashley Bloomfield. Weekly care rates have gone up 3.0% effective from 1/7/20, a little more than the official inflation rate for the last year at 2.5%. I am reminded that this increase probably doesn't keep up with the real cost pressures of care so the transformation process OCA are on to create a much improved level of return on investment through care suites will be the much needed driver of future profit growth.

Looking at this today, (after yesterday's miserable new chapter in the MET fiasco has unfolded), I am hopeful the Sweedes' stay well away from this one especially with their miserable record of manipulation and opportunistic pricing and we look to enjoying steady profit growth in the years ahead and stay free of a repeat of Covid 19 getting into the community. Provided that happens it is likely we will be very well rewarded in the fullness of time.

[Maverick]

I agree the SUM forecast gave a little bit of comfort about the net effect of Covid 19 and as Maverick astutely notes that forecasted result covers the full period of the Covid direct effect. I am not however as optimistic as you Mav, as you know, because of the substantial difference in their business model, SUM is care light second only to MET and their model is substantially different to OCA.

That being said perhaps I am a little too pessimistic with my forecast range of $40-45m underlying profit for the year. So much depends upon the amount of new unsold stock they held as at 30 November 2019 being sold as the valuers had a 25% discount on that which amounts to 8 cps. Sell most of it and the second half could be very good and if not, not so good. This makes any attempt to forecast anything more or less a guaranteed exercise it getting egg on one's face.

I hope I am pleasantly surprised and end up buying Mav his well deserved beer. Remind me mate what was that bet ? Are you over $50m and I am betting under $50m ?

Coutts kindly forwarded me the other day an email detailing the new weekly care rates the DHB's are paying by region which was sent by our very own very likeable director of heath Ashley Bloomfield. Weekly care rates have gone up 3.0% effective from 1/7/20, a little more than the official inflation rate for the last year at 2.5%. I am reminded that this increase probably doesn't keep up with the real cost pressures of care so the transformation process OCA are on to create a much improved level of return on investment through care suites will be the much needed driver of future profit growth.

Looking at this today, (after yesterday's miserable new chapter in the MET fiasco has unfolded), I am hopeful the Sweedes' stay well away from this one especially with their miserable record of manipulation and opportunistic pricing and we look to enjoying steady profit growth in the years ahead and stay free of a repeat of Covid 19 getting into the community. Provided that happens it is likely we will be very well rewarded in the fullness of time.
Great post Beagle, as always. I think we can actually start quantifying numbers now on covid costs and sales /resales with the clues now out there.
RYM have said their sales were at new record levels pre lockdown. They report inquiry is now higher than usual post covid. However they also said there is a shortfall of covid cost reimbursement from the Govt but the $ amount was vague.
ARV (OCA`s closest cousin)have since answered that question a bit by saying their covid cost shortfall for them was about $3.5m . One cannot however work out how the lockdown sales impacted them as they have new stock they acquired since last PCP.
The mystery of how much sales were impacted during the lockdown levels was quantified this week by SUM sales figures, by my calcs, they are down from PCP by about 17% both on sales and resales each for the quarter. They have also given more clues on covid costs to them which were not too severe with a pretty good profit forecast. (as you say, they don't have as much PPE to worry about compared to ARV or OCA)

We already know how many, what types, values, margins etc OCA units had up for sale in December, we can use industry rule of thumb for the rates of sales/resales of these that happened during summer season (pre lockdown) .
We also know from OCA that their care suits sold right through lockdown and enquiry was above normal levels.

I`ve tweaked the maths after the SUM sales result. I'm very confident we will at least achieve 50m underlying (Yes, where you buy me a beer Beagle), with a possibility up to $53m. Of course there's plenty of likelihood to end up with egg on my face for sure but the mounting clues are real and all paint the same consistent picture and deserve to be commented on. Also supporting these facts is plenty of anecdotal evidence and comments I've heard , without exception these all point together that the upcoming result will be very respectable.

BTW, I did manage to sell that vehicle yesterday and yes, the funds went straight into another piece of care suite.

[value_investor]

Great post Beagle, as always. I think we can actually start quantifying numbers now on covid costs and sales /resales with the clues now out there.
RYM have said their sales were at new record levels pre lockdown. They report inquiry is now higher than usual post covid. However they also said there is a shortfall of covid cost reimbursement from the Govt but the $ amount was vague.
ARV (OCA`s closest cousin)have since answered that question a bit by saying their covid cost shortfall for them was about $3.5m . One cannot however work out how the lockdown sales impacted them as they have new stock they acquired since last PCP.
The mystery of how much sales were impacted during the lockdown levels was quantified this week by SUM sales figures, by my calcs, they are down from PCP by about 17% both on sales and resales each for the quarter. They have also given more clues on covid costs to them which were not too severe with a pretty good profit forecast. (as you say, they don't have as much PPE to worry about compared to ARV or OCA)

We already know how many, what types, values, margins etc OCA units had up for sale in December, we can use industry rule of thumb for the rates of sales/resales of these that happened during summer season (pre lockdown) .
We also know from OCA that their care suits sold right through lockdown and enquiry was above normal levels.

I`ve tweaked the maths after the SUM sales result. I'm very confident we will at least achieve 50m underlying (Yes, where you buy me a beer Beagle), with a possibility up to $53m. Of course there's plenty of likelihood to end up with egg on my face for sure but the mounting clues are real and all paint the same consistent picture and deserve to be commented on. Also supporting these facts is plenty of anecdotal evidence and comments I've heard , without exception these all point together that the upcoming result will be very respectable.

BTW, I did manage to sell that vehicle yesterday and yes, the funds went straight into another piece of care suite.



I think any result from any of the retirement villages where underlying profit hasn't decreased is a mammoth task. SUM have shown this now and ARV has insinuated it. RYM's and ARVs last results are 31/03 YE so a bit outdated showing increases.

Anything $50m+ I'd be impressed with considering the circumstances. Not sure if the care side of the business will be able to stem the flow of reduced profit from increased staffing costs. Plus we've already seen how covid has affected the development and sale side for the others, can't see OCA being exempt from it.

I'd be happy to eat my words on this, considering I am a shareholder. It would be extraordinary if they could pull one out.

[Beagle]

Thanks Mav. I admit I haven't tried too hard to quantify the Covid effect so will be very pleased to buy you a beer if underlying profit is over $50m.
The reason I haven't spent too much time on it is that I have observed with RYM, ARV and now SUM that the market seems quite happy to look through what will hopefully be one-off costs and sales effects with Covid 19 and look forward to future years profits. When one starts to think about OCA's underlying profit for FY21 the shares look very good value here, especially relative to the rest of the market and the other sector companies all trading at a significant premium to NTA, (apart from MET).

[tim23]

what makes people think the swedes want OCA. It not even half way through it re model. They have enough retirement homes in the land of no winter sun and frozen lakes. There is no cap gain easy pickings in OCA yet. No OCA holder in there right mind would sell this stock for at least 10 years.

Article in Herald speculated along these lines.

[King1212]

https://i.stuff.co.nz/business/122045160/thousands-of-returning-kiwis-join-the-jobhunters-in-postcovid-nz?utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Monday+13+J uly+2020

For those that want a data....on how many kiwis back home n how many tourists left since march

[mfd]

https://i.stuff.co.nz/business/122045160/thousands-of-returning-kiwis-join-the-jobhunters-in-postcovid-nz?utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Monday+13+J uly+2020

For those that want a data....on how many kiwis back home n how many tourists left since march

You have to get through a fair few anecdotes before you find the data

"Between April and June, 56,871 people left New Zealand, so there was a net loss of 35,747 people during the three-month period, Customs data shows"

Jury is still out on whether returning kiwis will make up for the hugely reduced numbers of other immigrants.

[Beagle]

You have to get through a fair few anecdotes before you find the data

"Between April and June, 56,871 people left New Zealand, so there was a net loss of 35,747 people during the three-month period, Customs data shows"

Jury is still out on whether returning kiwis will make up for the hugely reduced numbers of other immigrants.

Maybe so but with 68,000 new Covid 19 cases in America yesterday the way their juror is voting is clear.

[Cyclical]

Unintentionally parked outside The Sands in Brown's Bay yesterday eve...didn't notice until returning from dinner a couple of hours later. The wife couldn't understand the excitement but I thought it was pretty cool to have a look at something we have a partial interest in. Looks very nice from what I could see of it in the dark :-)

[thegreatestben]

Seeing the $1.00 this morning :)

[Beagle]

Lot of money flowing out of MET into OCA. Selling a non dividend paying dog with a dysfunctional board and inept management and a broken development model at a discount to NTA to buy a well governed, highest dividend yield for the sector, well managed company with the best development margins in the industry, still at a material discount to NAV. Very smart move in my opinion.

Meanwhile over at MET the arbitrage funds are piling into it looking for an "easy" 10 cents, (nearly $50m of shares by value changed hands yesterday). One wonders if they have ever heard the old "once bitten twice shy" adage ? What could possibly go wrong ? Surely we wouldn't be able to ride that roller-coaster yet again...or maybe, just maybe we might...:D :D

[JohnnyTheHorse]

Seeing the $1.00 this morning :)

Probably never go below $1 again.

[Paradox]

Probably never go below $1 again.

This was the sentiment last month as well, but it did go down from $1.0x to sub-90s;

Methinks it is MET $ and also the positive outlook likely to arise from the AGM shortly.

[Beagle]

This was the sentiment last month as well, but it did go down from $1.0x to sub-90s;

Methinks it is MET $ and also the positive outlook likely to arise from the AGM shortly.

Nearly $50m changed hands yesterday. Some of that is bound to find its way into this well managed company and SUM other places that are arguably not as well managed.

[Grimy]

Probably never go below $1 again.

If I had a dollar for every time that has been said..........

[winner69]

Nearly $50m changed hands yesterday. Some of that is bound to find its way into this well managed company and SUM other places that are arguably not as well managed.

That's a very subjective opinion there mate

RYM and SUM shareprice going well today

[Beagle]

That's a very subjective opinion there mate

RYM and SUM shareprice going well today

SUM companies seem to have a demonstrated multi year pattern of an inability to sell what they build, even when they cut the build number back dramatically...and that's before we talk about their consenting issues. How's Boultcott street going ? No worries about their expansion in Victoria...the grass must be greener on the other side of the fence eh mate...just keep building more and more and more units...what could possibly go wrong ?

Meanwhile over at OCA 86% of their multiyear pipeline is already consented and they have the strongest development margins in the sector. Hmmm.

Dog's are allowed to have subjective opinions and objective ones :p

[King1212]

Master Beagle....what u think the dividend will be? Next week is the result....2.6c again?

[winner69]

Master Beagle....what u think the dividend will be? Next week is the result....2.6c again?

I hope it’s 3 cents

Great company, great management ...always reward investors well.

[Entrep]

Great company, great management ...always reward investors well. regardless of the macro environment?

[Beagle]

Master Beagle....what u think the dividend will be? Next week is the result....2.6c again?

Gidday mate, this is their dividend policy.
Oceania Healthcare has established a dividend policy with a targeted pay out ratio of 50% to 60% of annual underlying NPAT. We intend to commence paying dividends during the 2018 financial year, with an initial interim dividend expected to be paid in February 2018.

The final dividend will be consistent with that policy taking into account full year earnings and the dividend for the first half.
Directors of OCA strike me as an astute bunch of people with their eye very much on providing the best quality care and focusing on the long run growth of the company so whatever the dividend is, it will be consistent with that approach.

As you know I think the Covid19 costs incurred have been significant so second half profitability and dividend might not match the first half but the market has aptly demonstrated with ARV, SUM and RYM it is happy to look through the what are hopefully one-off costs of dealing with Covid 19.

I'd rather not pick a figure because that's almost guaranteed to end up getting egg on my snout and raw egg is quite hard to lick off and doesn't taste very good :)

[winner69]

Gidday mate, this is their dividend policy.

to be continued...

So my 3 cents could be on light side ...

[Beagle]

https://www.oceaniahealthcare.co.nz/investors/news-article-docs/oca-dividend-reinvestment-plan-offer-document.pdf
Shares in lieu of dividend were issued at a 2.5% discount at the time of the interim result this year.

Time will tell Winner me ol mate, I am focused on the long run .

[Baa_Baa]

https://www.oceaniahealthcare.co.nz/investors/news-article-docs/oca-dividend-reinvestment-plan-offer-document.pdf
Shares in lieu of dividend were issued at a 2.5% discount at the time of the interim result this year.

Time will tell Winner me ol mate, I am focused on the long run .

If you don’t need the dividend income then the DRP shares at a discount to market is quite satisfying, seeing your holding balance increase. I’m in the DRP.

[Beagle]

If you don’t need the dividend income then the DRP shares at a discount to market is quite satisfying, seeing your holding balance increase. I’m in the DRP.

I agree, its an excellent way to build wealth over the long haul and as you say, very satisfying to see your shareholding size grow.

On another subject, second day in a row that MET has seen nearly $50m traded and second day in a row where all the rest of the sector has benefited except RYM.
Sometimes the market seems quite good at pricing extra risk and this seems to be one of them. (Long second lockdown in Melbourne can't be helping RYM's profitability there).

[winner69]

I agree, its an excellent way to build wealth over the long haul and as you say, very satisfying to see your shareholding size grow.

On another subject, second day in a row that MET has seen nearly $50m traded and second day in a row where all the rest of the sector has benefited except RYM.
Sometimes the market seems quite good at pricing extra risk and this seems to be one of them. (Long second lockdown in Melbourne can't be helping RYM's profitability there).

So a good take up of DRP could encourage them to maximise divie (60%) - less cash to pay out ...more capital

Pity they’ll knock off the tax due on 3 cents before they calculate how many shares you get

[Cyclical]

So a good take up of DRP could encourage them to maximise divie (60%) - less cash to pay out ...more capital

Pity they’ll knock off the tax due on 3 cents before they calculate how many shares you get

I'm thinking they're more likely to be on the conservative side this time, and rather than focus on cps, think of it more as a % per share. With shares @ ~$1, a juicy dividend now is going to be a hard act to follow % wise on the next round when they are trading at a 30+% premium to today's sp ;-) That and they really need to keep something in the war chest should this covid thing get crazy. Of course those two scenarios would likely be mutually exclusive...

[winner69]

I'm thinking they're more likely to be on the conservative side this time, and rather than focus on cps, think of it more as a % per share. With shares @ ~$1, a juicy dividend now is going to be a hard act to follow % wise on the next round when they are trading at a 30+% premium to today's sp ;-) That and they really need to keep something in the war chest should this covid thing get crazy. Of course those two scenarios would likely be mutually exclusive...

What war chest?

Suppose you mean borrrow less

[Paradox]

SP has been slowly but steadily climbing, leading up to next week.

[dubya]

SP has been slowly but steadily climbing, leading up to next week.

It's great isn't it?! I love the slow and steady; up two or three cents a day. OCA my biggest holding by a country mile.
I think a lot of MET money is coming over, and some bargain hunting too. In my murky crystal ball I see it heading up into the $1.20's (but that's a bit of wishful thinking too :) :) )

[Onion]

It's great isn't it?! I love the slow and steady; up two or three cents a day. OCA my biggest holding by a country mile.
I think a lot of MET money is coming over, and some bargain hunting too. In my murky crystal ball I see it heading up into the $1.20's (but that's a bit of wishful thinking too :) :) )

I'm in a similar boat (biggest holding). I'm enjoying the climb too, especially given I was able to get my average cost down to 85c during the SP plunge in March and we are well north of there now.

But don't get ahead of yourself. I thought 2 years ago that we had seen the last of prices under $1.10. How wrong I was! It is never real profit until it is in the broker account.

[Cyclical]

I thought 2 years ago that we had seen the last of prices under $1.10. How wrong I was! It is never real profit until it is in the broker account.

Yeah, and then you'll wish you hadn't sold, as has been the case for pretty much everything I've let go of since late March! My consolation though is that most of the funds from other sales have gone towards accumulating more OCA, so swings and roundabouts :)

[King1212]

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12348641

[clip]

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12348641

What has that got to do with OCA? 🤔

[bull....]

What has that got to do with OCA? 樂

oca venturing into building bunkers for wealthy old folks lol even ones with a dementia room