OCA - Oceania Group - retirement villages

[Ggcc]

The SP drop is concerning, but someone is selling out for various reasons, and there are a lot who are going with the flow. Could be a manipulation preceeding a takeover. I am so overweight now in this sector it scares me a bit, but I feel as a long term hold it will have merit. It would be a bugger if this relates to leaky building issues.
It will most likely be the possibility of how the following will impact all retirement operators. The ongoing cost of building that seems are increasing ten fold, followed with the lack of staff, followed by lack of tradies, the government who might want people to receive some of the capital gains and let’s throw covid in the mix scenario. I’m still in as this is a short term blimp, but anything the government adds onto the cost of the operator, would be silly not to pass onto the end user.

[davflaws]

Thanks mate, appreciated. Sometimes I'm my own worst enemy and expect perfection and that every investment decision I make will be right and every year every share owned will give me a positive outcome. That's not really realistic especially in the circumstances this year.

So when OCA drops into the red and (since I am ridiculously overweight) the whole portfolio gives a big lurch, or when PX1 heads down (a "punt" so not so exposed) - I go to sea.

A day off the E coast of Northland is good for the soul and even when the weather is not marvelous, I remember 5 years around Cook Strait and feel grateful.

You should do it more often.

[Baa_Baa]

The SP drop is concerning, but someone is selling out for various reasons, and there are a lot who are going with the flow. Could be a manipulation preceeding a takeover. I am so overweight now in this sector it scares me a bit, but I feel as a long term hold it will have merit. It would be a bugger if this relates to leaky building issues.

Forget the conspiracy manipulation takeover leaky building etc, the whole sector peaked late August and is now simultaneously falling, all of them. So, what sector macro events are causing the sell off?

We've had theories put forward here of covid, inflation, rising interest rates, house prices peaking, rising building costs, labour shortages, risk of regulation.

Whatever it is, or all of them, OCA is not alone in the sector sell-down. The whole sector is re-rating.

[winner69]

RYM NTA as Sep 21 up 24% from Sep 20 and up 7% from Mar 21

Hope OCA can do better than this ....esp as now they are well past that inflection point

[Beagle]

So when OCA drops into the red and (since I am ridiculously overweight) the whole portfolio gives a big lurch, or when PX1 heads down (a "punt" so not so exposed) - I go to sea.

A day off the E coast of Northland is good for the soul and even when the weather is not marvelous, I remember 5 years around Cook Strait and feel grateful.

You should do it more often.

I couldn't agree more and I would if I still owned a boat. Unfortunately there's huge numbers of Aucklanders looking for escapism at present so finding high quality late model launches at a fair price is like finding a needle in a haystack.

[BlackPeter]

I couldn't agree more and I would if I still owned a boat. Unfortunately there's huge numbers of Aucklanders looking for escapism at present so high quality launches at a fair price are like finding a needle in a haystack. I'm too scared to ask what one of these costs now, probably quite a bit north of a million ($1.2-$1.3m) and what the wait time is, probably well over a year. https://rmarine.nz/models/395-suv/

These sorts of things are best owned in a partnership as otherwise they sit on the marina for far too long eating their heads off with overheads and growing barnacles. If any highly experienced boatie wants to go halves please send me a PM.

I don't speak from own experience, but an old boatie once told me that owning a boat is the fastest way to drain money down the gurgler ... and I trust his judgement in that regard.

I think I would just keep my money in shares and when I want to go on a boat trip just rent a boat when I need it.

Shares make money, boats drain money. Easy choice.

[Beagle]

I can tell you from 17 years boating experience they cost a lot of money to run but chartering a good one at a fair price at the height of the summer season is much easier said than done. I edited that post because much as I wouldn't mind a half share in that boat I linked the prospect of $600K tied up in a very quickly depreciating asset (liability?), as well as about $15K to $20K per annum to run it, (my half share of costs) + fuel is not especially appealing. Been there, done that. I also found as I got into my 50's I was more prone to sea sickness. I want to try something different...not sure what that is just yet. Maybe a nice luxury motorhome, we'll see.

Speaking of feeling queasy....that OCA share price...down from $1.56 just a few months ago, ouch !!

[davflaws]

Kia ora Beagle

As you well know - a boat is a hole in the water lined with some durable material, into which you pour money. It has three dimensions - length, breadth, and debt. Or for those with nautical pretensions, length beam and (over)draft.

But try a 10ft parkercraft, garden trailer, 5hp outboard, chillybin with chardonnay and ice, pkt of squid and a berley bomb. Chump change for you.

Pootle about in the upper harbour and bring home a fish for tea.

[Baa_Baa]

OCA is not alone in the sector sell-down. The whole sector is re-rating.

Since the late August highs for RYM, SUM and OCA, and mid-Sept high for ARV, all of them are significantly down now, technically below the 200MA's, deep into over-sold RSI.

SUM -15.95%
RYM -18.04%
ARV -12.10%
OCA -18.89%

These are times when value investors who are in it for the long haul, who are not too concerned about day to day or month to month share price, might be seeing opportunities to enter or increase their holdings.

Those discounts to recent SP highs are looking tasty and possibly will be even more attractive as this re-rating runs its course.

[Beagle]

Kia ora Beagle

As you well know - a boat is a hole in the water lined with some durable material, into which you pour money. It has three dimensions - length, breadth, and debt. Or for those with nautical pretensions, length beam and (over)draft.

But try a 10ft parkercraft, garden trailer, 5hp outboard, chillybin with chardonnay and ice, pkt of squid and a berley bomb. Chump change for you.

Pootle about in the upper harbour and bring home a fish for tea.

Always a great way to spend some time :) https://www.smartmarine.co.nz/
Maxxon inflatables are a good bit of kit in my experience. Could easily fit one in the garage of a campervan, trundle off down the Coramandel and there's some awesome fishing to be had up close around the mussel farms ;)

[Panda-NZ-]

If it goes below support it might be time to sell.

Plus coronavirus might still be an unresolved issue with what's going on in europe.

[Maverick]

I was talking with Mudfish today and ended up sending a bunch of messages to explain my thoughts on the upcoming announcement and share price. It reads pretty clear so I thought I may as well paste it on here as some here may be interested.


Here are the HY1 underlying profit results dating back to 2018;
20.7m-21m-24m-23.6m-?
I've calculated we will get $25.1m this HY if they sell 30 apartments ( I have formed this number by my usual ratios and adjusted down for the Auckland lockdown using SUM results). As I said today they have an unusually large pile of extra empty apartments to sell at the beginning of this period due to a lot of late deliveries last HY and early deliveries this HY.
After reading RYM results yesterday I'm now growing confident the lockdowns did not reduce new sales as much as I have allowed for. This coupled with such a large bunch of empty apartments at HY beginning I know am considering selling 50 is possible. This would simply reduce the overhang of new stock back to the normal top end of OCAs usual offerings. The more I contemplate it the more I think it's quite possible.

Also remember their care side is past the point of inflection and I calc they make an extra 1.5m or so extra each HY. So it's reasonable to assume the result will be 2-3m more than PCP disregarding sales effect.

Sooo,,, if they achieve new apartment sales of 30 (easy peasy) then they are currently trading at a PE of 16. If they manage to sell 50 apartments, the profit will end up near 30m then their PE will be 13.6.
Now if they achieve the base line 30 apartment sales to get approx 25m profit they would have grown profit with PCP by 6% , I`d say it deserves a PE of 18, that makes the SP worth $1.42. If they achieve utopia and sell 50 , their growth will be 27% up on PCP , surely that deserves a PE of 20 making the SP $1.90.
Remember these sales were done during lockdown and in winter so the next HY will almost certainly be better . HY2 is always better than HY1 anyway.

I'm picking the SP will rise to somewhere in between these 2 cases, say $1.50-$1.60 before Christmas.


While RYM and SUM have fallen lately , I do think that is logical as they are trading on very high PEs of 35 and 27 respectively as of yesterday. I would like to think the market is still remaining logical enough to see it has oversold OCA with a current PE of 16 once some facts come out shortly.
I'm saying at the moment the market has got it wrong with OCA and Greg T has it right.


Hope this is useful to readers here as this sizable SP fall is unsettling ( even as long term holders). It will be very welcomed to get some facts soon.

[Dlownz]

Nice Mav. Looks good. For the record Oceania gracelands hastings completed a total of 9 end of September and a October. Not sure how many will show in sales but they were all sold well before June I believe.
As well as turn over of existing units and running at their highest occupancy. I believe its undervalued at the moment but I just have to be patient. I had a order at 1.27 but I don't think I'm going to get it. All ready have alot 😊

[winner69]

Mav posted this bit -

Here are the HY1 underlying profit results dating back to 2018; 20.7m-21m-24m-23.6m-?

At least the numbers aren’t going backwards over time :) .. even though sales numbers have been climbing 92- 144 -185 -268

The old selling heaps more things and making stuff all more trick -- still puzzles me

this inflection point story they fabricated is a great myth I reckon - we've been conned

Shows you why worry about about Underlying Earnings - just look at Comprehensive Income and increase in Book Value --- all the other stuff is noise with Oceania

[Beagle]

Underlying earnings a non GAAP measurement was something started by Ryman and is easily enough understood and appropriate for them and some others in this sector. My own view (which doesn't fit with the accounting profession) is that with OCA as they have such a high percentage of their assets in PPE (property plant and equipment) with their care facilities underlying earnings do not encapsulate the progress being made in the same way as they do for the other companies in this sector.

Total comprehensive income therefore becomes the only relevant yardstick as this is really a property company that ostensibly makes nothing from care so to invest in property one must understand that its the total comprehensive income one is investing for.

It makes me sad to see this under what the true NAV is likely to be but further to my comments about possible regulatory changes I do feel that they can adapt their business model to suit any changes. For example if retirement companies were forced to pass on half the capital gain then the weekly fees and going to come in for very serious review as are the DMF percentages. You might see weekly fees double and DMF's uplifted to 45% over 4 years. (15% DMF fist year followed by 3 more years @ 10% per annum). If people don't like it then stay in your own home and good luck getting quality care in your old age.

Bottom line is I think companies can and will adapt if the "socialism stick" comes out so this selling below true adjusted NAV, (which I estimate as at least $1.40) at present isn't warranted.

[winner69]

Underlying Earnings good for measuring how well an outfit has done ‘operationally’ in the accounting period …a measure of their activities.

It doesn’t encapsulate increase in company value.

[Baa_Baa]

We've had theories put forward here of covid, inflation, rising interest rates, house prices peaking, rising building costs, labour shortages, risk of regulation.

Whatever it is, or all of them, OCA is not alone in the sector sell-down. The whole sector is re-rating.

Apologies for re-quoting myself twice, but my view is that the market doesn't like covid and especially so the retirement sector. We saw the 2020 fall in SP's almost across the board, whereas now in 2021 the market is more selective in writing-down company's SP's.

As we are exposed to daily covid updates, it's hard to piece it all together, it's easy to forget when key events happened even only a couple of months ago. What we need is a timeline, and here it is (https://www.nzdoctor.co.nz/timeline-coronavirus). From this we can correlate key events with the market reactions.

I won't bore everyone with a detailed analysis of key events, so if you bring up a SP chart for any of the RV's from late August, you will see a correlation to the covid timeline, beginning with L4 lifting, and progressing into Sept with reduction to L3 in Auckland, outbreaks in Wellington, Waikato and Northland, reduction to L2, a private RV outbreak, deaths happening and so on.

My conclusion is the retirement sector is being re-rated primarily through fear of covid in the community, and it is all but given that covid will spread nationwide. This is far more concerning to the RV sector imo as the country has accepted covid will become endemic.

So even though all retirement company's are already oversold, we can look back to see in 2020 that that 'technicality' didn't stop the fall in SP's. I would anticipate a scenario of less 'steep' or 'deep' decline than 2020, but a continued decline nevertheless. It may not happen, i.e. a sustained bounce in SP from current oversold, but I'm not counting on that happening just yet.

As covid spreads through NZ, it's understandable that the market is concerned, if not fearful, of outbreaks in the retirement villages. It's probably not 'if' but 'when' that happens in a listed RV company. This backdrop of covid creates lingering doubts and as we saw, even a very good results announcement like RYM has been met with sustained selling.

To end on a more opportunistic note, lower SP's are really good for DRP participants and value investors who want to take advantage of significant discounts to recent SP peaks, discount to NAV/NTA etc.

[winner69]

Isn’t an increasing death rate good for retirement sector …..quicker turnover of stock etc etc

[percy]

Isn’t an increasing death rate good for retirement sector …..quicker turnover of stock etc etc

Not if they die before they enter a retirement village.

[Baa_Baa]

Isn’t an increasing death rate good for retirement sector …..quicker turnover of stock etc etc

In cold hearted terms if the 'turnover' increased then for sure, it's good for business, but as you know in terms of reputational damage a covid outbreak in a listed RV could be disastrous in the medium term. Like who would put themselves or their parents or grandparents into a RV that 1. currently has covid, or 2. has been unable to keep covid out.

[Old mate]

In my opinion soon covid is going to be everywhere. Everybody in the next few years will get it. I think elderly will have less chance of getting it in a village than in open communities and better care if they do. Look what's happened and happening overseas again at some point it's going to be bad here. It's a matter of time before you get it. But yeah won't "look" good if retirement villages have the inevitable outbreaks.

[iceman]

Deleted. Wrong thread

[dreamcatcher]

Asian and Polynesians have no need for Retirement Villages because family care for their elders themselves. Probably your safest place to avoid Covid is staying in your own home.

Today's Anti-vaccine mandate and Anti lock down protests will add to the growing number of Covid cases especially once restrictions are lifted. These 3000 teachers and health workers sacked need to be replaced but from where. Current NZ unemployment rate a low 3% which means zero as remaining considered as unsuitable.

Inflation numbers and staff shortages going to add to the wage bill. Fortunately some Rest Home care employers are benefiting from immigration's decision in letting work visa holders a path to residency as they were unable to leave NZ and had visas extended now over 3yrs.

Family working in the health system showed me list after list of people needed to do an extra shift because of chronic shortage of staff. Attracting staff in the health care area already under enormous pressure so wages sure to rise.

Our 5-11yr olds still some way off from been vaccinated and recently read that CATS also get Covid.

If property prices decline then this retirement section will struggle or this new 'Lying Flat Movement' for youth hits NZ shores

[Snow Leopard]

Asian and Polynesians have no need for Retirement Villages because family care for their elders themselves...

You have no need to ever post again because you make ill-informed over-simplifications.

Disc: :mad ;:

[Bjauck]

Asian and Polynesians have no need for Retirement Villages because family care for their elders themselves. Probably your safest place to avoid Covid is staying in your own home… Are there overseas studies or stats to illustrate that? How many doctors do house calls in NZ? How many elderly people in their own homes enforce a strict visitor policy applied to the whole household if they live in a multi-generational home?

[aquaman]

New video from Joshua Wang re thoughts on share price drop over last few months. Lots already discussed here but worth a watch
https://www.youtube.com/watch?v=zHKtXHEZAdA

[Panda-NZ-]

Are there overseas studies or stats to illustrate that? How many doctors do house calls in NZ? How many elderly people in their own homes enforce a strict visitor policy applied to the whole household if they live in a multi-generational home?

The covid outbreaks in nursing homes worldwide?

https://www.nytimes.com/interactive/2020/us/coronavirus-nursing-homes.html

[bull....]

The covid outbreaks in nursing homes worldwide?

https://www.nytimes.com/interactive/2020/us/coronavirus-nursing-homes.html

hit the nail on the head , no different to cruise ships

[winner69]

Mav got me excited about OCA doing a Monday announcement …thought it was today but heck have to wait another seven sleeps

Some companies are pretty slack taking so long to report ……no need to do them on 14 column paper any more and with modern tech you’d think they’d be able to churn them out pretty quick with a bit of wherewithal.

[bottomfeeder]

Yep Joshua Wang highlights some valid points. On the fip side, we need to accept that until, home testing with near immediate results, and a better vaccines and treatments, Corona is with us permanently and we have to learn to live with it. Every coronavirus announcement will affect all stocks if you let it get to your worry place. Just have to move on.

[BlackPeter]

hit the nail on the head , no different to cruise ships

Well, either you have no clue about the conditions for crew on cruise ships or you don't understand how (well managed) retirement homes are run. Possibly you don't have a clue about both.

On all Covid impacted cruise ships I am aware of some of the crew had Covid as well and still have been required to sleep in communal cabins together with other staff and perform their duty. Ideal Covid breeding and spreading conditions

Never heard about a (first-world) rest home where staff needs to sleep in communal dormitories and are required to keep working when sick.

As well - instead of making ill informed comments I recommend you do some research on the Covid policies of NZ retirement villages ...

[dreamcatcher]

You have no need to ever post again because you make ill-informed over-simplifications.

Disc: :mad ;:

I should have stated its my personal observation when I lived in China and noted that many elderly living and been cared for by family our own included.

But you are correct there are many more Asian countries.

[dreamcatcher]

The covid outbreaks in nursing homes worldwide?

https://www.nytimes.com/interactive/2020/us/coronavirus-nursing-homes.html

One third is a staggering number........

[bull....]

Well, either you have no clue about the conditions for crew on cruise ships or you don't understand how (well managed) retirement homes are run. Possibly you don't have a clue about both.

On all Covid impacted cruise ships I am aware of some of the crew had Covid as well and still have been required to sleep in communal cabins together with other staff and perform their duty. Ideal Covid breeding and spreading conditions

Never heard about a (first-world) rest home where staff needs to sleep in communal dormitories and are required to keep working when sick.

As well - instead of making ill informed comments I recommend you do some research on the Covid policies of NZ retirement villages ...

an infected worker is just the same no matter where they work and i would say you are ill - informed. covid carriers can infect before showing symtoms or testing positive

So it is inevitable no matter how good you think the rules are in retirement villages. you just need to accept reality

[Beagle]

New video from Joshua Wang re thoughts on share price drop over last few months. Lots already discussed here but worth a watch
https://www.youtube.com/watch?v=zHKtXHEZAdA

Good video Josh.

[Maverick]

Good video Josh.
I'll second that Beagle, that's a very well articulated video Josh W, thanks as always for your great work:t_up:.

sorry about you having to wait out untill next week Winner. Got my game plan all ready for next Sunday,....Country Calendar and straight to bed ...bigger than Christmas Eve.

[BlackPeter]

an infected worker is just the same no matter where they work and i would say you are ill - informed. covid carriers can infect before showing symtoms or testing positive

So it is inevitable no matter how good you think the rules are in retirement villages. you just need to accept reality

B/S ... staff in retirement homes are fully vaccinated and wear masks. Residents are separated in smaller bubbles and clusters. Visitors are screened. So - sure, an outbreak still can happen (and probably will at some stage and at some time), but the likelihood for it is so much lower than it is on a cruise ship.

You do understand the concept of risk and likelihood, do you?

[couta1]

an infected worker is just the same no matter where they work and i would say you are ill - informed. covid carriers can infect before showing symtoms or testing positive

So it is inevitable no matter how good you think the rules are in retirement villages. you just need to accept reality Yes and the reality is that this will blow over and this needs based business will just keep trucking along and growing, if it gets into any of the listed retirement operators villages, do you think they are suddenly going to stop their building and expansion plans. Hopefully most can see through your fear mongering campaign against the sector on here, I certainly can.

[bull....]

Yes and the reality is that this will blow over and this needs based business will just keep trucking along and growing, if it gets into any of the listed retirement operators villages, do you think they are suddenly going to stop their building and expansion plans. Hopefully most can see through your fear mongering campaign against the sector on here, I certainly can.

of course there not going to stop building.
anyway at the end of the day i imagine next yr we will all know first hand what happens when a village goes full covid and the outcomes from it to both people and share prices

[couta1]

of course there not going to stop building.
anyway at the end of the day i imagine next yr we will all know first hand what happens when a village goes full covid and the outcomes from it to both people and share prices You will notice that all of the Covid cases to date have been in non listed small players, ask yourself why is this? I could answer the question for you but I'm not going to, the chance of full Covid as you say in any of the listed retirement sector villages is extremely remote IMO.

[Panda-NZ-]

You will notice that all of the Covid cases to date have been in non listed small players, ask yourself why is this? I could answer the question for you but I'm not going to, the chance of full Covid as you say in any of the listed retirement sector villages is extremely remote IMO.

Hundreds of potential carriers per day vs only a couple maybe at home.

I know where I would rather be.

[justakiwi]

I have no doubt whatsoever, that all of the major RV's will have a detailed plan already in place, for how they will manage an outbreak (whether it be one resident or many).

I do not have the same level of confidence with regards to smaller facilities. The "plan" we have is broad, with no specifics, and I have literally no confidence in it. We don't even have a plan in place currently, for how we deal with unvaccinated visitors. It is a recipe for disaster right now.

I know where I would rather be working in the event of an outbreak.

[couta1]

I have no doubt whatsoever, that all of the major RV's will have a detailed plan already in place, for how they will manage an outbreak (whether it be one resident or many).

I do not have the same level of confidence with regards to smaller facilities. The "plan" we have is broad, with no specifics, and I have literally no confidence in it. We don't even have a plan in place currently, for how we deal with unvaccinated visitors. It is a recipe for disaster right now.

I know where I would rather be working in the event of an outbreak. Exactly, my wife is currently the manager of a 350 resident facility and things are as tight and detailed as they could possibly be in regards to the whole Covid situation, I have every confidence in OCA and the other listed operators to manage any potential outbreak.

[Beagle]

Exactly, my wife is currently the manager of a 350 resident facility and things are as tight and detailed as they could possibly be in regards to the whole Covid situation, I have every confidence in OCA and the other listed operators to manager any potential outbreak.

I want to know what your wife thinks of Oceania at under $1.30. Good buying ?

[couta1]

I want to know what your wife thinks of Oceania at under $1.30. Good buying ? Well she bought more last week if thats any indication, I already have enough. Lol

[cyclist]

I already have enough. Lol

Those are new words for you couta1!

(Said in genuinely lighthearted jest :)))

[Beagle]

Well she bought more last week if thats any indication, I already have enough. Lol

Both the Couta's are in, its time to back the truck and trailer up, what could possibly go wrong lol

[Greekwatchdog]

Both the Couta's are in, its time to back the truck and trailer up, what could possibly go wrong lol

An average result where the market values this at $1.00.

I note For Bar rated RYM as underperform with target of $11.90 this morning.

[Beagle]

An average result where the market values this at $1.00.

I note For Bar rated RYM as underperform with target of $11.90 this morning.

I see very little prospect of $1.00 but in the short term who knows...
Thanks for that but please PM me when RYM are $7 and I might get some.
Q&A with our new CEO https://www.stuff.co.nz/business/the-monitor/127038376/the-monitor-economy-qa-brent-pattison-ceo-of-oceania-healthcare

[winner69]

You will notice that all of the Covid cases to date have been in non listed small players, ask yourself why is this? I could answer the question for you but I'm not going to, the chance of full Covid as you say in any of the listed retirement sector villages is extremely remote IMO.

Just shows how exposed villages are to ‘letting’ the virus in

Hopefully all under control

https://www.nzx.com/announcements/383383

[Ggcc]

I guess I just caught a falling knife. Bought a few more yesterday and am happy for the longterm

[850man]

It would seem that despite all the covid disruption, retirement villages are doing OK based on other's reporting. Hopefully same for OCA and Brent has turned things around to lift this whale from it NTA plus bugger-all position.

[Beagle]

It would seem that despite all the covid disruption, retirement villages are doing OK based on other's reporting. Hopefully same for OCA and Brent has turned things around to lift this whale from it NTA plus bugger-all position.

Yeap...they're a long term thing though so one needs to hold "doggedly" I have decided to see if someone will be silly enough to top me up at $1.27.

[Maverick]

Yeap...they're a long term thing though so one needs to hold "doggedly" I have decided to see if someone will be silly enough to top me up at $1.27.
Damn your good at this Beagle! That sniffer of yours just seems to know just when and where to be and across many companies too. Well done.

[Beagle]

Beagle's are notorious for always being hungry and sniffing out their next feed lol...but you're too kind...the last 3 months has been quite tough in a lot of ways.

[Poolboy]

I think I'll wait 'til the country is ravaged by covid then buy a whole lot more at .76

That's if I survive.

[bull....]

I think I'll wait 'til the country is ravaged by covid then buy a whole lot more at .76

That's if I survive.

me too , will wait till the first few retirement villages are swamped with covid and see what the market re-action is and what happens to the people of cause

Im thinking 2 outcomes possible

the re-sales sky-rocket which would be a + for the bottom lines of the companies
or re-sales collapse cause of bad perceptions due to covid implications of being in a village.

[alokdhir]

me too , will wait till the first few retirement villages are swamped with covid and see what the market re-action is and what happens to the people of cause

Im thinking 2 outcomes possible

the re-sales sky-rocket which would be a + for the bottom lines of the companies
or re-sales collapse cause of bad perceptions due to covid implications of being in a village.

If u both think RVs are only in NZ and Covid is a new thing for the world then its easy to keep guessing the outcomes ....

But for me it may have come to the communities in NZ more freely for the first time ...but whole world has already experienced it and survived very well .

Also our markets like all others is equally sharp and has factored in a good chance of what u say will happen ....most likely worst case will not happen ...then soon it will show us in hindsight when was the best time to buy in ...:D

[YoungBull]

me too , will wait till the first few retirement villages are swamped with covid and see what the market re-action is and what happens to the people of cause

Im thinking 2 outcomes possible

the re-sales sky-rocket which would be a + for the bottom lines of the companies
or re-sales collapse cause of bad perceptions due to covid implications of being in a village.

What do you presume is the alternative option for residents? Live at home? What are the people who need care going to do in your opinion?

[bull....]

What do you presume is the alternative option for residents? Live at home? What are the people who need care going to do in your opinion?

well if you need care guess your choices are limited , if your already in a village guess most wont have the option of going back to there own place will they. people who havnt made a decision on there living outcomes have a choice though depending on the covid outcomes ... to come.

time will tell what the outcomes are for these businesses during a pandemic which nz hasnt fully experienced yet

[artemis]

well if you need care guess your choices are limited , if your already in a village guess most wont have the option of going back to there own place will they. people who havnt made a decision on there living outcomes have a choice though depending on the covid outcomes ... to come.

time will tell what the outcomes are for these businesses during a pandemic which nz hasnt fully experienced yet

Say what? The Auckland curve is flattening. We have it on the best authority, our government.

[winner69]

Say what? The Auckland curve is flattening. We have it on the best authority, our government.

Yep, Ashley put a slide up at the press conference .... told us that even though nobody could see his slide.

they haven't learnt - never use slides in a press conference

[couta1]

well if you need care guess your choices are limited , if your already in a village guess most wont have the option of going back to there own place will they. people who havnt made a decision on there living outcomes have a choice though depending on the covid outcomes ... to come.

time will tell what the outcomes are for these businesses during a pandemic which nz hasnt fully experienced yet Yes and only time will tell, in the mean time its back to the arena for you. By the way once a person is assessed as needing residential care they no longer have a choice as home help is no longer able to provide the care that person needs.

[Poolboy]

Darn, it's on it's way back up again.

Girlfriend said "How much are you down from last week?" I said "Not much, about the price of a new Corolla." She "What? Sell!" Me "Are you mad. I've just bought some more." LOL

[Chinesekiwi]

Darn, it's on it's way back up again.

Girlfriend said "How much are you down from last week?" I said "Not much, about the price of a new Corolla." She "What? Sell!" Me "Are you mad. I've just bought some more." LOL

Funny.

My partner has stopped asking how much I'm down - no one wants to hear they lost out on a Tesla Model 5 ... oh well at least the brochure was free.

I stopped calculating a long time ago.

Am still very much committed to the stock - and have topped up recently.

[Rawz]

When are the results due out?

[Greekwatchdog]

When are the results due out?
Monday 29/11

[Rawz]

Monday 29/11

Thanks. They can’t come soon enough!

[winner69]

Don’t know big this is but Earl has bought 6 villages for Metlife

https://quoteapi.com/resources/da9866271f9d0071/announcements/met.nzx/383532/MET_Metlifecare_to_acquire_six_villages_from_Selwy n.pdf

Interesting - The purchase follows a competitive tender process in which Metlifecare was identified as the party most closely aligned with The Selwyn Foundation, a charitable organisation, in terms of shared values - particularly a strong focus on people and the holistic wellbeing of residents

Suppose Oceania wasn’t even interested

[dabsman]

Don’t know big this is but Earl has bought 6 villages for Metlife

https://quoteapi.com/resources/da9866271f9d0071/announcements/met.nzx/383532/MET_Metlifecare_to_acquire_six_villages_from_Selwy n.pdf

Interesting - The purchase follows a competitive tender process in which Metlifecare was identified as the party most closely aligned with The Selwyn Foundation, a charitable organisation, in terms of shared values - particularly a strong focus on people and the holistic wellbeing of residents

Suppose Oceania wasn’t even interested

Suppose they were aligned with the ownership going offshore? Now a charity for the Scandanavians? Highly aligned...

[Beagle]

https://www.nzx.com/announcements/383584

Looks like a really experienced guy. He should add a lot of capability to their development team.

[dreamcatcher]

Inflation - Skill Shortages - Wages

Oceania Healthcare chief executive Brent Pattison - "Retaining and recruiting talent for all New Zealand businesses in a tight labour market is also a major concern. The aged care sector (https://www.stuff.co.nz/timaru-herald/news/125466379/nzs-agedcare-sector-faces-an-impending-crisis), for instance, is facing an extreme talent shortage in terms of registered nurses. We’ve relied heavily on international nurses to fill this gap, and I’ve no doubt that many of our skilled nurses will head overseas for greater freedoms and opportunities."

https://www.stuff.co.nz/business/the-monitor/127038376/the-monitor-economy-qa-brent-pattison-ceo-of-oceania-healthcare

Immigration's skills shortage list

https://skillshortages.immigration.govt.nz/


Disc: hold neither buying nor selling

[winner69]

https://www.nzx.com/announcements/383584

Looks like a really experienced guy. He should add a lot of capability to their development team.

Must have learnt a lot when he helped out at Kiwi Property KPG :)

Obviously Brett thinks he better than that old guy he sent down the road ….but this new guy pretty old as well.

What he says about himself -

About
A multi-disciplined property professional with thirty-five years’ experience, specialising in retail and commercial development. A proven strategic leader with the ability to make effective decisions based on strong commercial acumen with an acute market awareness and connection.

[Beagle]

Must admit I thought the market would react more favorably to his appointment than it has.
Maybe being involved with the "jinxed" SKC convention center with all its well known cost overruns is not viewed very positively ?
Then again, maybe valuable lessons were learned and a wealth of experience is a really good thing ?
Time will tell...

[Muse]

Must admit I thought the market would react more favorably to his appointment than it has.
Maybe being involved with the "jinxed" SKC convention center with all its well known cost overruns is not viewed very positively ?
Then again, maybe valuable lessons were learned and a wealth of experience is a really good thing ?
Time will tell...

smooth seas don't make for skillful sailors that's for sure

[Baa_Baa]

Must admit I thought the market would react more favorably to his appointment than it has.
Maybe being involved with the "jinxed" SKC convention center with all its well known cost overruns is not viewed very positively ?
Then again, maybe valuable lessons were learned and a wealth of experience is a really good thing ?
Time will tell...

He finished at SkyCity in July 2014, was GM Development at Precinct Properties until April 2021, and currently is Programme Director Terminal Integration at AK Airport. Hugely experienced.

[winner69]

Announcing a replacement Group General Manager Property & Development is never going to move the share price ….just another Exec appointment y

[bull....]

1.30 the new resistance ?

[fastbike]

Interesting
"What are you most concerned about right now?Regrettably, this means we’re underprepared for ongoing population growth and the challenges that will come with that, including our ageing population and climate change."
How does this position a portfolio ?

[justakiwi]

For anyone who's interested ...

NZX Virtual Investor Event - 3 December 2021

Might simply be a re-hash of Monday's presentation, but could be worth a watch.


13253

[Maverick]

Beagle, did you get your $ 1.27 top up filled?With just half an hour to go it seems very likely this is the bottom.
With RYM and ARV scorecard in and the current OCA SP it's very hard to see how it can go down from here.
Really looking forward to the update. From analyzing the other operators results / comments and their SPs i'm picking oca SP omewhere in $1,40 this time next week.

[Beagle]

Got a few more mate but had to ante up a bit more than $1.27. For what its worth I've pretty much given up trying to predict the short term SP with this one. Medium to long term is much easier to figure out ;)

[Baa_Baa]

Bullish price targets forecast:

Market Screener on OCA (https://www.marketscreener.com/quote/stock/OCEANIA-HEALTHCARE-LIMITE-103506268/consensus/)
Mean consensus BUY (4 analysts - 3 Buy, 1 Outperform)
Average target price 1,71 NZD
High Price Target 1,90 NZD
Spread / Highest target 47,3%

Forsyth Bar maintain their $1.90 'Outperform' price target from 8/9/21

[winner69]

Bullish price targets forecast:

Market Screener on OCA (https://www.marketscreener.com/quote/stock/OCEANIA-HEALTHCARE-LIMITE-103506268/consensus/)
Mean consensus BUY (4 analysts - 3 Buy, 1 Outperform)
Average target price 1,71 NZD
High Price Target 1,90 NZD
Spread / Highest target 47,3%

Forsyth Bar maintain their $1.90 'Outperform' price target from 8/9/21

Four guru analysts can’t all be wrong so looking good for OCA share price

I’d be happy if lowest guess of $1.50 is hit next week …or even the week after

[alokdhir]

Lowest Guess or Forecast buddy ....U dont seem very confident here ...:p

[dreamcatcher]

Probably unknown at present if vaccinations are effective against new strain of Covid Omicron Variant will have some running here.

[alokdhir]

OCA results coming out on a difficult day for the markets ....Everything always against this poor stock ...

[couta1]

OCA results coming out on a difficult day for the markets ....Everything always against this poor stock ... SP prediction at close tomorrow equals $1.27. Lol

[alokdhir]

SP prediction at close tomorrow equals $1.27. Lol

Thats a reasonable outcome ...market maybe down 2% ...unless FPH is up 5%

[alokdhir]

Good luck holders ...which maybe almost 90% of members ....lol

[jimdog31]

Thats a reasonable outcome ...market maybe down 2% ...unless FPH is up 5%

id say market be down more like 3-4%

[alokdhir]

id say market be down more like 3-4%

I think not NZX ...as Lister said we already depressed and have a defensive market ...so even 2% down for day is too much ...though surely it can open big down but will recover most ground before close ..

[Ricky-bobby]

HALFYR: OCA: Oceania delivers improved performance despite COVID-19 08:30a.m.
OCA
29/11/2021 08:30
HALFYR
PRICE SENSITIVE
REL: 0830 HRS Oceania Healthcare Limited

HALFYR: OCA: Oceania delivers improved performance despite COVID-19

MEDIA RELEASE
29 November 2021

OCEANIA DELIVERS IMPROVED PERFORMANCE DESPITE COVID-19 BACKDROP

Oceania today announced unaudited proforma Underlying Earnings before
interest, tax, depreciation and amortisation (EBITDA) of $36.5m for the six
month period ended 30 September 2021, a 19.7%, ($6.0m) increase on the six
month period ended 30 September 2020.

Highlights:
o A 19.7% increase ($6.0m) in unaudited [proforma] underlying EBITDA compared
to the six month period ended 30 September 2020.
o Aged care business continued to perform well throughout the period despite
COVID-19 disruptions.
o Sales volumes (for both independent living apartments and villas, as well
as care suites) being 10.6% ahead of the six month period ended 30 September
2020, despite ongoing COVID-19 lockdown restrictions.
o Completion of the acquisition of Waterford (Hobsonville Point, Auckland) in
April 2021 and a resource consent for 50 independent living apartments and a
basement carpark has been secured.
o The completion of 49 apartments at Eden (Auckland) in April 2021 and eight
villas at Gracelands (Hastings) in September 2021.
o 545 units (apartments, villas and care suites) under construction as at 30
September 2021.
o Oceania's total assets are now $2.1b, representing 9.7% growth since 31
March 2021.
o Entry into a conditional sale and purchase agreement to acquire land
adjacent to our Franklin site.
o Completion of a heavily oversubscribed retail bond offer in August 2021,
raising $100m.
o Appointment of Rob Hamilton and Peter Dufaur as independent Directors.
o Appointment of Andrew Buckingham as Group General Manager Property &
Development.
o Interim dividend of 2.1 cents per share (not imputed) announced (30
November 2020: 1.3 cents). This will have a record date of 6 December 2021
and will be paid on 20 December 2021. The Dividend Reinvestment Plan will
apply to this dividend.

As a result of Oceania previously changing its balance date to 31 March, the
comparative trading performance noted below is reported on the basis of the
six month period to 30 September 2021 compared to the six month period to 30
September 2020:

30 September 2021 unaudited non-GAAP six months trading measures vs six
months to 30 September 2020
$m's
6 months to 30 September 2021 6 months to 30 September 2020 Growth
$m %
Underlying EBITDA (6 v 6 proforma) 36.5 30.5 6.0 19.7%
Underlying NPAT (6 v 6 proforma) 27.5 22.5 5.0 22.2%
Sales 230 208 22 10.6%
Occupancy 92.5% 91.1%

Statutory measures for the six month period to 30 September 2021 are reported
below compared to the six month period to 30 November 2020.

30 September 2021 unaudited GAAP six month statutory measures vs six months
to 30 November 2020
$m's
6 months to 30 September 2021 6 months to 30 November 2020 Growth
$m %
Operating Revenue (6 v 6 stat) 113.9 103.9 10.0 9.6%
Reported NPAT (6 v 6 stat) 36.9 24.8 12.1 48.8%
Operating Cashflow (6 v 6 stat) 52.5 74.5 (22.0) (29.5%)
Total Assets (Sept v March stat) 2,064.3 1,882.2 182.1 9.7%
Dividend (cents per share) 2.1 1.3

Oceania CEO Brent Pattison advised that "Oceania has continued to provide a
safe, vibrant and well connected community for our residents despite the
extended Governmental restrictions and costs associated with COVID-19. The
business has responded well through high levels of vaccination, regular
communications with staff, residents and their families, as well as a
significant investment in surveillance, including declarations, online
bookings and saliva testing."

Oceania has been working with Government officials and Ministry of Health
representatives with regard to health policy. Oceania has also taken an
industry leadership position in calling for our Auckland residents to be
allowed to reconnect with their loved ones safely. Oceania remains
well-prepared to manage any infections that occur at its sites, with
industry-leading infection control policies and a highly experienced clinical
team.

Mr Pattison explained that "Prior to the Alert Level Four lockdown being
announced on 17 August 2021, sales volumes were strong and development
activities were progressing well. The extended lockdowns, particularly in
the Auckland region, have temporarily impacted Oceania's sales, delayed
building works and have added direct costs associated with COVID-19."

Village sales have remained strong throughout the period, despite ongoing
COVID-19 restrictions. In the six months to 30 September 2021, there was a
total of 102 independent living (apartment and villa) sales, comprising 57
new sales and 45 resales. This is an increase of 25.9% from the six month
period ended 30 September 2020.

Oceania's total assets increased to $2.1 billion, up 9.7% ($182.1m) on 31
March 2021, primarily due to significant capital expenditure and the
acquisition of the Waterford and Franklin sites during the period.

"We have continued to make good progress with the execution of our
development pipeline during the six month period to 30 September 2021,
despite the challenges presented by the COVID-19 lockdown restrictions. As
at 30 September 2021, there were 545 units under construction across New
Zealand." said Mr Pattison.

The appointment of Andrew Buckingham as Group General Manager Property &
Development is a strategic appointment that will further enhance Oceania's
performance in this area.

Oceania's total funding positions the company well for future growth. A
heavily oversubscribed seven year retail bond issue of $100m in September
2021, following a capital raise of $100m undertaken in March/April 2021, and
Oceania's inaugural seven year retail bond issue in October 2020.

Oceania Chair Liz Coutts noted "We were delighted to have welcomed Rob
Hamilton and Peter Dufaur to the Board as independent Directors during
September 2021. They bring an extensive range of skills and we are looking
forward to them making a significant contribution to the future performance
and growth of Oceania."

Mrs Coutts advises the Board declared an interim dividend of 2.1 cents per
share (unimputed) (30 November 2020: 1.3 cents). The record date for the
dividend is 6 December 2021 and the payment date is 20 December 2021. The
Dividend Reinvestment Plan will apply to the dividend payable on 20 December
2021 at a discount of 2.5% to the volume weighted average price of shares
sold on the NZX Main Board over the period of the five trading days starting
on 3 December 2021.

ENDS

[Ferg]

Unadjusted raw NTA is $1.28 based on equity of $906.9m / shares on issue of 705.7m.

[trader_jackson]

its usually not good news when it looks complicated... and it looks complicated

[alokdhir]

its usually not good news when it looks complicated... and it looks complicated

Dividend of 2.1 Cents ...before was 1.3 Cents ...shows results great ...

[jimdog31]

its usually not good news when it looks complicated... and it looks complicated

Thats par for OCA course.

Simply though NAV of $1.34 vs shareprice of $1.30

And its worth more than $1.34

• The NAV reflects the value of existing sites, plus the land and WIP atdevelopment sites. As such, the present value of net development cashflows and future earnings at development sites are excluded.

[bull....]

its usually not good news when it looks complicated... and it looks complicated

agree they have gone out of there way to make it more time consuming to analyze. a red flag in my opinion

[jimdog31]

agree they have gone out of there way to make it more time consuming to analyze. a red flag in my opinion

Everything is a red rag to you bull! A buying signal for others

[bull....]

Everything is a red rag to you bull! A buying signal for others

yes you were saying that at over 1.40 too. good luck you might get a small bounce as it declined a lot leading up to the announcement but doesnt change my view long term 1 before 2

[alokdhir]

No RV company who are always short of cash as development costs are huge and for long , will raise dividend substantially if not doing well .

I think results are great and soon we will hear from Mav saying so ....:t_up:

[Bjauck]

Dividend of 2.1 Cents ...before was 1.3 Cents ...shows results great ... Dividend payout per share is back to what it was three years ago. Dividend payout does not necessarily reflect the value of the company.

[winner69]

Unadjusted raw NTA is $1.28 based on equity of $906.9m / shares on issue of 705.7m.

That's 6% higher than March .... pretty slack really

[Maverick]

No RV company who are always short of cash as development costs are huge and for long , will raise dividend substantially if not doing well .

I think results are great and soon we will hear from Mav saying so ....:t_up:

Yep, at first glance its a beauty - confirmation its just where it should be. This will take a few days to properly unpack but let me sum up the result in the most basic way.

Underlying earnings ( the ultimate measure of the business in my opinion.)
HY1 underlying earnings....20.9m...23.7...23.65...27.5m

You can all judge for your self whether this is worth its current PE of 16%

[winner69]

So many different 'profit' numbers and different periods ....and even resorting to 'proforma' numbers (allowing for repaying wage subsidy or something)

One does get the feeling they changed balance date to make the numbers even murkier

Like t_j says when it looks complicated it's usually not good news

[winner69]

Yep, at first glance its a beauty - confirmation its just where it should be. This will take a few days to properly unpack but let me sum up the result in the most basic way.

Underlying earnings ( the ultimate measure of the business in my opinion.)
HY1 underlying earnings....20.9m...23.7...23.65...27.5m

You can all judge for your self whether this is worth its current PE of 16%


What about on a per share basis?

[winner69]

What's this Adjusted Underlying NPAT they talk about?

Adjusted Underlying NPAT 22,701 v 19,130 in pcp ...up 18%

[couta1]

Everything is a red rag to you bull! A buying signal for others Listening to bull about this stock is like listening to a real estate agent telling you how to fix your car. Lol Steady/Solid result by the way.

[Beagle]

Total Comprehensive income up 10.5% to $62.7m = 8.9 cps for the half year = annualised 17.8 cps = PE of just 7.2
NAV $1.34 up from $1.28 and the $1.34 will be after CBRE deducting a theoretical discount on unsold units so the real NAV will be a bit higher.
I think its a satisfactory result and the share price is well underwritten by being less than the real net asset value.
Nice to see the dividend back to where it should be. OCA is a good hold as (part of a broadly and internationally diversified portfolio) the cheapest stock in this sector by a very long way.

[bottomfeeder]

Results on track. March results will be the telling one. Happy with my relatively overweight investment. Expecting the SP to reach $1.40 reasonably quickly.

[bull....]

Listening to bull about this stock is like listening to a real estate agent telling you how to fix your car. Lol Steady/Solid result by the way.

yes i see the market is totally uninspired by the result , just like me.

[Muse]

yes i see the market is totally uninspired by the result , just like me.

its a sea of red out there today, although a few minutes trading do not make a day. last trade @1.29 flat on last close - a lot better than the rest of the market.

[couta1]

yes i see the market is totally uninspired by the result , just like me. Come on bull your not that silly(I hope) the market was always going to be uninspired on Omicron Monday.

[bull....]

Come on bull your not that silly(I hope) the market was always going to be uninspired on Omicron Monday.

dis agree nzx down 1% hardly a massive fall , if result was good it would have gone up

[couta1]

dis agree nzx down 1% hardly a massive fall , if result was good it would have gone up I'm obviously giving you far too much credit, how many good results produce an upward sp movement on the day, maybe 50% of the time on average at a guess.

[YoungBull]

Is there a conference call today? Does anyone have the link?

[justakiwi]

https://event.webcasts.com/starthere.jsp?ei=1507877&tp_key=7208bb1c83 (https://www.google.com/url?q=https://event.webcasts.com/starthere.jsp?ei%3D1507877%26tp_key%3D7208bb1c83&sa=D&source=calendar&usd=2&usg=AOvVaw3NIwAFIk7LOyTIUBLwizOc)



Is there a conference call today? Does anyone have the link?

[Mudfish]

On opening, all retirement stocks low volume turnover. Appears not a massive 'run for the hills' situation. With downwards pressure globally, the very solid if not excellent, OCA report will take time to be recognised. The good divi screams 'on track' to me. I'm back to the old, 'happy holder' situation. Thumbs up.

[Beagle]

Interesting call. On one hand fair adjusted value of NAV as confirmed by the CFO is $1.42 and they seem to be managing construction cost pressures well and the outlook for development is sound. Also care suite prices have risen nicely.
On the other hand (with 50% of their business model still in basic care) its disappointing to note that DHB funding for care services and the rate of funding increase to cover the rapidly rising cost of providing same is falling further behind with funding now 4.8% behind the real cost and the company in formal dispute with the Govt regarding this.

One analyst noted that care cost increases in the last 3 years had outstripped the rising DMF revenue from care suites, (or words to that effect) which fairly closely emulated my concerns expressed previously in this thread about the rampant cost of care.

9% rate of increase in the cost of care is at a very significant variation to what Earl was saying before he departed (that care costs would broadly be in line with funding increases).
Anyone who follows me will know this is an area of real concern for me and remains so going forward.

On a positive note Brent suggested that increases in the costs of care suites as the business model behind these has become more entrenched would provide increased DMF revenue and investment in high level clinical care could be amortised over a much increased number of care suites going forward.

Inflation pressures in the construction sector appear well managed. eps accretion from the Hobsonville Waterford acquisition was questioned by one analyst who expressed scepticism that this should have showed up already...lockdown effects notwithstanding.

Disappointing to see the 113 care suites at Lady Allum in Milford being pushed back into FY23.

Conclusion: This is an OK result in a difficult period with extensive lockdown's. Others will be more positive than me but there is no debate that the cost of providing care is rising at an alarming rate and this is not a new issue. If anything, this problem appears to be getting worse rather than being ameliorated by the expanding number of units.

Fair value NAV is $1.42 I accept that figure. I note this is the only company in the sector to trade at a discount to asset value. Cheap, or cheap for a reason ?, you folks be the judge.

Disc: Modest position owned as part of a well diversified portfolio. My rating HOLD for long term gradual capital appreciation and modest yield.

[winner69]

Thanks for listening i in and reporting beagle

That was very naughty of that analyst asking about EPS accretion ..... very naughty indeed

Maybe they had done the sums and found that EPS (underlying earnings) hadn't gone up much at all ....a few percent and nowhere near the 22% that UE went up in $ terms

[Beagle]

Good to see one analyst calling them out.
I thought this was dirt cheap...now after seeing even higher care cost inflation I am not so sure ? I had expected the rate of care cost inflation to moderate this half, not accelerate. Care costs to be an ongoing strong handbrake on growth for the foreseeable future. Downgrade from Buy / Accumulate to HOLD is how I see it.

[winner69]

Good to see one analyst calling them out.
I thought this was dirt cheap...now after seeing even higher care cost inflation I am not so sure ? I had expected the rate of care cost inflation to moderate this half, not accelerate. Care costs to be an ongoing strong handbrake on growth for the foreseeable future. Downgrade from Buy / Accumulate to HOLD is how I see it.

There's quite a few things in the report that don't look 'right'

[Beagle]

9% increase in care costs is the worst of it and in my opinion is a very serious ongoing systemic issue despite The CEO and CFO trying to represent otherwise in the call.

[justakiwi]

Two things I was very interested to hear in the presentation, which others may not have picked up on.

Firstly, an exclusive partnership with Bay of Plenty (I think he said "Council" but could have been DHB?) - OCA contracted to provide a new high and complex needs aged care service model.

Secondly, mention was made at one point, about their focus/investment into care, DHB reviews pending, and a few other things - Brent made a comment that implied "this is going to present us with future opportunities, which we are perfectly positioned to take advantage of."

Both of these tell me that OCA fully understands what is coming. They understand the care aspect of aged care very well. They know that there is probably "change in the wind" and future government investment in care, will be significant. The government has no alternative. They must financially support all aged care providers, to deliver the care our elderly need. If OCA comes up with a brilliant service delivery model for the high and complex needs aged care contract, they will have their foot in the door and a head-start in terms of being prepared to take up future opportunities that will present themselves.

Sometimes its the little things hidden amongst the financials that tell the story. This is what sets OCA apart from the others, and this is why I hold.

[couta1]

9% increase in care costs is the worst of it and in my opinion is a very serious ongoing systemic issue despite The CEO and CFO trying to represent otherwise in the call. Quite a bit of this Covid specific though so probably 4-5% excluding Covid costs.

[winner69]

the LTI scheme they had in place in 2018 had a hurdle of Underlying Earnings being $86m in F2020 ---- LTI targets usually set to be 'achievable' eh.

last 12 months underlying earnings have been $55.7m - still way short of where they thought they would be 18 months

This seems to me an indication that the company itself has and is still struggling to keep up with it's own expectations.

They won't disclose what the current UE target is in the new LTI

Could be classed as a serial under performer (at least disappointing v expectations)

[winner69]

'Inflection' not in their vocabulary these days

The new word is 'premiumisation'

Appears numerous times in the preso

[couta1]

Two things I was very interested to hear in the presentation, which others may not have picked up on.

Firstly, an exclusive partnership with Bay of Plenty (I think he said "Council" but could have been DHB?) - OCA contracted to provide a new high and complex needs aged care service model.

Secondly, mention was made at one point, about their focus/investment into care, DHB reviews pending, and a few other things - Brent made a comment that implied "this is going to present us with future opportunities, which we are perfectly positioned to take advantage of."

Both of these tell me that OCA fully understands what is coming. They understand the care aspect of aged care very well. They know that there is probably "change in the wind" and future government investment in care, will be significant. The government has no choice. If OCA comes up with a brilliant service delivery model for the high and complex needs aged care contract, they will have their foot in the door and a head-start in terms of being prepared to take up future opportunities that will present themselves.

Sometimes its the little things hidden amongst the financials that tell the story. This is what sets OCA apart from the others, and this is why I hold. The Govt absolutely needs OCA, they are sunk without its model and what it provides, unfortunately they have been underfunding the sector for ever and a day which is why I believe they won't interfere too much in the sector, if they did then they would need to pour huge resources into it or find a home for a large number of vulnerable elderly.

[Waltzing]

Toss up then between this model and the new KPG model.....:scared:

It between KPG's Little Boxes made of Ticky Tacky and Premiumisation.....

Furnishing by IKEA....

https://www.youtube.com/watch?v=2_2lGkEU4Xs

[winner69]

Underlying Earnings per share in H1 were 3.9 cents v 3.6 in pcp

8% increase ....suppose many would say that is EPS accretive .... ha ha ha .....but the actual underlying earnings were up 22%

That analyst was right in asking what is going on.

Supposeone more thing we have to hope that Brett and his team deliver on

[JohnnyTheHorse]

Has that inflection point been reached yet?

[Beagle]

Quite a bit of this Covid specific though so probably 4-5% excluding Covid costs.

Can't recall if they mentioned 9% increase inclusive or exclusive of the $1m extra Covid costs but you can see for yourself here on page 19 http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/383708/360534.pdf that the total employee costs are up from $68.3m to $77m a 12.7% increase ! I presume the extra over and about the 9% they were talking about in the call is in regard to the new Waterford village at Hobsonville.

Even if you back out $1m from that $77m (76 / 68.3) = 11.3% increase and back out the 3.7% increase for new employee costs I presume pertain to Waterford that's still a 7.6% increase in employee costs which is consistent with previous years increases...BUT Earl told us the employee cost inflation would ameliorate going forward and go up broadly in line with MOH funding and quite clearly this is not the case.

In effect, while much is made of the increasing DMF revenue over time, the lions share of these gains are being eaten up by employees and up to this point shareholders are just getting the scraps left over. Whether that will change over time going forward remains to be seen but I see no sign yet of the rampant employee cost inflation abating which is a concern.

[Waltzing]

Reflection point then....:eek2:

[alokdhir]

Bullish price targets forecast:

Market Screener on OCA (https://www.marketscreener.com/quote/stock/OCEANIA-HEALTHCARE-LIMITE-103506268/consensus/)
Mean consensus BUY (4 analysts - 3 Buy, 1 Outperform)
Average target price 1,71 NZD
High Price Target 1,90 NZD
Spread / Highest target 47,3%

Forsyth Bar maintain their $1.90 'Outperform' price target from 8/9/21

So much for Guru Analysts ...all four were bullish ...Forbars should be buying now TP 1.91 in few years maybe if patients take care of themselves without staff ..lol

[winner69]

Has that inflection point been reached yet?

Not a thing any more mate ..... probably was only a pipe dream anyway ..... if such a thing ever existed ..........blame Earl for that

[justakiwi]

Seriously. Why do you people hold OCA if you are so down on them all the time? You are literally never happy. If you don't believe in the company, just get out (of OCA and this discussion), and give the rest of us some peace and quiet.

[dabsman]

We are like drug addicts. When we are using we are feeling great. When we run out all we are looking for is another hit

[Rawz]

Yeah this is a stock we love to hate. Its not even about getting returns for me anymore lol

[Mudfish]

Underlying Earnings per share in H1 were 3.9 cents v 3.6 in pcp

8% increase ....suppose many would say that is EPS accretive .... ha ha ha .....but the actual underlying earnings were up 22%

That analyst was right in asking what is going on.

Supposeone more thing we have to hope that Brett and his team deliver on

I've been thinking about this while swimming some lengths. Approximately 80m new shares entered the system 24/3 to raise 100m$. That means this cash has only been in the system for 6 months. I think it would take a little more time than 6 months for the new cash to start making cash. Surely acquisitions require settling in time for the new money to start generating income. Therefore, eps increases may not show massive increases at this point but hopefully come through in the future. I might be wrong of course, will dig deeper.

[Beagle]

What is the value in the forum if not to debate the pro's and con's ?

[justakiwi]

That's not what you do Beagle, and you know it. At least dabsman and rawz are honest about it.


What is the value in the forum if not to debate the pro's and con's ?

[Bev73]

Exactly. I Greatly appreciate the present discussion.
What is the value in the forum if not to debate the pro's and con's ?

[winner69]

I've been thinking about this while swimming some lengths. Approximately 80m new shares entered the system 24/3 to raise 100m$. That means this cash has only been in the system for 6 months. I think it would take a little more time than 6 months for the new cash to start making cash. Surely acquisitions require settling in time for the new money to start generating income. Therefore, eps increases may not show massive increases at this point but hopefully come through in the future. I might be wrong of course, will dig deeper.

It’s not clear or patently obvious how much if anything the acquisitions contributed to the first half’s profit ….anybody know?

[Beagle]

That's not what you do Beagle, and you know it. At least dabsman and rawz are honest about it.

Didn't you start your own facebook group for relentless positivity ? If you can't handle a robust discussion about the pro's and con's maybe you'd be happier on there ?

[allfromacell]

It’s not clear or patently obvious how much if anything the acquisitions contributed to the first half’s profit ….anybody know?

I recall Brent mentioned on the call that Aucklands lengthy lockdown contributed to its muted impact on the bottom line.

I found the results pleasing but accept the rising costs are concern but I think the SP more than overstates the issue.

Happy holder.

[850man]

What is the value in the forum if not to debate the pro's and con's ?

Agreed. Need to hear the bad news too and direct generally works best. It's not all roses out there and companies often gloss over the non-rosy in their reports

[Beagle]

It’s not clear or patently obvious how much if anything the acquisitions contributed to the first half’s profit ….anybody know?

They said it was immaterial...not sure if that was on an adjusted eps basis or not. I would hope it was. Promised eps accretion in the second half.
You have previously expressed cynicism about eps accretive talk and suggested there is no accountability, not just referring to OCA.
I think you are right to have a cautious view.

[allfromacell]

It’s not clear or patently obvious how much if anything the acquisitions contributed to the first half’s profit ….anybody know?


They said it was immaterial...not sure if that was on an adjusted eps basis or not. I would hope it was. Promised eps accretion in the second half.
You have previously expressed cynicism about eps accretive talk and suggested there is no accountability, not just referring to OCA.
I think you are right to have a cautious view.

I think Auckland going through one of the longest lockdowns in history is a pretty fair excuse.

[Beagle]

I think Auckland going through one of the longest lockdowns in history is a pretty fair excuse.

Yeah...I guess it is. Fair to say its been a "brutal" process. Market seems okay with the result so I guess that's the main thing...sure wouldn't want it going any lower as its already at a ~ 10% discount to fair adjusted NAV of $1.42

[alokdhir]

Yeah...I guess it is. Fair to say its been a "brutal" process. Market seems okay with the result so I guess that's the main thing...sure wouldn't want it going any lower as its already at a ~ 10% discount to fair adjusted NAV of $1.42

Thats most likely the enhanced divi of 2.1 Cents which is keeping it buoyant today ...goes ex soon ...maybe just 3 more trading days ...should take it to 1.33-35

[hyinvest]

Decrease of 29.6% in operating cash flow (p. 22)

[winner69]

Result just confirms my long time theory in that’s there no money to be made in actually caring for people and running villages on a day to day basis is expensive. ……all profits come from building and selling things.

Seems ‘no money to be made’ is actually losing heaps.

Must have it all wrong though as they say they made $16,291 profit per care bed / suite in the six months (better not tell the government that bit)

[dompf]

Agreed. Need to hear the bad news too and direct generally works best. It's not all roses out there and companies often gloss over the non-rosy in their reports

its good that this came out Monday for the market to find it’s feet and feel with financials.

whole market is in an Omicron funk, pretty low trading day for a financials release (at least so far) will be interested to see how the big players rerate OCA and for operators in this sector with all the goings on whole sector is being a little shunned at the moment.

great to see decent divi back, that softens my unhappy Auckland blues.

[DonkeyKong]

its good that this came out Monday for the market to find it’s feet and feel with financials.

whole market is in an Omicron funk, pretty low trading day for a financials release (at least so far) will be interested to see how the big players rerate OCA and for operators in this sector with all the goings on whole sector is being a little shunned at the moment.

great to see decent divi back, that softens my unhappy Auckland blues.


Haven’t had a chance to read fully or listen to their presentation. Did they mention why they are increasing the dividend?

At first glance it seems to counter the point of raising the 100mil earlier in the year.

[Beagle]

Agreed. Need to hear the bad news too and direct generally works best. It's not all roses out there and companies often gloss over the non-rosy in their reports Thanks and I agree that seems to be a widespread practice with company reporting, hence the value of a robust debate on here.

DK - dividend increase appears to be a return to normal practice of paying out 50-60% of underlying profit, (which is the expected range they stated as their dividend policy when they listed), with this one being the mid point at 55%. I am not sure why they were so miserable with last years interim dividend at just 1.3 cps. I have taken shares in lieu of dividend for quite some time now but am underwater with the last two which were issued at $1.53 and $1.404 respectively. I'd be super disappointed if in due course I was underwater this time as well.

[Bjauck]

Result just confirms my long time theory in that’s there no money to be made in actually caring for people and running villages on a day to day basis is expensive. ……all profits come from building and selling things.

Seems ‘no money to be made’ is actually losing heaps.

Must have it all wrong though as they say they made $16,291 profit per care bed / suite in the six months (better not tell the government that bit)

It has seemed that it is often investing in real estate, especially if leveraged, that brings the best after tax return in NZ…

Does that $16,291 in profit per care bed include both premium and standard beds?

[RupertBear]

Unfortunately I saw your snarky post before I logged in so I will respond. You know you're on permanent ignore but regrettably the filter doesn't filter the pollution unless I am logged in. Some of us have serious money invested, not chump change like some others do. If you can't handle a robust adult discussion about the pro's and con's (and its quite obvious you can't from your repeated attempts to moderate the content of this thread) and just want a forum where all members do is pump each others tyres with just the positive stuff then I suggest you go back and stick too your little fakebook group. I do realise that you are one of the beneficiaries of the rampant employee cost inflation we are seeing with caregivers wages...I'll leave it to others to judge if they think your comments are not sullied by this fact...if you must feel the need to keep "contributing" on here. I'll try and log in before looking next time so the filter works immediately :eek2:

Ouch :mellow: Thats unnecessarily harsh Beagle. Not all of us are as rich as you claim to be and what is “chump change” to you might actually be someones hard earned life savings. Some compassion and understanding of other peoples situation wouldn't go amiss in these tough times :)

[percy]

Unfortunately I saw your snarky post before I logged in so I will respond. You know you're on permanent ignore but regrettably the filter doesn't filter the pollution unless I am logged in. Some of us have serious money invested, not chump change like some others do. If you can't handle a robust adult discussion about the pro's and con's (and its quite obvious you can't from your repeated attempts to moderate the content of this thread) and just want a forum where all members do is pump each others tyres with just the positive stuff then I suggest you go back and stick too your little fakebook group. I do realise that you are one of the beneficiaries of the rampant employee cost inflation we are seeing with caregivers wages...I'll leave it to others to judge if they think your comments are not sullied by this fact...if you must feel the need to keep "contributing" on here. I'll try and log in before looking next time so the filter works immediately :eek2:

Disgraceful....................................... .......

[Beagle]

Its in response to a number of personal attacks against me and repeated attempts by the poster in question to moderate out anything they see as negative.

[iceman]

Its in response to a number of personal attacks against me and repeated attempts by the poster in question to moderate out anything they see as negative.

That is true Beagle and I don't agree with it. But I think many of us think you have both overstepped the mark with this discussion.

[Beagle]

That is true Beagle and I don't agree with it. But I think many of us think you have both overstepped the mark with this discussion.

You know I respect your opinion and Percy's too so I must have stuffed up. I've had a really, really crappy day and had a gutsful of some things already. I contribute a heck of a lot on here. Yes that was probably a bit harsh. I am sorry but like everyone else on here I am human and sometimes err a bit and not every post is going to be "A" grade. It is what it is but I'll go back and edit and reduce the tone down.

[iceman]

I've had a really, really crappy day. I contribute a heck of a lot on here. Yes that was probably a bit harsh. I am sorry not every post is perfect.

I agree you contribute a lot on here and behind the scenes, appreciated by many including yours truly. You should be happy today, you're about to go into a new system with a red light

[Greekwatchdog]

I've had a really, really crappy day and had a gutsful of that already. I contribute a heck of a lot on here. Yes that was probably a bit harsh. I am sorry but like everyone else on here I am human and sometimes err a bit and not every post is going to be "A" grade. It is what it is but I'll go back and edit and reduce the tone down.

Hey Pooch, Your frustration needs to ne directed at Brent and the board. You highlight important cost on business that continues to go against shareholders. I have no issue with the level of pay as they deserve it. However I have a problem with these costs not being passed on. You want all these services you have to pay for it. Take it easy in Akl.

[Beagle]

Ouch :mellow: Thats unnecessarily harsh Beagle. Not all of us are as rich as you claim to be and what is “chump change” to you might actually be someones hard earned life savings. Some compassion and understanding of other peoples situation wouldn't go amiss in these tough times :)

Yeah fair comment. I erred and have gone back and edited that post.

[Beagle]

Hey Pooch, Your frustration needs to ne directed at Brent and the board. You highlight important cost on business that continues to go against shareholders. I have no issue with the level of pay as they deserve it. However I have a problem with these costs not being passed on. You want all these services you have to pay for it. Take it easy in Akl.

Thanks mate. Not my finest hour with that post....but its human nature to get angry sometimes. I agree with you, its really frustrating to see what ostensibly amounts to all the gains being eaten up by employees. The way the business model is at present I would say the shares are only fair value, not good value and the discount to adjusted NAV of $1.42 the market is according to this stock is probably warranted because of a multi year systemic problem in this area.

Its tough to see something you thought was good value become just fair value...but the old Wall Street Gordon Gekko saying of "Never get emotional about a stock" seems an appropriate one to recall at this time. I'm also a bit disappointed in myself adding a bit to this holding the other day, against my more reasoned judgement of the overall macro situation. I fell into the "it must be good value at this heavily discounted price"...line of thinking.

[Baa_Baa]

Really happy with the overall headline results and the divi returning, a flat close today when the sector shed a few more is probably the best outcome a short termer could hope for when the rest of the sector was down.

Lots to like in the results and lots more good stuff to look forward to. Understandable that those who have an intense focus on the share price are a bit uppity, after all, we're still plumbing the 400 EMA which is pretty rough.

Hopefully the market doesn't get too excited or exuberant before the Divi strike is set, don't really want a big lift in the VWAP, that can come later.

Be nice people, we'll still be discussing this years from now, hopefully a heck of a lot richer.

[percy]

Thanks mate. Not my finest hour with that post....but its human nature to get angry sometimes. I agree with you, its really frustrating to see what ostensibly amounts to all the gains being eaten up by employees.

Really pleasing to see you seeing the errors of your ways.
Good on you.

[davflaws]

You have withdrawn with dignity and grace. Well done. You contribute a lot to these forums, and generally do so with courtesy and generosity.


Thanks mate. Not my finest hour with that post....but its human nature to get angry sometimes. I agree with you, its really frustrating to see what ostensibly amounts to all the gains being eaten up by employees.

[Greekwatchdog]

Thanks mate. Not my finest hour with that post....but its human nature to get angry sometimes. I agree with you, its really frustrating to see what ostensibly amounts to all the gains being eaten up by employees.

Yeah you telling a Greek who has a very short fuse and shows it and says it.. There is a lot of emotion swelling up and I think sometime out of the big smoke if possible might be good for us all this holiday period.

[Gerald]

There's quite a few things in the report that don't look 'right'


Must be mr new flash investment banker doing some witchcraft number jiggling.

[Beagle]

Yeah you telling a Greek who has a very short fuse and shows it and says it.. There is a lot of emotion swelling up and I think sometime out of the big smoke if possible might be good for us all this holiday period.

Absolutely mate. Its been a really long and truly brutal lockdown in Auckland and I think in general the way this Covid pandemic is dragging on and on, its really tough on everyone. Going into a red light system for Auckland feels like the lockdown hasn't really ended. I think the prison border walls go back up on 17 January so we're only really allowed out on parole for a month. I can't help wondering how many won't come back to Auckland ? Many have had enough of confinement and I am one of them.

[Greekwatchdog]

Absolutely mate. Its been a really long and truly brutal lockdown in Auckland and I think in general the way this Covid pandemic is dragging on and on, its really tough on everyone. Going into a red light system for Auckland feels like the lockdown hasn't really ended. I think the prison border walls go back up on 17 January so we're only really allowed out on parole for a month. I can't help wondering how many won't come back to Auckland ? Many have had enough of confinement and I am one of them.

All this because the Govt. and MoH failed to protect all of us at MIQ. Depends if they have job but maybe we just need to learn to live with this. Its not going anywhere.

We just have to adapt sort of like OCA management. Adapt for shareholders whilst looking after staff and residents. As Meatloaf would belt "2 out of 3 ain't bad" In this case the 1 us shareholders are frustrated with some of their approach to cost management.

[RupertBear]

You know I respect your opinion and Percy's too so I must have stuffed up. I've had a really, really crappy day and had a gutsful of some things already. I contribute a heck of a lot on here. Yes that was probably a bit harsh. I am sorry but like everyone else on here I am human and sometimes err a bit and not every post is going to be "A" grade. It is what it is but I'll go back and edit and reduce the tone down.

Good on you Beagle :)

[Monarch]

The employee costs are very concerning, but not all that surprising. The labour market has been incredibly tight of late and we are above sustainable economic output, with this in mind the acceleration of wage costs makes sense. Not to mention the nurses wage escalation etc etc. Lets not forget the wage growth in context of inflation, which has been quite high of late, I would be interested to know if it is accelerating in REAL terms. I reckon the leadership are definitely aware and self conscious of the fact that EPS growth was muted, I couldn't find this HIGHLY RELEVANT METRIC anywhere in the report.

The wage issue can't continue forever. Sooner or later, the wages will reach a point where they are attractive enough to steal workers from other sectors and rising labour supply will calm it down. If that doesn't happen for whatever reason, I'd expect a pivot in strategy from management, which OCA's debt light balance sheet should facilitate. We are at peak economic cycle at this point so things should only calm down from here.

That being said, I imagine once the traffic light system starts and case numbers rapidly elevate, we will start seeing the odd case crop up in the villages. That will be the time to buy. This stock is a retail investor favourite and Sharesies make up a non-trivial part of the register, when the wind picks up it is the weakest leaves that fall first.

[Ggcc]

Thanks mate. Not my finest hour with that post....but its human nature to get angry sometimes. I agree with you, its really frustrating to see what ostensibly amounts to all the gains being eaten up by employees.

Remember they are taking a dispute against the government for what I believe a 4.8% shortfall from the government. They said something like certain costs increasing above 1.5% in care should be able to be paid by the government. The increasing cost outside of OCA control were what was being discussed. It will be interesting to see what happens from here, but going forward the board was optimistic about % returns exceeding increased % labour costs. Plus 1 million towards covid costs

[Beagle]

Radius healthcare also reported today and provides a useful point of comparison. Financials' are here http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/RAD/383705/360515.pdf

I note they are also struggling with increased labour costs which are up 10% on the previous corresponding period (pcp) but I also note that labour costs as a percentage of gross revenue are 60%. Stripping out property revaluations OCA's total labour costs as a percentage of gross revenue (including DMF fees) are 67.6% up from 65% in the pcp so significantly more that Radius.

Excluding capital gains from resale of property here is the history of total employee costs as a percentage of gross revenue (including DMF revenue) since OCA listed:-
2017 60%, same level of efficiency Radius Healthcare currently have)
2018 62.3%
2019 64%
2020 66%
2021 65.9%
1H 2022 67.6%

Despite all the talk about transitioning to a new business model generating enhanced returns there has actually been a material decline in the efficiency of the business model, (this is what one analyst was getting at in the call today), since they listed in terms of what percentage of gross revenue flows through to shareholders. That said the change in the business model will generate higher resale profits in the future so overall the gradual business transformation is a good thing but like almost all good things they take a LOT of time.

Sure, some of the increase can be attributed to Covid specific matters, no argument there but this trend is concerning and started well before Covid and represents systemic challenges of our labour market and its flow through effect on shareholders returns especially in light of what appears to be a systemic issue with Govt underfunding the true cost of care.

Will the trend revert to the the low 60's percentage range when labour market challenges and Covid cost pressures ameliorate or do we face ongoing systemic challenges due to the severe staff shortages in the healthcare sector that will continue to pressure shareholders returns going forward ? That's the $64,000 question.

My opinion is these headwinds do not look likely to materially abate anytime in the foreseeable future so despite its apparent cheap price (as OCA is more affected by these challenges than any of the other main listed players) I see it as a hold at the current price and not the bargain it appears to be. I think the analysts are a fairly optimistic with their average $1.71 target price.

That said, I think its clear the development numbers in FY23 are going to be strong with 113 care suites at Lady Allum deferred into FY23 so we should see underlying eps up nicely next year. Whether that's repeatable in FY24 and beyond is very hard to say but I certainly don't see increasing DMF revenue as a panacea for all the challenges OCA faces and they will need to keep up a strong development pipeline.
Increased resales should also be a very good positive in FY23. My hope is that Maverick is right and that increased level's of new independent living units being developed over the next few years (which is where the real money is) will finally give shareholders some real joy.

It would be nice to see finally see this crack $2 but I think this could be a few years away. I guess the unimputed dividend yielding 3.25% is one of the best in the sector so that's something to help us as we travel this long journey to hopefully getting great returns in the future.

House price declines in 2022 could be the next challenge. Lots of pro's and con's.

[dreamcatcher]

Expecting share-market bounce with omicron border restrictions hopefully reversed shortly.

"Covid symptoms linked to the new omicron variant have been described as "extremely mild" by the South African doctor who first raised the alarm over the new strain"

https://www.cnbc.com/2021/11/29/omicron-covid-variant-symptoms-heres-what-we-know-so-far.html

One headwind less.............

[allfromacell]

Expecting share-market bounce with omicron border restrictions hopefully reversed shortly.

"Covid symptoms linked to the new omicron variant have been described as "extremely mild" by the South African doctor who first raised the alarm over the new strain"

https://www.cnbc.com/2021/11/29/omicron-covid-variant-symptoms-heres-what-we-know-so-far.html

One headwind less.............

Ealry reports it's significantly more contagious than Delta with much milder symptoms, if this is accurate it would be fantastic news for humanity and OCA might even give us an Xmas rally (hopefully after the DRP).

Nothing but speculation for now, let's see what the data shows. It's still very much a concern especially if symptoms are comparable and reinfections common.

It was interesting to hear OCA are leveraging saliva based testing, I haven't seen that technology used very much yet in NZ, it's safe to say covid is taken very seriously and I'm sure very much appreciated by residents and family.

[dreamcatcher]

Ealry reports it's significantly more contagious than Delta with much milder symptoms, if this is accurate it would be fantastic news for humanity and OCA might even give us an Xmas rally (hopefully after the DRP).

Nothing but speculation for now, let's see what the data shows.

True highly transmissible but in a good way as symptoms appear mild and correct only speculation until tests complete. Possibly vaccinated people OK
Unfortunately South Africa has a very low 25% Covid vaccination rate

https://www.telegraph.co.uk/global-health/science-and-disease/south-african-doctor-raised-alarm-omicron-variant-says-symptoms/

[winner69]

Hey Beagle - that RAD you mentioned is trading at just under 2 times Book Value - OCA at 1 times

On same multiple OCA be priced at $2.50 plus :eek2:….might cheer you up :) ….or might make you grumpier :(

[Greekwatchdog]

For Bars update this morning..

1H22 Result; Costs Overshadow Strong Trends


OUTPERFORM
Oceania Healthcare (OCA) reported a solid 1H22 result, slightly ahead of our expectations on underlying earnings and
EBITDA but below our expectations on annuity EBITDA. There were some clear positives at the revenue line with strong
growth in DMF and robust development margins, both driven by strong underlying trends within OCA's pioneering care
suite model. However, cost growth outpaced revenue growth within the care segment and on an overall basis driven by
increased overhead costs and the well flagged care cost inflation, as has been experienced by both Arvida (ARV) and Ryman
Healthcare (RYM). OCA is currently valued at one times last reported net tangible assets (NTA) and FY23 P/E of 12x; we
continue to see it as one of the most attractive risk/reward propositions across the NZ market.
What's changed?
Care suite model; from additional extra to a must have
OCA has pioneered the use of care suites in New Zealand, something we believe is becoming increasingly necessary to run a
profitable aged care business in New Zealand. Care suites deliver on two fronts; firstly, it increases the cash recovery of capex
materially, we estimate by 15–20% for an integrated operator. Secondly and increasingly importantly, it gives OCA an ability to adjust
pricing to offset what appears to be very strong cost inflation within aged care staff costs. We forecast OCA's care EBITDA to grow
by a CAGR of >20% over the next three years, helped by the maturity of the care suite model.
Inherent lack of productivity gains leaves care earnings exposed to the full force of inflationary pressures
There is an inherent lack of ability to improve productivity within the provision of care. This leaves care operators exposed to the full
force of wage inflation with increasing revenues the only lever to offset this, revenues that are to a large degree dependent on
government funding. We estimate that OCA's expenses per care bed is increasing by 7% per annum currently, something it is able to
somewhat offset due to the transition to care suites. However, at some stage we believe funding for care will need to increase.
Valuation and our view


We view OCA as one of the best risk rewards in the NZ market currently. It has sector leading cash recovery of capex, its care suite
focussed model provides some insulation against potentially stalling or falling house prices while it still provides strong growth in
underlying earnings as its villages mature. It is currently valued at 1x last reported NTA, 12x FY23 P/E and 20x FY23 EV/annuity
EBITDA — all of which are at an approximately 50% discount to its larger peer, RYM.

[jimdog31]

For Bars update this morning..

1H22 Result; Costs Overshadow Strong Trends


OUTPERFORM
Oceania Healthcare (OCA) reported a solid 1H22 result, slightly ahead of our expectations on underlying earnings and
EBITDA but below our expectations on annuity EBITDA. There were some clear positives at the revenue line with strong
growth in DMF and robust development margins, both driven by strong underlying trends within OCA's pioneering care
suite model. However, cost growth outpaced revenue growth within the care segment and on an overall basis driven by
increased overhead costs and the well flagged care cost inflation, as has been experienced by both Arvida (ARV) and Ryman
Healthcare (RYM). OCA is currently valued at one times last reported net tangible assets (NTA) and FY23 P/E of 12x; we
continue to see it as one of the most attractive risk/reward propositions across the NZ market.
What's changed?
Care suite model; from additional extra to a must have
OCA has pioneered the use of care suites in New Zealand, something we believe is becoming increasingly necessary to run a
profitable aged care business in New Zealand. Care suites deliver on two fronts; firstly, it increases the cash recovery of capex
materially, we estimate by 15–20% for an integrated operator. Secondly and increasingly importantly, it gives OCA an ability to adjust
pricing to offset what appears to be very strong cost inflation within aged care staff costs. We forecast OCA's care EBITDA to grow
by a CAGR of >20% over the next three years, helped by the maturity of the care suite model.
Inherent lack of productivity gains leaves care earnings exposed to the full force of inflationary pressures
There is an inherent lack of ability to improve productivity within the provision of care. This leaves care operators exposed to the full
force of wage inflation with increasing revenues the only lever to offset this, revenues that are to a large degree dependent on
government funding. We estimate that OCA's expenses per care bed is increasing by 7% per annum currently, something it is able to
somewhat offset due to the transition to care suites. However, at some stage we believe funding for care will need to increase.
Valuation and our view


We view OCA as one of the best risk rewards in the NZ market currently. It has sector leading cash recovery of capex, its care suite
focussed model provides some insulation against potentially stalling or falling house prices while it still provides strong growth in
underlying earnings as its villages mature. It is currently valued at 1x last reported NTA, 12x FY23 P/E and 20x FY23 EV/annuity
EBITDA — all of which are at an approximately 50% discount to its larger peer, RYM.

we continue to see it as one of the most attractive risk/reward propositions across the NZ market.

[winner69]

we continue to see it as one of the most attractive risk/reward propositions across the NZ market.



Analysts love OCA, insiders love OCA, majority on ST love OCA ……..seen as so cheap it’s not funny etc etc

Question then : why does the market per se (instos and fund managers) not like OCA? Lack of their support continues to suppress the share price.

Brett has to work that out and fix it.

[jimdog31]

Analysts love OCA, insiders love OCA, majority on ST love OCA ……..seen as so cheap it’s not funny etc etc

Question then : why does the market per se (instos and fund managers) not like OCA? Lack of their support continues to suppress the share price.

Brett has to work that out and fix it.

I think there has been a certain allocation towards the retirement sector, and the other options have been more appealing. SUM, RYM, ARV

it'll find its way to OCA eventually.

Every dog has its day.

[psychic]

Metlife was always consided a dog too right? In the end, buying MET at NTA (and less) was a winner regardless of the market love.
Patience...

[couta1]

Metlife was always consided a dog too right? In the end, buying MET at NTA (and less) was a winner regardless of the market love.
Patience... Yep and I can tell you that Metlife is going great guns nowadays.

[couta1]

we continue to see it as one of the most attractive risk/reward propositions across the NZ market.

For sure, show me a better buy on the NZX.

[fiasco]

Was impressed on the call yesterday. I know there's a few things for the Exec to continue to work on which is great, looking forward to them raising care prices whilst reducing opex costs. I'm glad they value their people and are paying their employees above public care, we all know with COVID there is a massive talent shortage!

Happy to continue leaving this holding as is, and come back in a few years to a very different SP, just as I did with SUM!

[Shareguy]

Craigs not impressed. Neutral TP $1.40

Guidance withdrawn, outlook mixed. At the time of the $100m capital raise in March OCA issued guidance that the two acquisitions being funded by the raise would be "low to mid single digit EPS accretive" to then consensus estimates for FY22e uNPAT. OCA did not re-iterate that guidance today. In the absence of firm guidance, growing cost inflation headwinds, some deferral of new build completions due to recent Covid restrictions, and seasonality, suggests to us that trading will remain subdued in 2H22. We have upgraded our headline uNPAT estimate from $51m to $54m to reflect that OCA is now backing out depreciation on Care Suites to calculate uNPAT

[winner69]

Craigs not impressed. Neutral TP $1.40

Guidance withdrawn, outlook mixed. At the time of the $100m capital raise in March OCA issued guidance that the two acquisitions being funded by the raise would be "low to mid single digit EPS accretive" to then consensus estimates for FY22e uNPAT. OCA did not re-iterate that guidance today. In the absence of firm guidance, growing cost inflation headwinds, some deferral of new build completions due to recent Covid restrictions, and seasonality, suggests to us that trading will remain subdued in 2H22. We have upgraded our headline uNPAT estimate from $51m to $54m to reflect that OCA is now backing out depreciation on Care Suites to calculate uNPAT



That's one pretty damning report for Craigs to put out....obviously not fooled by the 'positivity' of the announcements.

Echos what I was saying yesterday

And I did note that OCA had changed how they had backed out some depreciation numbers.

On the old basis H! Underlying NPAT would have been $22.7m instead of the reported $27.5m

I hate it when companies keep changing how they report things .... makes it near impossible to track things in a consistent manner .... suppose thats why they do these tricky things

I think Maverick will be pulling his hair out recasting all the numbers in his spreadsheets to reflect the new way of doing things

[winner69]

Craig's man says - Guidance withdrawn, outlook mixed. At the time of the $100m capital raise in March OCA issued guidance that the two acquisitions being funded by the raise would be "low to mid single digit EPS accretive" to then consensus estimates for FY22e uNPAT. OCA did not re-iterate that guidance today.

Cardinal sin in the capital markets is making 'promises' when you've got your hand out for cash and then a short time later going back on your word ..... the money men have long memories

[bull....]

Craigs not impressed. Neutral TP $1.40

Guidance withdrawn, outlook mixed. At the time of the $100m capital raise in March OCA issued guidance that the two acquisitions being funded by the raise would be "low to mid single digit EPS accretive" to then consensus estimates for FY22e uNPAT. OCA did not re-iterate that guidance today. In the absence of firm guidance, growing cost inflation headwinds, some deferral of new build completions due to recent Covid restrictions, and seasonality, suggests to us that trading will remain subdued in 2H22. We have upgraded our headline uNPAT estimate from $51m to $54m to reflect that OCA is now backing out depreciation on Care Suites to calculate uNPAT

see the analysts are coming around to bull.s long held view of nothing spectacular here

[couta1]

see the analysts are coming around to bull.s long held view of nothing spectacular here Craigs probably have a lot of clients who they want to buy on behalf of id say.

[dompf]

think you meant "Analyst"

Someone just bought the block @130

[winner69]

Reported H122 NPAT was $12.1m higher than pcp

Some $8,5m of that came from an item 'Gain on purchase of business assets'

It was nice that CBRE changed their assumptions shortly after the acquisition and OCA were able to book what they purchased at a higher price --- instant gains, cool eh

But the point is that without that Reported NPAT only increased by $3.6m or 14% ....and Beagles favourite metric Comprehensive Income would have been LESS

No worries .... just numbers and the story remains the same so all hunky dory

[Beagle]

That's one pretty damning report for Craigs to put out....obviously not fooled by the 'positivity' of the announcements.

Echos what I was saying yesterday

And I did note that OCA had changed how they had backed out some depreciation numbers.

On the old basis H! Underlying NPAT would have been $22.7m instead of the reported $27.5m

I hate it when companies keep changing how they report things .... makes it near impossible to track things in a cosisten manner .... suppose thats why they do these tricky things

Hmmm. I'm a bit time poor today mate but would you mind working out what that means on an underlying per share basis taking into account the extra shares issued earlier this year ? On a like for like accounting basis it looks like the underlying eps has gone down ? Surely not ? Maybe this is why they were at pains not to mention eps anywhere in their presentation ?

[winner69]

You keep posting like OCA is going out of business Lol.





Ha ha - Oceania not going broke ..... lose a few million (sometime more) each reporting period in looking after people and running villages but as long as they keep on building and selling things they won't go broke

[winner69]

Share price doing well so far today .... that's good

Might reach Craig's target this week:t_up:

[bottomfeeder]

Oceania bonds at 3.3%, last sale at 3.62%. Sure sign they issued those at the right time. Fixed for 5 years. The future looks good. Will be at $1.60 after full year results are out.

[bottomfeeder]

Oceania bonds at 3.3%, last sale at 3.62%. Sure sign they issued those at the right time. Fixed for 5 years. The future looks good. Will be at $1.60 after full year results are out.

Too much? At least $1.58.

[winner69]

Good news - the adjusted underlying OCA share price just hit $1.52

[BlackPeter]

Good news - the adjusted underlying OCA share price just hit $1.52

How do you calculate that ? Ah yes, and is this important measure gross or net of diluted depreciation?

[couta1]

Resistance has been broken! And that ain't no bull.

[winner69]

Resistance has been broken!

....and becomes new suport

We will never see sub 130 again .... never

[Waltzing]

Never? :t_up:

[davflaws]

....and becomes new suport

We will never see sub 130 again .... never

What never? - Well, hardly ever!

[Ferg]

We will never see sub 130 again .... never

Didn't you say that about 150?
:p

[bull....]

Resistance has been broken!

yep and i have been rambling on here for ages the range bottom was 1.30 so anyone who brought just under it may have a very low risk trade on now. i wont go as far as to say long term buy lol

[Waltzing]

well coincidence it never drop to 1.25 chart support an earning report saved it..Dropped below 1.20 and it was a sell.

[alokdhir]

....and becomes new suport

We will never see sub 130 again .... never

We will check your prediction this Friday ...after it goes ex divi and more news of Omicron is known

[couta1]

We will check your prediction this Friday ...after it goes ex divi and more news of Omicron is known I've got Optimus Prime on speed dial to deal with that decepticon scumbag Omicron if need be.

[Poolboy]

that decepticon scumbag Omicron if need be.

Omicron... Omicron, that name rings a bell. I think I used to buy computers off them back in the 80's.

[cyclist]

Omicron... Omicron, that name rings a bell. I think I used to buy computers off them back in the 80's.

I know of them as a test equipment manufacturer for the power industry. Doesn't sound that scary 😀

[Snoopy]

There's little value in providing basic care services funded by the Govt Snoopy. Nobody is building new supply of basic care units which typically are only circa 15 sq metes.
I am going off memory here but when OCA listed they were about 70 / 30 basic govt funded care v premium care units.
Over time as they complete their redevelopment program they are moving to 30 / 70 basic v premium care units.
This year marks the point of inflection as noted in their annual report where its about 50/50.
Over the years ahead the sale of occupation right agreement units both apartments and care suites will generate a much higher return on invested capital than the Govt funded basic units would.
A good long read of the investor presentation and annual report would dramatically lift your understanding of their business model.
Investor presentation http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/356710/326865.pdf
Annual Report...some good heartwarming stories in there about how well residents were cared for which got me thinking its not all about just the numbers...bet you never thought a greedy bean counting dog would say that ;) http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/356711/326868.pdf


A post (above) from July 2020




Excluding capital gains from resale of property here is the history of total employee costs as a percentage of gross revenue (including DMF revenue) since OCA listed:-
2017 60%, same level of efficiency Radius Healthcare currently have)
2018 62.3%
2019 64%
2020 66%
2021 65.9%
1H 2022 67.6%

Despite all the talk about transitioning to a new business model generating enhanced returns there has actually been a material decline in the efficiency of the business model, (this is what one analyst was getting at in the call today), since they listed in terms of what percentage of gross revenue flows through to shareholders. That said the change in the business model will generate higher resale profits in the future so overall the gradual business transformation is a good thing but like almost all good things they take a LOT of time.

Sure, some of the increase can be attributed to Covid specific matters, no argument there but this trend is concerning and started well before Covid and represents systemic challenges of our labour market and its flow through effect on shareholders returns especially in light of what appears to be a systemic issue with Govt underfunding the true cost of care.

Will the trend revert to the the low 60's percentage range when labour market challenges and Covid cost pressures ameliorate or do we face ongoing systemic challenges due to the severe staff shortages in the healthcare sector that will continue to pressure shareholders returns going forward ? That's the $64,000 question.

My opinion is these headwinds do not look likely to materially abate anytime in the foreseeable future so despite its apparent cheap price (as OCA is more affected by these challenges than any of the other main listed players) I see it as a hold at the current price and not the bargain it appears to be.

I think the analysts are a fairly optimistic with their average $1.71 target price.

That said, I think its clear the development numbers in FY23 are going to be strong with 113 care suites at Lady Allum deferred into FY23 so we should see underlying eps up nicely next year. Whether that's repeatable in FY24 and beyond is very hard to say but I certainly don't see increasing DMF revenue as a panacea for all the challenges OCA faces and they will need to keep up a strong development pipeline.
Increased resales should also be a very good positive in FY23. My hope is that Maverick is right and that increased level's of new independent living units being developed over the next few years (which is where the real money is) will finally give shareholders some real joy.


I appreciate that people (or dogs even) are allowed to revise their opinion as market conditions evolve. And I don't disagree with Beagle's latest assessment (above). But one thing that is puzzling me is the joining of the dots between the July 2020 position and today. The elderly homeowner, on the cusp of moving into care, is on paper up to 40% better off today if they convert their house to cash. So, on paper, there should have been plenty of money to move from their house to a 'premium' care unit which OCA are specialising in. And IIRC I was told that though there are rich all over the country, there are so many multi-millionaire home owners in Auckland, that the construction of entire 'premium' villages is viable, and OCA are the ones best positioned to benefit.

So what happened?

SNOOPY

[Beagle]

Hi Snoopy,

I think much has already been explained but obviously the pandemic has dragged on and on and the cost of providing care services has far outstripped Earl's representations made as recently as Feb 2021 wherein during the call when he responded to a question from one analyst regarding how they should think about the cost of care going forward and he said that he believed it would move up in line with MOH funding, or words very close to that effect. I don't think some of the analysts on the call on Monday are very impressed to now see care costs rising at 9% per annum ! Its rather convenient for Earl he's not here to face the music.

Therefore I am not surprised to see analysts pulling back their forecasts...first indications are starting to come through some are not impressed. Average target price before the result was $1.71 and is now $1.64 and may reduce a little more once all the revised forecasts are in
https://www.marketscreener.com/quote/stock/OCEANIA-HEALTHCARE-LIMITE-103506268/consensus/

Obviously being in dispute with MOH for 4.8% of extra costs they're not funding is a real headwind to the business, until its resolved.
To me from comments across the sector by OCA and other operators, MOH are simply not funding the extra costs imposed on care business's by Covid and that seems egregiously unreasonable considering quality health care providers are doing an awesome job of protecting the elderly and vulnerable.

In a quieter moment I sometimes ponder if we're headed towards a situation where the MOH underfunding will become so chronic that if you want quality care you'll be forced to buy a care suite ? I wonder in due course once OCA have achieved their targeted 70:30 premium / basic care transformation whether they'll keep going and ultimately almost completely transform to only a premium care suite and independent living unit business model and get out of basic care altogether ?

There is clearly more money to be made with independent living units. I am not sure if my recollection is that good but I think originally when they acquired the new full feature village at Waterford in Hobsonville they were going to add a whole bunch of care suites but I noted in the presentation the other day they are planning for 50 more independent living apartments. I might be over or misinterpreting this but I am encouraged by what I see as perhaps a subtle shift in focus towards more independent living units.

Finally, June 2020 is a long time ago my friend. Everyone needs to be agile and on their toes to navigate this difficult market.
Disc: Holding a modest sized stake.

[couta1]

Hi Snoopy,
I think much has already been explained but obviously the pandemic has dragged on and on and the cost of providing care services has far outstripped Earl's representations made as recently as Feb 2021 wherein during the call when he responded to a question from one analyst regarding how they should think about the cost of care going forward and he responded that he believed it would move up in line with MOH funding.

Obviously being in dispute with MOH for 4.8% of extra costs they're not funding is a real headwind to the business, until its resolved.
To me from comments across the sector by other operators that MOH are simply not funding the extra costs imposed on care business's by Covid and that seems egregiously unreasonable considering quality health care providers are doing an awesome job of protecting the elderly and vulnerable.

In a quieter moment I sometimes ponder if we're headed towards a situation where the MOH underfunding will become so chronic that if you want quality care you'll be forced to buy a care suite ? I wonder in due course once OCA have achieved their targeted 70:30 premium / basic care transformation whether they'll keep going and ultimately almost completely transform to only a premium care suite and independent living unit business model and get out of basic care altogether ? Your last paragraph is the point especially if any Govt was dumb enough to interfere too much with the current model, operators like OCA could just wind back their hospital and dementia care levels leaving a massive ongoing problem for the Govt to deal with.

[850man]

Your last paragraph is the point especially if any Govt was dumb enough to interfere too much with the current model, operators like OCA could just wind back their hospital and dementia care levels leaving a massive ongoing problem for the Govt to deal with.

Not wanting to get political but agree that government intervention is a huge risk, based on track record of meddling and making things worse overall even for the group they are intending to help

[Sideshow Bob]

Another little climb today.....

[Panda-NZ-]

If there was not a cure to aging on the horizon then I wouldn't want to check in to places such as this.

Keep the inheritance intact, spend my final year in a motorhome going up and down NZ for a couple of years, eating what I want etc. Would be a better situation.

[bottomfeeder]

If there was not a cure to aging on the horizon then I wouldn't want to check in to places such as this.

Keep the inheritance intact, spend my final year in a motorhome going up and down NZ for a couple of years, eating what I want etc. Would be a better situation.

Yes, but when you are not very mobile, perhaps incontinent, or losing your mind a little, aches and pains, problems with balance, you have no other alternative. You are not like wine, humans always get worse with age. Some worse than others. Perhaps you will be one of the extremely lucky ones. But after your couple of years on the road, then what.

[allfromacell]

If there was not a cure to aging on the horizon then I wouldn't want to check in to places such as this.

Keep the inheritance intact, spend my final year in a motorhome going up and down NZ for a couple of years, eating what I want etc. Would be a better situation.

There is no dignity in spending your last years in a motorhome you can’t drive, a home you cannot clean and a body you can’t keep hygienic.

People are living longer and longer and becoming more and more frail in the last years, your thoughts are nice but unrealistic unless you plan to end your life before you get to a state described above. The reality is the human will to live is stronger than most realise, it pays to plan ahead, for your sake and your families.

My grandfather lost his wife last year and staunchly wanted to live in his own home, he was reluctant to move into a care solution but what he didn’t realise was the strain it put on his family having to drive to him over an hour way multiple times a week to look after-him, he become very depressed and dropped all of his hobbies.

He finally moved into an aged care provider and the difference is night and day, he is in significantly less strife as he is getting nutritious food all the time, his meds aren’t missed and has people around him who he can socialise with. He looks years younger and has even started playing his musical instruments again. He is enjoying his life and it’s such a relief.


The services companies like OCA provide really are needs based, people cannot live without them unless they have families who can stay with them during the days and work less and less hours, even then they are not professionals. This is increasingly difficult in the modern world with people working more and more and living longer and longer.

[Panda-NZ-]

The nice thing is you can record things for your grandkids today and it will last forever . So I'd want to do that and then take up a dignified exit through euthanisa.

[Beagle]

................

[bottomfeeder]

The nice thing is you can record things for your grandkids today and it will last forever . So I'd want to do that and then take up a dignified exit through euthanisa.

When they go through your things after you have passed on, they throw everything out.

[RTM]

When they go through your things after you have passed on, they throw everything out.

That’s certainly not my experience.

[Panda-NZ-]

When they go through your things after you have passed on, they throw everything out.

In the cloud your videos and recordings will exist somewhere.

Your descendants x10 may still be able to access them.

[artemis]

When they go through your things after you have passed on, they throw everything out.

My next door neighbour of many years passed on, and her family hired several skips. Maybe not everything was biffed but looked like most.

[Muse]

In the cloud your videos and recordings will exist somewhere.

Your descendants x10 may still be able to access them.

Hmmm..then my grandkids are going to see a lot of weird stuff.

[Baa_Baa]

Sorry to get back on topic but the stock watchers might have noticed a breakout (up) from the down trend channel the past couple of months. RSI (sentiment) is bullish up to 50's already. A run up is possible, stall at $1.40, break that and $1.50 or so is in play. Today was on volume which has been lacking for November.

[winner69]

Care and rising wage cost ….immigration policy?

My mate Michael

@MHReddell
Interesting result - in NZ we sometimes think of immigration keeping down the cost of rest-home care - but of course if true, this result presumably comes about mostly by pushing down the relative price of these types of labour.

In response. To this study:

Immigrants keep us out of nursing homes
by Tyler Cowen November 30, 2021 at 2:31 pm in Economics Law
We examine whether immigration causally affects the likelihood that the U.S.-born elderly live in institutional settings. Using a shift-share instrument to identify exogenous variation in immigration, we find that a 10 percentage point increase in the less-educated foreign-born labor force share in a local area reduces institutionalization among the elderly by 1.5 and 3.8 percentage points for those aged 65+ and 80+, a 26-29 percent effect relative to the mean. The estimates imply that a typical U.S-born individual over age 65 in the year 2000 was 0.5 percentage points (10 percent) less likely to be living in an institution than would have been the case if immigration had remained at 1980 levels. We show that immigration affects the availability and cost of home services, including those provided by home health aides, gardeners and housekeepers, and other less-educated workers, reducing the cost of aging in the community.


https://marginalrevolution.com/marginalrevolution/2021/11/immigrants-keep-us-out-of-nursing-homes.html


Interesting response to Michaels post

An unpalatable job on low pay. Schools don’t foster the kind of graft needed in rest home work. By encouraging tertiary education we’re reducing workers we need. Suppressing wages & ignoring these immigrants will eventually require rest home care that will compound our aging popn

[Maverick]

Well that has to be one of the most complicated reports I think I've ever seen. Where do we even start?

To pick just one (of dozens) as not to send everyone to sleep, Beagles post about rampant care costs constantly stripping away any of the ultra slow gains of DMFs etc. You raise very valid concerns, and always have, about this ever growing disappointment.

To be fair, , the analyst pointing out that operation costs have gone up 9% , although true , needs a bit of unpacking . In those costs they had an extra one off cost of $1m for covid cost and they also repaid $1.8m of wage subsidy also they took over the staff cost at Frankton- a big paddock with a single level 44 bed rest home on it.
If We set aside these extra cost out and consider the extra new staff additions then the staff cost have actually risen this HY at the usual OCA annual pace of about 6.25% p/a over the last 5 years ( the govt DHB fees have gone up about 5.5% p/a in comparison over the same time) .

The ratio of operations expense /care fees tells a grim picture as you, again, rightly point out Beagle
These are annual ratio results;
2017-83%...2018-87%..2019-.90%...2020-97%...2021-97%...2022-(inc estimated 2hy) 97%.

So this year and the last 2 years operations expense /care fees have leapt up a lot and then flatlined at 97% which is pretty well only break even. This is either DHB underfunding as you suggest or extra covid costs (or some combo most likely). Given the time period and flatness of the 2 prior years (plus this year) I'm tilting towards covid being the biggest reason. I pity the poor mum and dad owned rest homes who will be really struggling without fandangled ORAs and PAC fees to help. One thing in the incumbent "big care" providers favour is that no smaller players in their right mind will be building new rest homes. While a future moat for OCA, it's seriously real problem for future oldies who get sick without a lot of money.

Looking ahead some years to 2026 in my spreadsheets when the care stuff should be humming, I've got bad news. The 97% operations expense /care fees ratio hasn't budged. But I am basing my forward assumptions based on only 5 years of history with bulk decommissions and covid disruptions within it so things are likely to actually be better than calculated but who knows for sure.

I don't believe OCAs care suits (including the PAC and DMF) will ever really make any decent money … EVER.
I've always said they were a red herring as the source of where the OCA profit growth will come from and now I think it's actually worse than I was anticipating. Yes, they will make a little more profit in the future but it's more to do with their footprint growing rather than improved operations.

On a far lesser concern but more immediate effect for their “care” part of their profit is why the heck did they repay the subsidy ( I'm pretty sure ARV haven't...T-J?) . It has helped wipe out the growth this HY (the other reason being the 12.5% new share issued but that's for another day).
Financially I'm personally against the repayment as this is what the subsidy was for but a part of me is also proud that the directors choose to do an honorable thing. I did not know they did this until Monday so has caused me to downgrade my earlier stated share price expectations because of the reduced EPS effect. Although it will have no effect in a year or so.

While they have tried to show us 2 sets of books with stripped out repayment figures ( yet more adjustment on adjustments) it just has helped create a report that is extremely difficult to untease.

A year from now things will be simpler and clearer with all of these multi layers of adjustments having washed through.
I see it as the directors trying to be as informative as possible but for the folk with a day job, I doubt anyone ( apart from a few here on ST) can actually DYOR …..it's just too much.

If you are willing Just a Kiwi, I'd love to hear your opinion on what you think covid costs might be as we live with the virus. OCA spent $1m on it for 1 month of lockdown !!!...extra staff wages and PPE. Knowing the workings of care as you do, is this an expense that will be somewhat cemented in going forward or do you think covid costs will relegate away into the infectious stuff you always dealt with anyway and therefore at those older historic costs?

[oldtech]

Thank you for those insights and explanations Maverick, always appreciate your insights.

[BlackPeter]

Well that has to be one of the most complicated reports I think I've ever seen. Where do we even start?

To pick just one (of dozens) as not to send everyone to sleep, Beagles post about rampant care costs constantly stripping away any of the ultra slow gains of DMFs etc. You raise very valid concerns, and always have, about this ever growing disappointment.

To be fair, , the analyst pointing out that operation costs have gone up 9% , although true , needs a bit of unpacking . In those costs they had an extra one off cost of $1m for covid cost and they also repaid $1.8m of wage subsidy also they took over the staff cost at Frankton- a big paddock with a single level 44 bed rest home on it.
If We set aside these extra cost out and consider the extra new staff additions then the staff cost have actually risen this HY at the usual OCA annual pace of about 6.25% p/a over the last 5 years ( the govt DHB fees have gone up about 5.5% p/a in comparison over the same time) .

The ratio of operations expense /care fees tells a grim picture as you, again, rightly point out Beagle
These are annual ratio results;
2017-83%...2018-87%..2019-.90%...2020-97%...2021-97%...2022-(inc estimated 2hy) 97%.

So this year and the last 2 years operations expense /care fees have leapt up a lot and then flatlined at 97% which is pretty well only break even. This is either DHB underfunding as you suggest or extra covid costs (or some combo most likely). Given the time period and flatness of the 2 prior years (plus this year) I'm tilting towards covid being the biggest reason. I pity the poor mum and dad owned rest homes who will be really struggling without fandangled ORAs and PAC fees to help. One thing in the care big incumbents favour is no smaller players in their right mind will be building new rest homes. While a future moat for OCA, it's seriously real problem for future oldies who get sick without a lot of money.

Looking ahead some years to 2026 in my spreadsheets when the care stuff should be humming I've got bad news. The 97% operations expense /care fees ratio hasn't budged. But I am basing my forward assumptions based on only 5 years of history with bulk decommissions and covid disruptions within it so things are likely to actually be better than calculated but who knows for sure.

I don't believe OCAs care suits (including the PAC and DMF) will ever really make any decent money … EVER.
I've always said they were a red herring as the source of where the OCA profit growth will come from and now I think it's actually worse than I was anticipating. Yes, they will make a little more profit in the future but it's more to do with their footprint growing rather than improved operations.

On a far lesser concern but more immediate effect for their “care” part of their profit is why the heck did they repay the subsidy ( I'm pretty sure ARV haven't...T-J?) . It has helped wipe out the growth this HY (the other reason being the 12.5% new share issued but that's for another day).
Financially I'm personally against the repayment as this is what the subsidy was for but a part of me is also proud that the directors choose to do an honorable thing. I did not know they did this until Monday so has caused me to downgrade my earlier stated share price expectations because of the reduced EPS effect. Although it will have no effect in a year or so.

While they have tried to show us 2 sets of books with stripped out repayment figures ( yet more adjustment on adjustments) it just has helped create a report that is extremely difficult to untease.

A year from now things will be simpler and clearer with all of these multi layers of adjustments having washed through.
I see it as the directors trying to be as informative as possible but for the folk with a day job, I doubt anyone ( apart from a few here on ST) can actually DYOR …..it's just too much.

If you are willing Just a Kiwi, I'd love to hear your opinion on what you think covid costs might be as we live with the virus. OCA spent $1m on it for 1 month of lockdown !!!...extra staff wages and PPE. Knowing the workings of care as you do, is this an expense that will be somewhat cemented in going forward or do you think covid costs will relegate away into the infectious stuff you always dealt at those older historic costs?



Hi Mav,

Great analysis, as always, thanks for sharing.

Given your outstanding analysis of this company, just a couple of questions which corossed my mind (you may or may not want to answer :)::

(1)
OCA's books always have been difficult to read and convoluted ... and with this report it just got one step worse.

This is something which can create cynical thoughts ... why would anybody want to present their figures in this form, unless they have something to hide.

Can you think about another reason?

Or is there a school for concealed book keeping which their CFO mastered - and if yes, would this be good for share holders like us?


(2)
I agree with your sentiments on repayment of the Covid wage subsidy. I guess given that this is funded by taxpayers and given to companies to (partially) cover some of the additional Covid expenses, I don't see how it is in the best interest of share holders if they repay this subsidy.

Do you?

[Rawz]

.....

A year from now things will be simpler and clearer with all of these multi layers of adjustments having washed through.
I see it as the directors trying to be as informative as possible but for the folk with a day job, I doubt anyone ( apart from a few here on ST) can actually DYOR …..it's just too much.

....



You can say that again. I am not even going to try whilst working full time and raising a young family.
This is why ST is so great. We are very lucky for you, Beagles, Winners etc contributions.

I base my investment in OCA based on macro trends and pricing to NTA. Then read everything that is posted here to help fill the gaps.

[Beagle]

Thanks for your thoughts Maverick. I know you have a lot of time to spend on OCA accounts. With no formal accounting or investment analysis training I think you do a splendid job in very difficult circumstances. As a professional I can report that OCA's accounts are by far the hardest to understand of any I have tried to comprehend.

Without restating anything I've previously said I agree with your perspective that care suites are by and large not going to be a material contributor to profitability going forward unless they are materially re-priced and I wouldn't rule that possibility out. By re-pricing I mean not just the capital value but also the DMF ratio's. Maybe we could see them repriced to a 15% per annum DMF fee non declining going forward ? I think OCA need to get super realistic and a lot more commercial here.

Its abundantly clear it costs an absolute fortune to provide high quality care and the cost is increasing at significantly more than the inflation rate. Not to put too fine a point on it but if "Johnny" has sold his $2m house to move into a $400K care suite and needs high quality care, he's still got $1.6m left over and does it really matter if he loses 15% per annum of the value of the care suite for every year he's there ?.... or is getting the very best care more important to him ?

I was also very disappointed to see them repaying the wage subsidy especially at a time when the Govt are outright refusing to fund the extra costs of care in relation to Covid. This makes no sense to me and looks like they have bowed to perceived socialist pressure.

I am hopeful that FY23 will see a good uplift in profitability with a more fulsome development book.
My expectations are that OCA management will take a more commercial approach towards unit and especially care suite pricing.

[Waltzing]

and the Beagle has Barked ...

its neck and neck between KPG and OCA...

[winner69]

BlackPeter says hope is not a good investing strategy but I'm hoping like hell that one day OCA will not be at the bottom of pile when it comes to how market rates it (Price / Book Value)

Here's the latest position. OMG the market views RAD more favourably.

I have also included how each Book Value has grown over the last four and half years --- maybe the market is rationale after all?


Hoping, hoping .... one day maybe the tabel will look different

[Snoopy]

Care and rising wage cost ….immigration policy?

My mate Michael

@MHReddell
Interesting result - in NZ we sometimes think of immigration keeping down the cost of rest-home care - but of course if true, this result presumably comes about mostly by pushing down the relative price of these types of labour.

In response. To this study:

[I] Immigrants keep us out of nursing homes
by Tyler Cowen November 30, 2021 at 2:31 pm in Economics Law

We examine whether immigration causally affects the likelihood that the U.S.-born elderly live in institutional settings.


I don't think it is realistic to compare the situation in the US (minimum wage $US10.30 per hour) and NZ as regards care home wages. In NZ those with L4 carer qualifications (a nurse in all but name) or for those with 12+ years service can earn $NZ27 per hour now (entry level wage is $NZ21.50 per hour). I think these are legislated minimums. So importing carer staff from overseas into NZ isn't going to get the job done 'super cheaply'. I imagine care homes in the USA are free to pay as little as they can get away with. So importing workers would push wages down 'over there'.

SNOOPY

[fastbike]

I don't think it is realistic to compare the situation in the US (minimum wage $US10.30 per hour) and NZ as regards care home wages. In NZ those with L4 carer qualifications (a nurse in all but name) or for those with 12+ years service can earn $NZ27 per hour now (entry level wage is $NZ21.50 per hour). I think these are legislated minimums. So importing carer staff from overseas into NZ isn't going to get the job done 'super cheaply'. I imagine care homes in the USA are free to pay as little as they can get away with. So importing workers would push wages down 'over there'.

SNOOPY
Yes too easy in this internet age to assume all USian views are valid.

[Panda-NZ-]

Residential housing is NZ's best performing asset class.

If OCA cannot capitalise on this then what good are they.

[justakiwi]

Great post as usual Mav. Really appreciate the time you put into this for our benefit.

Unfortunately, I really can't answer your question. Things are significantly different for small (often not for profit) rest homes like mine. Our organisation operates three facilities, with ours being the smallest - a standalone 32 bed rest home level home. Vastly different from the likes of OCA and others.

I don't have any inside knowledge of COVID related costs. From my perspective however, I don't believe there would have been many for the home I work in. I have yet to see any full PPE gear - we have been doing nothing different through-out COVID, other than wearing masks full-time, for a period of time. As all staff and the majority of residents are now double (or fully) vaccinated, we are no longer using masks for every day tasks. I do know we are soon to be fitted with the N95 masks, something that has not been done to date. To be honest I don't understand that. There will be stores onsite somewhere, of needed full PPE gear, should we get COVID in the home, but the overall cost of that wouldn't be huge.

No extra staffing costs either, except on a few occasions where a staff member has had a cold, and been required to get tested - and stay home until the test results are returned. They get paid for that time off, and someone else has to cover their shift, but I believe there is a government subsidy to help with that cost.

To be brutally honest, life with COVID has not been hugely different for us. Restricted access has pretty much been the only real disruption so far. Having said that, if a resident or residents gets COVID, our staffing costs will definitely increase. The plan (if you can even call it that) is to isolate infected residents in one section of the building, and have dedicated staff caring for them only. That means 3 staff to cover 3 round the clock shifts (or 2 staff working longer hours). If we have more than (say) 4-5 unwell residents, we would need two teams of 3. Given that we are already short staffed, I literally have no idea how we would make that work. Not forgetting that these COVID teams will need a break/day off at some point.

I guess what I'm saying is, increased staffing costs will be the biggest cost if we get COVID in the home. If by some miracle we don't, COVID related costs will remain minimal.

The situation in larger facilities will be very different. They will be taking things much more seriously than we are. They will already have detailed plans in place for how to manage an outbreak. Personally, I think they are already doing, and will continue to do, a vastly better job than we are. I believe they have also paid their staff "extra" as a show of goodwill and appreciation, which is not the case for us. I know where I'd rather be working if COVID gets in.

At the risk of further antagonising those here who resent the fact - aged care is a labour intensive sector. Even if you took away the care branch of OCA altogether, everything else still requires staff. Cleaners and housekeepers, cooks and kitchen hands, laundry staff, gardeners and grounds people, cafe and bar staff, admin and management .... there is more to "staffing costs" than just RNs and caregivers.


....
If you are willing Just a Kiwi, I'd love to hear your opinion on what you think covid costs might be as we live with the virus. OCA spent $1m on it for 1 month of lock-down !!!...extra staff wages and PPE. Knowing the workings of care as you do, is this an expense that will be somewhat cemented in going forward or do you think covid costs will relegate away into the infectious stuff you always dealt with anyway and therefore at those older historic costs?

[Maverick]

[/QUOTE]

(1)
... why would anybody want to present their figures in this form, unless they have something to hide.
….Can you think about another reason?
(2)
….I don't see how it is in the best interest of share holders if they repay this subsidy.
Do you?

They haven't been at all deceitful in their numbers that I can see ( and I can assure you I refuse to ever have the wool pulled over me ever again since Pike River…thanks again NZ oil and gas you bastards), I think they are just trying to tell too many stories of the many things they are transforming simultaneously which is causing the problem but what choice do they have? All but one* of the OCA numbers and their words stack up for me . This includes the "point of inflection" statement which for the record only ever applied to care profit about a year ago, not other aspects of the business
* (There has been one very disappointing exception - Earl saying a 1 1/2 yrs ago cooperate costs -"other expenses" -would flatline - they are rising at around 15% still!).


You have a frustrated and grumpy Beagle eager to have a good chew and of course Winner who has a fantastic memory for the what players said and did.
I think there is a pretty good team that OCA hasn't got a snowball's chance of hiding something if that was their intention.

My opinion on paying the subsidy back , and that's all it is -opinion ,is that it was unnecessary and has temporarily hurt the share price. But also a very good display of good will to the government. I suspect it has something to do with the advocacy going on between OCA with their role at the table of current industry reform. I also think it speaks of the company's integrity and also trying to be seen to be good guys. Certainly not a move by directors harbouring dodgy intentions referring back to your first question.

Really appreciate your extensive and honest summary of your experience. Just a Kiwi. I suspected what you have outlined was going to be the case with the smaller operators, how could they afford otherwise?. Was talking to a friend today who part owned a medical center about this and he thought that when you give staff a bonus , temporary pay , or whatever, that it is very hard to cancel it. I also like your point to JAK that so much staffing costs are far more than registered nurses.
My thinking for now is that the continuing and ongoing costs will be with us for some time and most likely to just inflate away in future wage rounds.
I'm not hoping for many gains at all for the foreseeable future in the care business.

Beagles comments about basically charging clients more for care suites is the most likely future outcome of the years ahead. OCA and its big friends by default will end up the only option to oldies falling apart (probably us). Eventually if OCA doesn't turn up the charging then the international pension fund who takes over OCA will.

Thanks for your responses , it's great to be sharing ideas together on this aspect.

[Beagle]

Yes.....EQT certainly took a "dogged" approach (sorry couldn't resist, not a Beagle but pretty cute nonetheless) https://eqtgroup.com/news/2021/acceptance-period-for-zorro-bidco-s-public-delisting-tender-offer-for-all-outstanding-zooplus-shares-commences with the MET takeover so the mind boggles as to what synergies and value add they could extract from a merged MET + OCA.

This hound reckons they would take no prisoners when it comes to doggedly extracting a top commercial return from all parts of the business especially care when people make needs based (as opposed to lifestyle), decisions.

Trading at slightly under fair adjusted NAV at present, as much as this pains me to say, is probably where they belong until they can prove their ability to counter steep care cost increases with commercially appropriate strategies that provide an appropriate return to shareholders.

If we look at how OCA have performed as we head towards their 5th anniversary of listing and compare that to how RYM and SUM performed in their first five years we see that something needs to change at a foundational level with OCA's approach.
RYM listed mid 1999 and almost exactly doubled five years later. SUM listed Nov 2011 at $1.35 and 5 years later were $4.86
OCA 79 cents to $1.35 in 4.5 years of an absolutely rampant property market is not exactly earth shattering stuff is it ! Blame Covid or is there more to this ?

SUM has the most care lite model and did the best by miles in its first 5 years. Hmmm... Time for a change of focus by OCA towards less care ?

[Muse]

Yes.....EQT certainly took a "dogged" approach (sorry couldn't resist, not a Beagle but pretty cute nonetheless) https://eqtgroup.com/news/2021/acceptance-period-for-zorro-bidco-s-public-delisting-tender-offer-for-all-outstanding-zooplus-shares-commences with the MET takeover so the mind boggles as to what synergies and value add they could extract from a merged MET + OCA.

This hound reckons they would take no prisoners when it comes to doggedly extracting a top commercial return from all parts of the business especially care when people make needs based (as opposed to lifestyle), decisions.

Trading at slightly under fair adjusted NAV at present, as much as this pains me to say, is probably where they belong until they can prove their ability to counter steep care cost increases with commercially appropriate strategies that provide an appropriate return to shareholders.

If we look at how OCA have performed as we head towards their 5th anniversary of listing and compare that to how RYM and SUM performed in their first five years we see that something needs to change at a foundational level with OCA's approach.
RYM listed mid 1999 and almost exactly doubled five years later. SUM listed Nov 2011 at $1.35 and 5 years later were $4.86
OCA 79 cents to $1.35 in 4.5 years of an absolutely rampant property market is not exactly earth shattering stuff is it ! Blame Covid or is there more to this ?

SUM has the most care lite model and did the best by miles in its first 5 years. Hmmm... Time for a change of focus by OCA towards less care ?

.............

[Beagle]

Dear old Ryman hard to believe Ngai Tahu & Direct Capital bought 50% of it for $28m back in the day. The float took a while to fire though first few years were poor and there was no liquidity. But fast forward to todays SP who cares right??

Even with the recent pullback RYM is 44 times your money in 22 years and SUM is 10 times your money in 10 years. No wonder we're addicted to punting, opps, sorry, investing in this sector. Trouble is in this horse race one animal is carrying more baggage than the others and that's why its at longer odds.

Next year will be interesting with a whopping 113 care suites, (I'm so "happy"), being completed at Lady Allum in Milford Auckland. Its one thing to build them and quite another to fill them and then another thing altogether to find the staff to service the residents needs.
Fortunately we might have the wonderful Waimarie development completed or very close to being completed in FY23 (strongly focused on independent living units) to come along and save the day and we might see record prices for top sea view apartments there.

On balance I think FY23 could finally see a decent uplift in earnings per share. I going to try my best to be optimistic and call for $1.70 by March 2023.
Disc: Punting a moderate bet and expecting modest returns from this heavily handicapped nag. Maybe I'll get the quinella with ARV ?

[biker]

Even with the recent pullback RYM is 44 times your money in 22 years and SUM is 10 times your money in 10 years. No wonder we're addicted to punting, opps, sorry, investing in this sector. Trouble is in this horse race one animal is carrying more baggage than the others and that's why its at longer odds.

Next year will be interesting with a whopping 113 care suites, (I'm so "happy"), being completed at Lady Allum in Milford Auckland. Its one thing to build them and quite another to fill them and another thing altogether to find the staff to service the residents needs.
Fortunately we might have the wonderful Waimarie development completed or very close to being completed in FY23 (strongly focused on independent living units) to come along and save the day and we might see record prices for top sea view apartments there.

On balance I think FY23 could finally see a decent uplift in earnings per share. I going to be optimistic and call for $1.70 by March 2023.
Disc: Punting a moderate bet and expecting modest returns from this heavily handicapped nag.

Do you have any further info on Waimarie Beagle?
No info on pricing or completion date by the company.
I’m on their contact list.

[Beagle]

Do you have any further info on Waimarie Beagle?
No info on pricing or completion date by the company.
I’m on their contact list.

They're on record as having started construction in October...I would hope they have it completed by March 2023. On the call they mentioned that the five hundred and something units they have in progress across various sites should all be completed within 18 months. I expect pricing will be VERY high. I hope you have deep pockets ! I'll take a guess and say the best apartments with the best sea views will be ~ $3m.

[Jay]

I can say that are still their building the Waimarie development, seem to be working most Saturdays (as well as Mon to fri that is), well the crane is!
Seems to be plenty of worker vehicles there most days

[Old mate]

And down we go. That was a short lived run post results. Mav makes a couple a comments and it's all over:t_up:

[dabsman]

And down we go. That was a short lived run post results. Mav makes a couple a comments and it's all over:t_up:

Its ex Divvy isnt it?