OCA - Oceania Group - retirement villages

[mistaTea]

Snoopy has made the most logical attempt from what I have seen so far at an explanation for that all important counterfactual we need to round out the case for buying into (or not) OCA.

[ValueNZ]

Snoopy has made the most logical attempt from what I have seen so far at an explanation for that all important counterfactual we need to round out the case for buying into (or not) OCA.

Talk about taking heed to the market...

Imagine for a second that OCA wasn't a publicly listed stock, what would you be willing to pay for the whole company? And is that lower than the current market cap? Those are the two questions you should be asking yourself before investing in anything.

[ValueNZ]

'The life of the business' of a retirement village starts with spades on the ground as real cash is spent paying the construction workers to build the complex. The life of the retirement village ends, -as a new investment entity at least- when the whole show is built up, and the residents are moved in. But the return from the business is constrained by the miserly government contribution to keep the operation running. From an investor perspective, those builders just got paid too much and the village ended up being overcapitalised. Fortunately Mr Market has a solution for this problem. Revalue the company 'on market' so that those retirement village book assets that are claimed to be worth $x are repriced to be only worth $0.5x.

That way everybody is happy, except perhaps for the founding investors that built the village!

SNOOPY

Too bad Mr Market is an irrational drunk who valued OCA at 40c and then 1.60 before returning to 68c within a span of 3 years. Unless you are suggesting the intrinsic value of OCA has changed that much over 3 years, you can throw your argument out the window.

[SailorRob]

Too bad Mr Market is an irrational drunk who valued OCA at 40c and then 1.60 before returning to 68c within a span of 3 years. Unless you are suggesting the intrinsic value of OCA has changed that much over 3 years, you can throw your argument out the window.


ValueNZ, you are going to get extremely rich with people thinking like this around you!

Snoopys case is what I dream about.

[Snoopy]

Talk about taking heed to the market...

Imagine for a second that OCA wasn't a publicly listed stock, what would you be willing to pay for the whole company? And is that lower than the current market cap? Those are the two questions you should be asking yourself before investing in anything.


May I suggest you have another read of Lyall Taylor's blog on the pricing of property
https://lt3000.blogspot.com/2020/07/market-inefficiency-liquidity-flywheels.html

The question you ask ValueNZ is a good one. And the answer for me is yes, if OCA was not listed, I would pay a lot more for it than the price those OCA shares trading on the market indicate the company is worth today. But the elephant in the room that you are ignoring is that OCA *is* listed. And if I have transposed Lyall Taylor's blog logic to OCA correctly, his view would be that it is the 'state of being listed', and the competitive investment opportunities that potential OCA share buyers have, that is keeping the share price low at around half of the net asset backing. And while OCA remains listed, this won't change.

SNOOPY

[mistaTea]

Talk about taking heed to the market...

Imagine for a second that OCA wasn't a publicly listed stock, what would you be willing to pay for the whole company? And is that lower than the current market cap? Those are the two questions you should be asking yourself before investing in anything.

You are still struggling to grasp the issue, and are conflating two different things.

At no point did I say that you need to agree with the markets assessment. Snoopy had just provided a rationale as to how the market may be viewing OCA, setting the price etc.

You may think trust the market is mistaken for doing so, and good on you. Continue to build your investment by all means.

You guys keep taking alternative propositions as a direct attack. Nobody is attacking you.

[SailorRob]

May I suggest you have another read of Lyall Taylor's blog on the pricing of property
https://lt3000.blogspot.com/2020/07/market-inefficiency-liquidity-flywheels.html

The question you ask ValueNZ is a good one. And the answer for me is yes, if OCA was not listed, I would pay a lot more for it than the price those OCA shares trading on the market indicate the company is worth today. But the elephant in the room that you are ignoring is that OCA *is* listed. And if I have transposed Lyall Taylor's blog logic to OCA correctly, his view would be that it is the 'state of being listed', and the competitive investment opportunities that potential OCA share buyers have, that is keeping the share price low at around half of the net asset backing. And while OCA remains listed, this won't change.

SNOOPY

Oh man this is GOLD.

The Forrest.

The Trees.

All I can do is pray you're correct and one day my annual dividend is 100% of the share price and snoop dog keeps selling them to me.

[SailorRob]

Lyall is 100% correct in what he says. Go look at Agrosy thread and I've said the same many times but nobody could understand.

But, this ain't Agrosy.

[winner69]

May I suggest you have another read of Lyall Taylor's blog on the pricing of property
https://lt3000.blogspot.com/2020/07/market-inefficiency-liquidity-flywheels.html

The question you ask ValueNZ is a good one. And the answer for me is yes, if OCA was not listed, I would pay a lot more for it than the price those OCA shares trading on the market indicate the company is worth today. But the elephant in the room that you are ignoring is that OCA *is* listed. And if I have transposed Lyall Taylor's blog logic to OCA correctly, his view would be that it is the 'state of being listed', and the competitive investment opportunities that potential OCA share buyers have, that is keeping the share price low at around half of the net asset backing. And while OCA remains listed, this won't change.

SNOOPY

Snoopy me ol’ mate, I get the feeling that most on here don’t get (or want to get) what you are saying

Aren’t you just answering why are OCA shares always so ‘cheap’ / ‘undervalued’ …ie share price doesn’t represent a ‘true’/‘realistic’ value …and you add that this is unlikely to change

[Snoopy]

Too bad Mr Market is an irrational drunk who valued OCA at 40c and then 1.60 before returning to 68c within a span of 3 years. Unless you are suggesting the intrinsic value of OCA has changed that much over 3 years, you can throw your argument out the window.


Looking backwards you can say that Mr Market must have been an irrational drunk. But having lived through those Covid-19 times, I am not so sure. At the time of OCA hitting 40c, Covid-19, the more deadly original strain, was rampant in other parts of thew world, There were no vaccines, nor medical treatments available and refrigerated containers were being stacked with Covid dead bodies in the United States. So it was quite conceivable that if Covid-19 had become established in NZ in those early days, entire retirement villages could have lost all of their residents, while it would be a battle for the staff to remain well enough to operate them. That means 40c for OCA might not have been irrational.

Likewise with interest rates near zero, even a meagre 3% return on assets was looking OK. So there was a very logical reason why retirement village shares might trade at near to NTA. It is only looking back on the situation when you realise that both the 40c and $1.60 Mr Market valuations were transient outlier scenarios. But they certainly did not feel that way at the time. My guess is that transient outliers aside, the value of OCA shares did not change much from that median value you pointed to of 68c. And OCA is probably still worth round about that figure today.

SNOOPY

[mistaTea]

Snoopy me ol’ mate, I get the feeling that most on here don’t get (or want to get) what you are saying

Aren’t you just answering why are OCA shares always so ‘cheap’ / ‘undervalued’ …ie share price doesn’t represent a ‘true’/‘realistic’ value …and you add that this is unlikely to change

Yes he has provided a possible if not plausible explanation as to why the shares are valued the way they are.

But Christ Almighty you would have thought he sh1t the bed the way people are responding!

[mistaTea]

Looking backwards you can say that Mr Market must have been an irrational drunk. But having lived through those Covid-19 times, I am not so sure. At the time of OCA hitting 40c, Covid-19, the more deadly original strain, was rampant in other parts of thew world, There were no vaccines, nor medical treatments available and refrigerated containers were being stacked with Covid dead bodies in the United States. So it was quite conceivable that if Covid-19 had become established in NZ in those early days, entire retirement villages could have lost all of their residents, while it would be a battle for the staff to remain well enough to operate them. That means 40c for OCA might not have been irrational.

Likewise with interest rates near zero, even a meagre 3% return on assets was looking OK. So there was a very logical reason why retirement village shares might trade at near to NTA. It is only looking back on the situation when you realise that both the 40c and $1.60 Mr Market valuations were transient outlier scenarios. But they certainly did not feel that way at the time. My guess is that transient outliers aside, the value of OCA shares did not change much from that median value you pointed to of 68c. And is is probably still worth round about that figure today.

SNOOPY

Amen, always easy in hindsight but at the time the market values each stock based on expectations. When things are very uncertain, those expectations are set on the very conservative side. Quite rightly too.

There is always a reason for why the market values the business a certain way at a certain time. You just have to be curious enough to want to understand why.

Snoopy going to give winner a run for his money soon on great posts.

[Snoopy]

Oh man this is GOLD.

The Forrest.

The Trees.

All I can do is pray you're correct and one day my annual dividend is 100% of the share price and snoop dog keeps selling them to me.


This indeed may happen if the cashflow is good and the dividend keeps increasing in line with that. So how is that cashflow going? And what was it that happened to the dividend last time around?

SNOOPY

[SailorRob]

Amen, always easy in hindsight but at the time the market values each stock based on expectations. When things are very uncertain, those expectations are set on the very conservative side. Quite rightly too.

There is always a reason for why the market values the business a certain way at a certain time. You just have to be curious enough to want to understand why.

Snoopy going to give winner a run for his money soon on great posts.

Can you help me out and link me to one great post from winner?

Not taking the piss they may be on a thread I don't read but I can honestly say I've never read one.

[SailorRob]

This indeed may happen if the cashflow is good and the dividend keeps increasing in line with that. So how is that cashflow going? And what was it that happened to the dividend last time around?

SNOOPY

The cash flow is mind boggling.

So if the market simply keeps valuing it at the same discount to cashflow or assets... Then won't you by definition get the earnings return or the asset return?

They should never have paid a dividend agreed. That was epic stupid.

[SailorRob]

This indeed may happen if the cashflow is good and the dividend keeps increasing in line with that. So how is that cashflow going? And what was it that happened to the dividend last time around?

SNOOPY

No Snoopy it will never happen.... You won't find a sustainable 100% dividend yield. Market will reprice.

[Snoopy]

Snoopy me ol’ mate, I get the feeling that most on here don’t get (or want to get) what you are saying

Aren’t you just answering why are OCA shares always so ‘cheap’ / ‘undervalued’ …ie share price doesn’t represent a ‘true’/‘realistic’ value …and you add that this is unlikely to change.


Yes I (and Lyall) are saying that, as a rule, real estate investors in listed entities should be prepared to see their investments trade well below net asset backing. But there is something about 'the float' that concerns me as well. I get that the float is 'free capital' borrowed from generations of village occupants which OCA never has to pay back. Not only is the money free. The on going flow of residents actually increases the value of the float at each 'handover point' as property values rise. Yes I get all that.

What I am less sure about is whether this 'free money' is being reinvested wisely, in the context of OCA being a listed entity. Building project 'cashflow out' is real. Finished building valuations can be reduced at the stroke of a pen. And even if you follow all the accounting rules to the letter and all of your property values are ticked off by the auditor, if that Mr Market doesn't believe you, then your shares will get marked down. Then your banking syndicate, noticing the share price dropping, starts making noises about 'capital ratios' and maybe getting some new 'discounted equity' on board to shore up the company's capital position.

Long term, I don't think the OCA business model is broken, even if all business modelling might be improved with a tweak. But there could me a medium term issue, over say 5-7 years, where property values as constructed and on the books are overvalued. And there is no easy way out by balancing the 'cashflow in' side of the equation to relieve the issue.

I think the danger of going 'all in' to one company is that it can make an investor very one eyed about their investment position!

SNOOPY

[SailorRob]

Looking backwards you can say that Mr Market must have been an irrational drunk. But having lived through those Covid-19 times, I am not so sure. At the time of OCA hitting 40c, Covid-19, the more deadly original strain, was rampant in other parts of thew world, There were no vaccines, nor medical treatments available and refrigerated containers were being stacked with Covid dead bodies in the United States. So it was quite conceivable that if Covid-19 had become established in NZ in those early days, entire retirement villages could have lost all of their residents, while it would be a battle for the staff to remain well enough to operate them. That means 40c for OCA might not have been irrational.

Likewise with interest rates near zero, even a meagre 3% return on assets was looking OK. So there was a very logical reason why retirement village shares might trade at near to NTA. It is only looking back on the situation when you realise that both the 40c and $1.60 Mr Market valuations were transient outlier scenarios. But they certainly did not feel that way at the time. My guess is that transient outliers aside, the value of OCA shares did not change much from that median value you pointed to of 68c. And OCA is probably still worth round about that figure today.

SNOOPY

Yes, Covid could have turned all the buildings to rubble. Jacinda said.

Dude... You didn't need to look back to see 39c was ridiculous. Bloody hell.

[Ferg]

Thanks for your subsequent post Snoopy. Unfortunately the accounts are not easy reading and they do require a slow methodical approach.


I still don't see the justification for using different valuation methods for Investment Properties and Care Suites. That seems an unnecessary tweak to muddy the waters of two ostensibly similar income streams.

I agree with you on this. However, I wonder if OCA are confusing themselves with the phrase "capitalisation rate" (or we are confusing ourselves with the definition). While 'cap rates' are a quick and dirty way of looking at property yields, I don't think they have actually used this method for valuing care suite properties. Why? My guess is they have calculated the "capitalised value using a discount rate" and the phraseology was condensed into "capitalisation rate". Cap rates in excess of 5 or 10% in todays climate are rare, so I suspect the median 12.5% "capitalisation rate" is actually a discount rate plus as you noted it is very close to the discount rate used for completed investment properties. Besides, using a purely cap rate method is not IMO an acceptable method for valuing properties for such a large listed entity. The more appropriate method is to discount forecast future cash flows using a discount rate. And I would readily phrase the discount rate used to calculate the capital value of a stream of cash flows as a 'capitalisation rate' (being the rate at which they were capitalised), which as we know is not the same thing as a 'cap rate'. Hence the reason I think they are confusing themselves which is unhelpful. Useful link:

https://propertymetrics.com/blog/difference-between-cap-rate-and-discount-rate/

[kiora]

Retirement village operators are property developers and value accordinately

https://finmodelslab.com/blogs/valuation/residential-development-valuation

"Challenges in Real Estate Development"

https://www.investopedia.com/ask/answers/100214/what-are-some-challenges-real-estate-development.asp

[Snoopy]

The cash flow is mind boggling.


That AR2023 and the cashflow statement within certainly made epic reading. Net decrease in the cash position a drop of a mere $2.376m over the year. Yay! Oh hang on. The improved cash position was all funded by increased borrowing!



So if the market simply keeps valuing it at the same discount to cashflow or assets... Then won't you by definition get the earnings return or the asset return?


Yes I think you are right. Even if the discount to net asset backing never unwinds, shareholders should still benefit from improvements in operational performance and dare I say it units sales, either individually or as packaged assets. The main point of contention is if there are any capital ratio issues along the future earnings path. I am not saying OCA will be a poor investment going forwards. I am just saying that the share price growth expectations of some investors going forwards may be a little high.

SNOOPY

[winner69]

Yes he has provided a possible if not plausible explanation as to why the shares are valued the way they are.

But Christ Almighty you would have thought he sh1t the bed the way people are responding!

Sure wound up a few eh

Talking of sh1t I think that guy Phaedrus would call this a ‘toxic’ thread


Quote - These "toxic" threads share many similarities and are quite easily identified. Here are a few pointers :-

Watch for a preponderance of overly loyal extremely positive contributions.
Any negative posters are "run off the thread".
When negative posters are accused of "downramping" you can be sure that all objectivity has been lost.
Look out for multitudinous "cut and paste" entries of scarcely relevant articles from the net.
Beware of threads where anyone posting a negative comment is personally attacked.
Dissenting views should be encouraged, not rubbished. We learn nothing from those that agree with us.

[mistaTea]

Sure wound up a few eh

Talking of sh1t I think that guy Phaedrus would call this a ‘toxic’ thread


Quote - These "toxic" threads share many similarities and are quite easily identified. Here are a few pointers :-

Watch for a preponderance of overly loyal extremely positive contributions.
Any negative posters are "run off the thread".
When negative posters are accused of "downramping" you can be sure that all objectivity has been lost.
Look out for multitudinous "cut and paste" entries of scarcely relevant articles from the net.
Beware of threads where anyone posting a negative comment is personally attacked.
Dissenting views should be encouraged, not rubbished. We learn nothing from those that agree with us.

Yeah, Phaedrus described the present day OCA thread perfectly lol.

It is so bad that on stocktalk it is even set as a 'Strict' thread so that Admin keep a close eye on it.

Some of the peeps here remind of the (now not so funny anymore) Ricky Gervais, where he quips that you either find his jokes funny or you are a c*nt.

[winner69]

Yeah, Phaedrus described the present day OCA thread perfectly lol.

It is so bad that on stocktalk it is even set as a 'Strict' thread so that Admin keep a close eye on it.

Some of the peeps here remind of the (now not so funny anymore) Ricky Gervais, where he quips that you either find his jokes funny or you are a c*nt.

Wonder if the reasons behind a low share price (non performing) and why discussions are toxic have things in common …..solve that and and Snoopy could write it up and become famous.

I pointed this thread out to a mate at LSE a while ago. He liked to get ‘raw material’ / case studies to give to his students doing behavioural finance and the role it plays in investor decision making.

Must catch up up him again …….and tell him this is a good study (again)

[Daytr]

Yeah, Phaedrus described the present day OCA thread perfectly lol.

It is so bad that on stocktalk it is even set as a 'Strict' thread so that Admin keep a close eye on it.

Some of the peeps here remind of the (now not so funny anymore) Ricky Gervais, where he quips that you either find his jokes funny or you are a c*nt.

Describes the Black Monday thread as well.

[Daytr]

This indeed may happen if the cashflow is good and the dividend keeps increasing in line with that. So how is that cashflow going? And what was it that happened to the dividend last time around?

SNOOPY

Snoopy perhaps I've missed it on this fast moving thread but I haven't seen you make mention of the 30% less refurbish costs on every resale. This imo is the most compelling thing about OCA and over time as the units are resold about every 5 - 7 years the float is going to start growing rapidly as the maturity profile of the portfolio moves forward.

A $1.2M unit is bought back at $800K, conservatively $200K is spent on refurb, probably more like $100k but let's stick with that. The unit has had capital gain over that 5 - 7 years of say another $100k, so OCA increases the float by $300K per unit & I think that is very conservative. So every 5 - 7 years the float will have increased by circa $400M once you allow for investment gain on the float or saved interest costs on borrowing to build more units.

That $400M imo is a conservative number & could be 50% higher than that.

Am I missing something?

[Snoopy]

Snoopy perhaps I've missed it on this fast moving thread but I haven't seen you make mention of the 30% less refurbish costs on every resale. This imo is the most compelling thing about OCA and over time as the units are resold about every 5 - 7 years the float is going to start growing rapidly as the maturity profile of the portfolio moves forward.

A $1.2M until is bought back at $800K, conservatively $200K is spent on refurb, probably more like $100k but let's stick with that. The unit has had capital gain over that 5 - 7 years of say another $100k, so OCA increases the float by $300K per unit & I think that is very conservative. So every 5 - 7 years the float will have increased by circa $400M once you allow for investment gain on the float or saved interest costs on borrowing to build more units.

That $400M imo is a conservative number & could be 50% higher than that.

Am I missing something?


Daytr, I think your general line of thinking is right, although I might take issue with some of the details. 30% less refurbishment costs every five years? That sounds credible if we look back over the last 5-7 years. But whether that will happen over the next 5-7 years, I am not sure. My gut feeling is that price to income ratios in the wider property market, and the cessation of twenty years worth of interest rate falls means that house prices will not rise that fast going forwards. OTOH I doubt if refurbishment costs will stop rising with inflation plus a bit more as good tradespeople are hard to come by.

A $1,2m unit bought back at $800k (presumably the price that the previous licence to occupy holder paid ) is a rise of 50% in 5-7 years, which is a quite bit higher than the percentage price rise even you were suggesting. I don't think you can claim another 'capital gain' of $100k over and above that. That sounds very much like double counting on an already optimistic price rise scenario., even allowing for your somewhat generous refurbishment cost assumption of $200k. So perhaps a gain of $200k per housing unit in the value of that float every 5-7 years might be nearer the mark? A bit lower than your 'very conservative' figure of $400k! Given NZ's infrastructure issues, I would expect rates bills to keep rising faster than inflation too, putting another permanent squeeze on retirement village operating margins.

But again all this is from an 'operator perspective'.

If we instead look from the 'investor perspective' the 'investment equation' only works if our investor can buy this house at half price. So from an investor perspective that house has increased in value over the 5-7 years from $800k/2 = $400k to $1,200k/2 = $600k (because our investor has bought the house via OCA's sharemarket listing at half NTA). However, the building team who does the refurbishment will still have to be paid in 'todays cash' which means $200k. That wipes out all of the investor capital gain of $200k, which means that in inflation adjusted terms our investor is going backwards. As you suggested in your post, that $200k of fix up costs is probably over generous. But your figures do allow me to show a kind of 'worst case' scenario where our investor ends up 'treading water' and not making any money at all, despite the 'float' rising in value.

SNOOPY

[SailorRob]

Posted to Snoopy on behalf of my mate 2cups.

Hi Snoopy,
Awesome post thanks for taking the time to post this, it is much appreciated.
I have lurked on share trader for a number of years and this is one of few posts that has
made me very interested in joining to enable further discussion.
I really think this is a good explanation of why OCA may be priced as it is, and it also really
hits home for me as to why when I look at housing prices, I think based on their rental
income they are way overvalued (funnily enough by somewhere approaching double).
One thing I am interested to dig in a bit deeper on (from your perspective), is why you
consider the Occupational Rights Agreement (or float) to be at best a market value of zero?
And I would be interested to know your thoughts on two things with regards to this;


1. The growth rate of the value of the occupational rights agreement (which to me from
memory appears to be somewhere in the ballpark of 15% since listing),


2. If we were to ignore the entire RV aspect of the business, and assume it broke even
only enabling it to sustain a break even operation into the future (perpetuity), while
also making an assumption there was zero property development, would you still
consider the ORA(float) to be worth zero and why? And if you didn’t consider it to be
worth zero, what would you consider it to be and why?

Thank you in advance for any reply you may provide, as well as for your initial post. Much
appreciated.

cupsy

[Daytr]

Daytr, I think your general line of thinking is right, although I might take issue with some of the details. 30% less refurbishment costs every five years? That sounds credible if we look back over the last 5-7 years. But whether that will happen over the next 5-7 years, I am not sure. My gut feeling is that price to income ratios in the wider property market, and the cessation of twenty years worth of interest rate falls means that house prices will not rise that fast going forwards. OTOH I doubt if refurbishment costs will stop rising with inflation plus a bit more as good tradespeople are hard to come by.

A $1,2m unit bought back at $800k (presumably the price that the previous licence to occupy holder paid ) is a rise of 50% in 5-7 years, which is a quite bit higher than the percentage price rise even you were suggesting. I don't think you can claim another 'capital gain' of $100k over and above that. That sounds very much like double counting on an already optimistic price rise scenario., even allowing for your somewhat generous refurbishment cost assumption of $200k. So perhaps a gain of $200k per housing unit in the value of that float every 5-7 years might be nearer the mark? A bit lower than your 'very conservative' figure of $400k! Given NZ's infrastructure issues, I would expect rates bills to keep rising faster than inflation too, putting another permanent squeeze on retirement village operating margins.

But again all this is from an 'operator perspective'.

If we instead look from the 'investor perspective' the 'investment equation' only works if our investor can buy this house at half price. So from an investor perspective that house has increased in value over the 5-7 years from $800k/2 = $400k to $1,200k/2 = $600k (because our investor has bought the house via OCA's sharemarket listing at half NTA). However, the building team who does the refurbishment will still have to be paid in 'todays cash' which means $200k. That wipes out all of the investor capital gain of $200k, which means that in inflation adjusted terms our investor is going backwards. As you suggested in your post, that $200k of fix up costs is probably over generous. But your figures do allow me to show a kind of 'worst case' scenario where our investor ends up 'treading water' and not making any money at all, despite the 'float' rising in value.

SNOOPY

Does OCA pass on capital gains?
I didn't think so? But I haven't looked into the company closely.
My point being, if the right to occupier sells back they get what they paid say $800K less 30%. OCA then sells the unit on for $1.2M which nets is $640K less refurbishment costs.
This is how I arrived at my higher figures.

[winner69]

"……………………..

[percy]

Does OCA pass on capital gains?
I didn't think so? But I haven't looked into the company closely.
My point being, if the right to occupier sells back they get what they paid say $800K less 30%. OCA then sells the unit on for $1.2M which nets is $640K less refurbishment costs.
This is how I arrived at my higher figures.

A friend of mine is a resident at Russley Village in Christchurch.
Your figures tye in with what her unit cost.
She would like to move into one of their appartments,which would cost her around $650,000.
Selling her unit would net her approx $560,000,so she would need to front up with $90,000 and watch her old unit being sold for $1.2mil.

[Snoopy]

Does OCA pass on capital gains?
I didn't think so? But I haven't looked into the company closely.
My point being, if the right to occupier sells back they get what they paid say $800K less 30%. OCA then sells the unit on for $1.2M which nets is $640K less refurbishment costs.
This is how I arrived at my higher figures.


Ah yes, the retention of licence to occupy fees is on the original purchase price. You are right about that, and I did not take into account that detail. Just to be clear, I am not putting myself forward as the OCA expert on all of those details! I am more trying to get a handle on the overall overarching picture as regards listed retirement villages.

SNOOPY

[Snoopy]

Posted to Snoopy on behalf of my mate 2cups.

Hi Snoopy,

Awesome post thanks for taking the time to post this, it is much appreciated. I have lurked on share trader for a number of years and this is one of few posts that has
made me very interested in joining to enable further discussion.


First things first. Welcome to the discussion Cupsy.



I really think this is a good explanation of why OCA may be priced as it is, and it also really hits home for me as to why when I look at housing prices, I think based on their rental income they are way overvalued (funnily enough by somewhere approaching double).


I think a seasoned property investor might be happy with a 3% gross yield if that was for a house with good tenants in a good suburb. However, put that same house inside a listed retirement village and that same investor would probably think that 3% yield was more than a bit light, purely because it was one step removed from them with a listed entity owning it. Investing in a listed entity like OCA is a different ball, (or house) game. It is four pages back now. But here is what I said about the float being worth zero



Sure I am leaving out the fact that the 'float' is occupier equity, not shareholder equity, so it is not shareholder equity that is being lost as Mr Market marks down OCA asset values via the share price as new villas are built. But what you have here from a cashflow perspective is a process where OCA shells out 'real money' to build a series of houses for $1m, which Mr Market promptly values at $600k as soon as they are built. Sure these are unrealised market value losses. And these losses would likely disappear if OCA was broken up and all the villas sold off. But this isn't going to happen. As long as Mr Market is unhappy with the cashflow being spun off from these villa assets, what you have here with OCA and the current return on asset business model is from a new shareholder perspective a perpetual loss making machine. And that means the market value of the float from a potential new shareholder perspective, which you claim to be the secret growth engine that keeps on giving, is at best zero.




cupsy wrote:
One thing I am interested to dig in a bit deeper on (from your perspective), is why you consider the Occupational Rights Agreement (or float) to be at best a market value of zero?
And I would be interested to know your thoughts on two things with regards to this;

1. The growth rate of the value of the occupational rights agreement (which to me from memory appears to be somewhere in the ballpark of 15% since listing),

2. If we were to ignore the entire RV aspect of the business, and assume it broke even only enabling it to sustain a break even operation into the future (perpetuity), while
also making an assumption there was zero property development, would you still consider the ORA(float) to be worth zero and why? And if you didn’t consider it to be
worth zero, what would you consider it to be and why?

cupsy

There is little to no doubt hat the float has real value from an OCA perspective. At least you would hope that OCA management would not be silly enough to deploy that float capital in a loss making venture. And even if OCA did lose some of that float money it would still not be a problem, provided the cumulative losses were wiped out by capital gains, next time that licence to occupy right was on sold.

But where that rate of return hurdle on the float comes under more scrutiny is when you consider that float as a pool of development money from a shareholder perspective. For much of the listed history of OCA, shareholders have declared (via the share price) that they see OCAs net assets as only worth about half what the book value is. This isn't just a vote on the income earning potential of those villas. There is also the issue of income from those villas cross subsidising the care units that make up the total 'OCA package'. But taking into account all of this, the opinion of Mr Market is that broadly for every $1 spent on developing assets, shareholders only see 50c of value being created. One interpretation of this is that shareholders see development of new villas and facilities as a value destruction exercise.

I haven't studied OCA to the extent of getting down to the nitty gritty of their development margins. But there will be some reading this post who have a good handle on this kind of detail. And they will be able to tell us if the capital sales margin on these developments is halved (which is the equivalent of developing these new properties in line with how shareholders see value, at half price) while construction costs remain the same, how profitable these new developments are - from a shareholder perspective.

You talk about the growth rate of the operational rights agreement(s). These are the balance sheet liabilities, which some would see as assets because unless the underlying villa is destroyed, they will never have to be repaid by OCA. This is the balance sheet representation of 'the float' we have been talking about. I take your word for it that this has been growing at a rate of 15% per annum from the time of OCA listing. I am not sure what more I can say about this, except that it will reflect both the growth in size of the licence to occupy villa portfolio and underlying property price inflation over that time-frame.

As to your second point, I am not sure you can ignore the RV aspect of the business, as that is the entire reason for OCA's existence! But I think I get your point. And that is if you are given some free money to invest (for that is what a perpetual loan that never has to be repaid is) could it still be worth zero? As long as that investment is making a positive return and -what is more important-, shareholders perceive that money is making a positive return (i.e. its value has not perceived to have dropped to 50c in the dollar), then yes I would say the float has positive value. What that positive value would be depends entirely on the nature of that investment

HTH

SNOOPY

[SailorRob]

First things first. Welcome to the discussion Cupsy.



I think a seasoned property investor might be happy with a 3% gross yield if that was for a house with good tenants in a good suburb. However, put that same house inside a listed retirement village and that same investor would probably think that 3% yield was more than a bit light, purely because it was one step removed from them with a listed entity owning it. Investing in a listed entity like OCA is a different ball, (or house) game. It is four pages back now. But here is what I said about the float being worth zero





There is little to no doubt hat the float has real value from an OCA perspective. At least you would hope that OCA management would not be silly enough to deploy that float capital in a loss making venture. And even if OCA did lose some of that float money it would still not be a problem, provided the cumulative losses were wiped out by capital gains, next time that licence to occupy right was on sold.

But where that rate of return hurdle on the float comes under more scrutiny is when you consider that float as a pool of development money from a shareholder perspective. For much of the listed history of OCA, shareholders have declared (via the share price) that they see OCAs net assets as only worth about half what the book value is. This isn't just a vote on the income earning potential of those villas. There is also the issue of income from those villas cross subsidising the care units that make up the total 'OCA package'. But taking into account all of this, the opinion of Mr Market is that broadly for every $1 spent on developing assets, shareholders only see 50c of value being created. One interpretation of this is that shareholders see development of new villas and facilities as a value destruction exercise.

I haven't studied OCA to the extent of getting down to the nitty gritty of their development margins. But there will be some reading this post who have a good handle on this kind of detail. And they will be able to tell us if the capital sales margin on these developments is halved (which is the equivalent of developing these new properties in line with how shareholders see value, at half price) while construction costs remain the same, how profitable these new developments are - from a shareholder perspective.

You talk about the growth rate of the operational rights agreement(s). These are the balance sheet liabilities, which some would see as assets because unless the underlying villa is destroyed, they will never have to be repaid by OCA. This is the balance sheet representation of 'the float' we have been talking about. I take your word for it that this has been growing at a rate of 15% per annum from the time of OCA listing. I am not sure what more I can say about this, except that it will reflect both the growth in size of the licence to occupy villa portfolio and underlying property price inflation over that time-frame.

As to your second point, I am not sure you can ignore the RV aspect of the business, as that is the entire reason for OCA's existence! But I think I get your point. And that is if you are given some free money to invest (for that is what a perpetual loan that never has to be repaid is) could it still be worth zero? As long as that investment is making a positive return and -what is more important-, shareholders perceive that money is making a positive return (i.e. its value has not perceived to have dropped to 50c in the dollar), then yes I would say the float has positive value. What that positive value would be depends entirely on the nature of that investment

HTH

SNOOPY



I haven't read much of today's posting yet, nor this one, but 2cups will be very happy you replied. He's a long time viewer and is trying to join up - some issue with email or something.

[SailorRob]

That AR2023 and the cashflow statement within certainly made epic reading. Net decrease in the cash position a drop of a mere $2.376m over the year. Yay! Oh hang on. The improved cash position was all funded by increased borrowing! SNOOPY

Slowly getting through the posts, just on this one;

With this logic a company that makes 100 million in cash from their business but reinvests 110 million at a 25% rate of return and funds the extra 10 by borrowing is a sad state of affairs?

No.

There is a lot more to it than net increase or decrease in cash as you well know.

[SailorRob]

I am not saying OCA will be a poor investment going forwards. I am just saying that the share price growth expectations of some investors going forwards may be a little high.

SNOOPY

I would not disagree.

[SailorRob]

Snoopy is 100% correct on these stupid property companies, they are worth nowhere near 50% of NTA...

NTA is a total joke. As it is with every property in NZ and has been for a long time. Nothing wrong with the businesses but the prices are way too high even currently they are way over valued.

It's not the market doesn't recognise the value - it over recognises it at current prices. A company that builds or buys property and earns a 3% yield, well where are they getting money to expand? Total joke.

All this nonsense about NTA and valuations and accounting is meaningless.

The value of the business is simply what it can produce in cash in the future and when that occurs and what happens to it.

If OCA model cannot produce massive stacks of cash that discounted to today are not worth far more than current share price then Snoopy is correct.

But what nobody is talking about is that a 3% return on assets between Argosy and OCA are very very different things in relation to equity capital.

OCA has far far more total assets in comparison to equity capital that even a very low return will see immense riches.

What's a 3% cash return on assets in relation to equity capital? And then those assets growing fast without any need for capital that you pay for?

So, if the cash is real and it is reinvested to create more cash then one day the market must recognise this. With the other companies it's all an illusion and the market has FINALLY worked this out (thought it was efficient)?

Any rental in NZ is worth less than half what you could sell it for right now... But the market is wrong and has been for a very very long time.

Snoopys argument is that if OCA had a money making machine that spat out $2 coins but as soon as the metal had cooled off the market valued them at $1 then that's what they are worth... Well, let's see what happens.


One thing Snoop, can you admit for me then that 50% NTA for both Argosy type company and OCA, one must be way wrong? Or are you saying that they are so similar they both should trade at the same discount?


Who cares about NTA? Apple trades for and is worth close to 50 times NTA and many companies are worth less than 10% of NTA. So NTA in and of itself means nothing. Who cares about accounting or how any of this is viewed?

All that matters is cash produced. That's it folks.

[SailorRob]

Should we not be seeing immense insider purchase announcements about now?


The day it hit 38 cents.

Instead we saw the biggest insider sale of all time.

[SailorRob]

Yep, you nailed it once again Bull.
Property will definitely crash and old people will either all die over this or no longer need late stage care anymore because Covid has stopped cancer and those other details that used to happen.
OCA is in big trouble , thanks for bringing it to our attention.


Legendary.

[mike2020]

Yip after reading this thread near on a decade we went down a serious rabbit hole today. After a period where you struggled to sell a house sales froze. Fundamentally nothing's changed.

[SailorRob]

Maybe this will help you Snoop, otherwise try some dak.



Merry Christmas to the OCA thread.

Here is a present for you all.


ANY company that has an interest free non callable loan that is equal almost to the equity capital of that company (let alone one which grows at 26% per year), all they have to do with their funds is something that isn't stupid and you're going to have a hell of a result over the long term. Then imagine on top of that another dollop of cash equal to nearly half your equity at extremely low rates for a long time as well. You don't have to invest it well to have a hell of a good result.


Let's put this into simple terms.


You have saved up $949,000 and then uncle Ebeneezer of Nigeria has loaned you $817,000 interest free and promised to give you more and more and he can't ask for it back, now you have 1.8 million dollars to invest, well you can just jam it into a term deposit and you're going to do very well. But wait, some other idiot gives you another $380,000 at ridiculously low interest rates (well below the term deposit).


You don't need to do anything special to generate incredible returns on your $949,000.


But imagine if you were a decent investor as well and you had a long track record of being able to allocate capital effectively.


Would you then take this 2.2 million dollar investment vehicle and sell it for $560,000?


Or if it was offered to you would you happily pay $560,000 for it?

[X-men]

Stop discussing this 🐕... market has its price...lol

[X-men]

Not clueless ..U dick head sailor moon. U have been defending this dog for years now..n the SP is still go no where!!!

Stop attacking me personally into my mailbox. Send me personal message if you want a lap dance..I will sit on your face....

[SailorRob]

Not clueless ..U dick head sailor moon. U have been defending this dog for years now..n the SP is still go no where!!!

Stop attacking me personally into my mailbox. Send me personal message if you want a lap dance..I will sit on your face....


It's called a reputation comment bro. Not a personal message.

You are however correct, clueless would be a far too complimentary description for you.

Can I change it to Cretin? Thanks.

[Ferg]

Snoopy & others - if you want to understand the cash flows then below is a summary.

DayTr mentioned the 30% but I'm not sure you understood it correctly. 30% is not the capital growth of the unit price over 5-7 years, that is the management fee deduction from the ORA that is retained by OCA. It's not that it sounds credible, it is the contractual deduction before on-charging refurbishment costs on departure. This 30% deduction from the ORA is before any capital gains on resales. So running some numbers:



Let's say OCA builds a unit at a cost of $1m
OCA sells said unit for $1.2m with a 'realised gain' of $200k (aka 'development margin')
Over the first 3 years, OCA takes and keeps 30% of the ORA value as 'management fees'. Given the difference in timing of management fees charged against the ORA versus their release to the P&L, such deferrals of income recognition are referred to as 'deferred management fees' or DMF.
Resident departs in say 6 years
Unit is refurbished at a cost of say $150k
Resident is repaid their ORA of $1.2m - $360k management fee - $150k refurbishment = $690k repaid in year 6/7 (note this is repaid from the proceeds received from the incoming resident, more on that below)
After 6 years inflation at say 3% p.a. the unit now resells for say $1.4m in year 7 to a new resident
Incoming resident pays $1.4m, OCA books a 'resale gain' of $200k (being new ORA of $1.4m less previous ORA value of $1.2m) - ignoring for now any sharing of capital gains with the departing resident. Note there is no double counting.
New resident has 30% of their $1.4m deducted over their first 3 years of occupation
and so on. as the cycle repeats


Run that through a cash flow model. Note the cash is not yet dropping out the bottom in total for OCA given they have used the retained cash to build another unit etc. IOW they are reinvesting that float to make more money.

Cash flows for modelling:
Year 0 has a cash outflow of -$1m for construction
Year 1 sees a cash inflow of +$1.2m
Years 1-3 sees 30% of the ORA 'earned' in the P&L but the cash is already in the bank account (consequently the ORA liability reduces by 30% over this time)
Year 6 sees the resident depart and there is a cash outflow of -$150k for refurb
Year 7 sees the new resident come in and pay +$1.4m (another cash inflow to OCA)
Year 7 sees the departing resident repaid their ORA less management fees less refurb = -$690k
Total cash banked from property transactions over the period years 0-7 (it's actually the same figures for years 8-12 assuming the resident stays 6 years) is a nett inflow of {-$1m + $1.2m - $150k - $690k + $1.4m} = +$760k
So from the property perspective in years 7-12 OCA has $760k in the bank, an asset worth at least $1.4m (ignoring inflationary gains in years 8-12 for now) and an ORA liability of {70% of $1.4m=} $980k for nett assets of $1.18m.
Nett assets of $1.18m is made up of initial gain of $200k + {30% of $1.2m retained=} $360k + {resale gain of} $200k + {30% of $1.4m retained=} $420k = $1.18m

I put up a detailed post on this elsewhere. Once the development stops, there is plenty of cash being produced on the assumption a) stocks are sold, and b) property continues to increase in value over the long term. I know I have not mentioned opex. Some opex is on-charged to clients for a nett cash cost of zero to OCA whilst other opex is funded from the management fees. History shows not all of the management fees are consumed by opex and there is in fact retained earnings from these.

I hope that helps.




Daytr, I think your general line of thinking is right, although I might take issue with some of the details. 30% less refurbishment costs every five years? That sounds credible if we look back over the last 5-7 years. But whether that will happen over the next 5-7 years, I am not sure. My gut feeling is that price to income ratios in the wider property market, and the cessation of twenty years worth of interest rate falls means that house prices will not rise that fast going forwards. OTOH I doubt if refurbishment costs will stop rising with inflation plus a bit more as good tradespeople are hard to come by.

A $1,2m unit bought back at $800k (presumably the price that the previous licence to occupy holder paid ) is a rise of 50% in 5-7 years, which is a quite bit higher than the percentage price rise even you were suggesting. I don't think you can claim another 'capital gain' of $100k over and above that. That sounds very much like double counting on an already optimistic price rise scenario., even allowing for your somewhat generous refurbishment cost assumption of $200k. So perhaps a gain of $200k per housing unit in the value of that float every 5-7 years might be nearer the mark? A bit lower than your 'very conservative' figure of $400k! Given NZ's infrastructure issues, I would expect rates bills to keep rising faster than inflation too, putting another permanent squeeze on retirement village operating margins.

But again all this is from an 'operator perspective'.

If we instead look from the 'investor perspective' the 'investment equation' only works if our investor can buy this house at half price. So from an investor perspective that house has increased in value over the 5-7 years from $800k/2 = $400k to $1,200k/2 = $600k (because our investor has bought the house via OCA's sharemarket listing at half NTA). However, the building team who does the refurbishment will still have to be paid in 'todays cash' which means $200k. That wipes out all of the investor capital gain of $200k, which means that in inflation adjusted terms our investor is going backwards. As you suggested in your post, that $200k of fix up costs is probably over generous. But your figures do allow me to show a kind of 'worst case' scenario where our investor ends up 'treading water' and not making any money at all, despite the 'float' rising in value.

SNOOPY

[SailorRob]

Snoopy & others - if you want to understand the cash flows then below is a summary.

DayTr mentioned the 30% but I'm not sure you understood it correctly. 30% is not the capital growth of the unit price over 5-7 years, that is the management fee deduction from the ORA that is retained by OCA. It's not that it sounds credible, it is the contractual deduction before on-charging refurbishment costs on departure. This 30% deduction from the ORA is before any capital gains on resales. So running some numbers:



Let's say OCA builds a unit at a cost of $1m
OCA sells said unit for $1.2m with a 'realised gain' of $200k (aka 'development margin')
Over the first 3 years, OCA takes and keeps 30% of the ORA value as 'management fees'. Given the difference in timing of management fees charged against the ORA versus their release to the P&L, such deferrals of income recognition are referred to as 'deferred management fees' or DMF.
Resident departs in say 6 years
Unit is refurbished at a cost of say $150k
Resident is repaid their ORA of $1.2m - $360k management fee - $150k refurbishment = $690k repaid in year 6/7 (note this is repaid from the proceeds received from the incoming resident, more on that below)
After 6 years inflation at say 3% p.a. the unit now resells for say $1.4m in year 7 to a new resident
Incoming resident pays $1.4m, OCA books a 'resale gain' of $200k (being new ORA of %1.4m less previous ORA value of $1.2m) - ignoring for now any sharing of capital gains with the departing resident. Note there is no double counting.
New resident has 30% of their $1.4m deducted over their first 3 years of occupation
and so on. as the cycle repeats


Run that through a cash flow model. Note the cash is not yet dropping out the bottom in total for OCA given they have used the retained cash to build another unit etc. IOW they are reinvesting that float to make more money.

Cash flows for modeeling:
Year 0 has a cash outflow of -$1m for construction
Year 1 sees a cash inflow of +$1.2m
Years 1-3 sees 30% of the ORA 'earned' in the P&L but the cash is already in the bank account (consequently the ORA liability reduces by 30% over this time)
Year 6 sees the resident depart and there is a cash outflow of -$150k for refurb
Year 7 sees the new resident come in and pay +$1.4m (another cash inflow to OCA)
Year 7 sees the departing resident repaid their ORA less management fees less refurb = -$690k
Total cash banked from property transactions over the period years 0-7 (it's actually the same figures for years 8-12 assuming the resident stays 6 years) is a nett inflow of {-$1m + $1.2m - $150k - $690k + $1.4m} = +$760k
So from the property perspective in years 7-12 OCA has $760k in the bank, an asset worth at least $1.4m (ignoring inflationary gains in years 8-12 for now) and an ORA liability of {70% of $1.4m=} $980k for nett assets of $1.18m.
Nett assets of $1.18m is made up of initial gain of $200k + {30% of $1.2m retained=} $360k + {resale gain of} $200k + {30% of $1.4m retained=} $420k = $1.18m

I put up a detailed post on this elsewhere. Once the development stops, there is plenty of cash being produced on the assumption a) stocks are sold, and b) property continues to increase in value over the long term. I know I have not mentioned opex. Some opex is on-charged to clients for a nett cash cost of zero to OCA whilst other opex is funded from the management fees. History shows not all of the management fees are consumed by opex and there is in fact retained earnings from these.

I hope that helps.



Yes helps a lot, great post. Only addition I have is where you say 'Over the first 3 years, OCA takes and keeps 30% of the ORA'. Perhaps should just read 'keeps' as the key point here is that they took it already!

This post highlights what I said earlier about the cash flows are mind boggling and was met with a somewhat snarky (yes SR is king of snark know) reply about net cash flows which are not in this context relevant.

[SailorRob]

Now I've tidied up all my work after reporting season, just for fun I thought I would see where OCA might roughly be, should it stop reinvesting in more land and developments, and just call it a day and finish their current pipeline.

Here's the parameters.
A. All values are at today's expenses and revenue rates.
B. No allowance for resales is included. I am fully in agreement with Sailor Rob that average house price movements simply reflect inflation of the era, no more. There is no real profit. This is a concept that most won't accept. History demonstrates property resale profits simply match inflation in the long run. So RESALE PROFIT is just inflation proofing of the assets- incredibly valuable for the long term investing aspect…but it isn't profit.
C. Clearly, no new sales margins
D. Villages are all completed and sold down to normal occupancy rates over the next 8 years.
E. I don't know what corporate costs will be as many staff won't be needed. I have retained the current expense ratios for this exercise which will no doubt be too high.

So in about 8 years when all this is finished and sold what are we left with?

Underlying Profit should be around $71m ( to compare today's annual unpat with resales removed is $31m - but this obviously includes new sales profit).

To make the numbers real simple… 2032that's $10c EPS + inflation value. So again, because this concept is so important, the $.10c is ON TOP OF inflation.

Here's the kicker …2032 …OCA now has no debt and a $2.4B cash float !

If OCA were to achieve a return of 5% net on this free cash float that's $.20c EPS extra! Yep , 200% more than what they will be making on their properties.

The only 2 questions to ask;


What would you pay for a share making $0.30 EPS ( that is inflation indexed) ?
What kind of mega industry would want to buy this return and access to this source of cash the most?


You can love or hate Sailor as much as you like but he is the one correctly banging on about the “float” , trying to get people to see the ultimate real value of these companies.

He's right , these future numbers are incredible and have feck all to do with what nurses are paid.




This post of Mavs is one of the all times...

Snoopy please read and you will see what the fuss is about and how you are totally and utterly incorrect comparing this to Lyalls Hong Kong listed property.

Chalk and Cheese.

Oh but in 2032 the 2.4 billion of cash will be scoffed at by the market and valued at ZERO. I don't think so.

[SailorRob]

I really think the extreme difficulty that Mav, myself, Ferg and a few others have in explaining this (to us) simple concept is why the market price is what it is.

It really seems hard to understand by most people.

But cash earnings getting shoved out the door into investors hands... Even Mr Market can understand this.

I'd love to see misatea's comeback to Ferg and Mavs post here rather than Mr market this and that and be careful and ohhh the market is telling you this and than and read the leaves or else you will get hurt etc...

Show us how the math doesn't stack.

[mistaTea]

I'd love to see misatea's comeback to Ferg and Mavs post here rather than Mr market this and that and be careful and ohhh the market is telling you this and than and read the leaves or else you will get hurt etc...


But I never said any of that?

And I have never said that your math doesn’t add up, nor that I think OCA is not a good long term investment?

I think I have complimented you on your analysis, in fact?

Why are you so angry mate.

[Ferg]

Yes helps a lot, great post. Only addition I have is where you say 'Over the first 3 years, OCA takes and keeps 30% of the ORA'. Perhaps should just read 'keeps' as the key point here is that they took it already!

This post highlights what I said earlier about the cash flows are mind boggling and was met with a somewhat snarky (yes SR is king of snark know) reply about net cash flows which are not in this context relevant.

Thanks SR. I'm often up for a debate provided it is conducted honestly and I would prefer any such debate is based on facts and actual operating methods.....not suppositions or guess work. My post is trying to reveal the actual methods employed by OCA which also de-mystifies the accounts for the average reader. Noted that part could be worded better because yes the cash is already in the bank. I see you were so quick with your reply that you can see my typos...!

Assuming 50% of the DMF (I can't recall the actual figure) is retained and the other 50% is spent on opex, the return after 7 years is $200k + 50% of $360k = $380k. Note this assumes annual non-chargeable opex of $25k which is more than enough IMO. Over 7 years this is a very basic nominal return on assets of 380k/1m/7 = 5.4% p.a. assuming no leverage or compounding/inflation etc - just a very basic measure like a 'cap rate'. Introduce leverage and the return on equity will be higher. That RoE should then be compared to alternative investments when assessing a value at a point in time. Simple and complicated at the same time.

[Valuegrowth]

What do you think about OCA’s balance sheet? I am a balance sheet follower. When are they planning to come out from debt? What about their future cash flow and ROE.

https://au.investing.com/equities/oceania-healthcare-ltd-balance-sheet

Their current liability is much higher than current asset. When they will have higher current asset than current liabilities. Cheers.

[SailorRob]

Thanks SR. I'm often up for a debate provided it is conducted honestly and I would prefer any such debate is based on facts and actual operating methods.....not suppositions or guess work. My post is trying to reveal the actual methods employed by OCA which also de-mystifies the accounts for the average reader. Noted that part could be worded better because yes the cash is already in the bank. I see you were so quick with your reply that you can see my typos...!

Assuming 50% of the DMF (I can't recall the actual figure) is retained and the other 50% is spent on opex, the return after 7 years is $200k + 50% of $360k = $380k. Note this assumes annual non-chargeable opex of $25k which is more than enough IMO. Over 7 years this is a very basic nominal return on assets of 380k/1m/7 = 5.4% p.a. assuming no leverage or compounding/inflation etc - just a very basic measure like a 'cap rate'. Introduce leverage and the return on equity will be higher. That RoE should then be compared to alternative investments when assessing a value at a point in time. Simple and complicated at the same time.


introduce leverage and the return can and will be FAR higher. You can increase leverage from conventional sources as well.

The ROE should be compared to alt investments but not just as ROE, the ability to reinvest how much more capital at said ROE.

Now that bold txt will go over many heads but folks - it is the meaning of life.

[Ferg]

What do you think about OCA’s balance sheet? I am a balance sheet follower. When are they are planning to come out from debt? What about their future cash flow and ROE.

https://au.investing.com/equities/oceania-healthcare-ltd-balance-sheet

Their current liability is much higher than current asset. When they will have higher current asset than current liabilities. Cheers.

I genuinely recommend you have a read of this, rather than relying on someone else's interpretation and classification of various accounts:
https://www.nzx.com/announcements/422074
in particular the second attachment, pages 16, 17 & 29-57.

Dovetail that research with the many excellent posts here by Maverick and SR so you understand the ORA liability. Also read up about the differing debt facilities and in particular the T&C's associated with the development facility.

In short the external interest bearing debt will disappear once OCA stops new developments. The ORA liability will never be repaid and should be viewed as 'quasi-equity'. Some debt is actually ok provided it can be serviced without impacting other things.

[Ferg]

Snoopy me ol’ mate, I get the feeling that most on here don’t get (or want to get) what you are saying

Aren’t you just answering why are OCA shares always so ‘cheap’ / ‘undervalued’ …ie share price doesn’t represent a ‘true’/‘realistic’ value …and you add that this is unlikely to change

Hey winner, I'm not sure who you are referring to but the value question is easily understood as I articulated in my summary of Lyall's article earlier. Very simplistically, where the required rate of return for equities exceeds the yield on properties, and the market values listed property entities on the same basis as other equities, then it is natural for such property entities to have reduced share prices relative to other equities. Hence the reason we see different 'packages' of such property entities to avoid such (de)valuations. NZL is classic example as I have previously posted regarding a lower / unsupported SP. That is not in dispute.

Keep in mind we have just come through a period of high interest rates and consequently high discount rates which together have a double whammy impact on levered property entities. The first negative impact is higher cash outflows to service debt and the other being lower property values due to higher discount rates. That is easy to understand. But it stays this way 'forever'? Yeah nah. And it has always been that way? Wrong as evidenced by historical prices set by 'Mr Market' for various RV's over the years where they were often in excess of 50% of NTA (so was 'Mr Market' right or wrong then?) and as also evidenced by the current SP of SUM relative to net assets. IOW observable anecdotal evidence directly contradicts conclusions regarding 'forever' and always.

What is harder to understand are the circular arguments not based on fact that have been shown to be complete cack and the cherry picking of quotes to support an argument. I often can't be bothered but Snoopy's cashflow analyses are so far off being correct, hence the reason for my post on the subject. {Aside: Notice my CF post (purposefully) has no equity so the return on equity per my post is currently infinite...! Yeah we could build in debt and equity but that adds complications which simply muddy the waters on 'perceived' cashflows...plus we are focusing on just the property aspect.} Surely it is better that we debate things based on fact and correct analysis rather than some half baked attempt as we saw with a series of posts? We are correct to question flawed analysis, but that is not an attempt to chase said poster away.....that should only be done to those who purposely troll. What I have focused on are the flawed analyses and partial quotes that were used to support the conclusion; note I did not dispute the conclusion regarding discounts to NTA. I realise I am crapping on supposed 'hallowed grounds' but the methods by which the conclusions were derived can only be described as fantasy. Whilst my reserve of patience has not been fully consumed on the matter, others have been discussing this topic at length for a while and I can understand their frustration at someone wading in with no knowledge of the subject.

[winner69]

It’s good we’ve sussed the whys and wherefores of why Oceania trading at close to 50% of this thing called NTA.

Summerset has essentially the same business model, has a float/equity ratio that’s about the same as Oceania but trades at more than 1x NTA

Wonder why? All the discussion re Oceania doesn’t answer that question

[SailorRob]

It’s good we’ve sussed the whys and wherefores of why Oceania trading at close to 50% of this thing called NTA.

Summerset has essentially the same business model, has a float/equity ratio that’s about the same as Oceania but trades at more than 1x NTA

Wonder why? All the discussion re Oceania doesn’t answer that question

Pretty obvious mate.

Proven model with the highest 10 EPS growth of any company in the world pretty much.

CAGR of nearly 50% for a decade.

They have shown they can make it work.

[winner69]

Pretty obvious mate.

Proven model with the highest 10 EPS growth of any company in the world pretty much.

CAGR of nearly 50% for a decade.

They have shown they can make it work.

So Oceania’s challenge is to demonstrate they can actually ‘rmake it work’ after years of trying

That takes more than words and glossy presentations …I’m sure you agree that takes successful execution of strategic intent eh

[Snoopy]

Snoopy perhaps I've missed it on this fast moving thread but I haven't seen you make mention of the 30% less refurbish costs on every resale. This imo is the most compelling thing about OCA and over time as the units are resold about every 5 - 7 years the float is going to start growing rapidly as the maturity profile of the portfolio moves forward.

A $1.2M unit is bought back at $800K, conservatively $200K is spent on refurb, probably more like $100k but let's stick with that. The unit has had capital gain over that 5 - 7 years of say another $100k, so OCA increases the float by $300K per unit & I think that is very conservative. So every 5 - 7 years the float will have increased by circa $400M once you allow for investment gain on the float or saved interest costs on borrowing to build more units.

That $400M imo is a conservative number & could be 50% higher than that.

Am I missing something?


Sorry Daytr, I made a complete hash of your example, due to my lack of understanding for how the fee structure for independent living retirement units works at OCA. I took the 30% you mentioned to represent inflation over the ownership period. In fact, I now believe you were talking about a 30% deferred management fee on the purchase cost.

So restating your example in chronological order.

1/ A villa is bought for $1.1m 5-7 years ago.
2/ The deferred management fee on that transaction is 30% of the purchase price: 0.3 x $1.1m = $330,000.
3/ The villa is bought back from the previous owner at the original purchase price, less deferred management fees. $1.1m - $0.33m = $0.8m (round figures)
4/ $200,000 is spent on villa refurbishment. So the cost on the books of the villa at handover date is now: $0.8m + $0.2m = $1.0m
5/ The villa has a capital gain over the 5-7 years of $100,000. So the handover sales price is: $1.1m + $0.1m = $1.2m
6/ Thus the net gain on the books to OCA over the period, with refurbishment costs taken into account, is $1.2m - $1.0m = $200,000

You say the float increased by $400k over the ownership period. That may well be right if the refurbishment costs do not come out of the float. I do not know how the internal accounting of the villa refurbishment works at OCA. However, I think this is what you were attempting to convey to me in your original post that I have quoted above.

That is all rather at odds with my original reply to you below, where I thought you were talking about an underlying 30% inflation rate over the ownership period. Sorry about the misunderstanding.



Daytr, I think your general line of thinking is right, although I might take issue with some of the details. 30% less refurbishment costs every five years? That sounds credible if we look back over the last 5-7 years. But whether that will happen over the next 5-7 years, I am not sure. My gut feeling is that price to income ratios in the wider property market, and the cessation of twenty years worth of interest rate falls means that house prices will not rise that fast going forwards. OTOH I doubt if refurbishment costs will stop rising with inflation plus a bit more as good tradespeople are hard to come by.

A $1,2m unit bought back at $800k (presumably the price that the previous licence to occupy holder paid ) is a rise of 50% in 5-7 years, which is a quite bit higher than the percentage price rise even you were suggesting. I don't think you can claim another 'capital gain' of $100k over and above that. That sounds very much like double counting on an already optimistic price rise scenario., even allowing for your somewhat generous refurbishment cost assumption of $200k. So perhaps a gain of $200k per housing unit in the value of that float every 5-7 years might be nearer the mark? A bit lower than your 'very conservative' figure of $400k!


In fact that $200k gain over the ownership period ties in what what you were saying exactly. So we were on the same page after all in the end.

SNOOPY

[Snoopy]

Resident is repaid their ORA of $1.2m - $360k management fee - $150k refurbishment = $690k repaid in year 6/7 (note this is repaid from the proceeds received from the incoming resident, more on that below)




I hesitate to ask this because Ferg is usually very accurate with his figures. But departing OCA residents pay a huge 30% deferred management fee AND get a large refurbishment bill on top of that? Surely not?

SNOOPY

[Bjauck]

…
I think a seasoned property investor might be happy with a 3% gross yield if that was for a house with good tenants in a good suburb. However, put that same house inside a listed retirement village and that same investor would probably think that 3% yield was more than a bit light, purely because it was one step removed from them with a listed entity owning it. Investing in a listed entity like OCA is a different ball, (or house) game. It is four pages back now. But here is what I said about the float being worth zero
…Why would a seasoned investor entertain a 3% gross yield on a house? Deposits in banks yield much more net than that, especially if a PIE wrapper is involved.

Of course it is the return from untaxed capital gains that drew in the seasoned investor in NZ housing. That coupled with leveraging, reduced the taxable yield, via interest deductibility, while boosting the leveraged untaxed capital gain.

Continued capital gains after so many decades of the boost to housing valuations from interest rate drops are not certain. However, NZ governments in both right and left have for these past decades supported existing real estate owners by tweaking the mixture of tenancy laws, immigration policies, planning procedures, failure to accommodate housing demand, inflation/interest rate policy, pandemic and crisis response. So perhaps we should never underestimate continued NZG implicit support for the interests of existing owners of housing, certainly whilst home ownership rates remain above the 40-50% level.

[Daytr]

Hi Snoop, yes that's what I was saying.
Even in a place like Auckland I can't see the average refurbishment cost of a one or two bedroom unit being $200k. New paint job, new carpets & perhaps every 2nd or 3rd resale a new kitchen etc.

With my mother's one bedroom unit she was only in it for 6 months so they didn't have to any refurb. I know this isn't typical and the average turnover I think in most retirement villages is about 5 years.

So back to the 2nd example I gave and it's probably more realistic than the first.
A unit is bought 5 years ago for $800K and is sold back to OCA at $560k after the 30%.
The cost of the refurb is $100k, I can see how it would cost more than this.

So the unit owes $660k to OCA. In the 5 years they averaged a 5% capital gain on the $800K so compounding that $1.021M so a net gain of $361k.

5% capital gain I think is reasonably conservative. Obviously in the last few years prices have dropped, but prior to that gains were averaging double digit.

So $360K per unit is about $655M for OCA every 5 - 7 years.

I suppose if we take the average at 6 years then its $109M p.a. plus what ever operating profit they make. Last year it was circa $50M so together $159M pa a pre tax or $114.48M after tax.
Which is an EPS of 15.4c per share.

It's currently trading at a multiple of 13.75 so if it maintained that the share price would be $2.12
But if it dropped back to a multiple of 10 which I think is more realistic then the SP should be around $1.54. As the DMFs aren't flowing quite yet and the company still has debt whilst building more units there needs to be a reasonable discount applied to those forecast share prices.

So imo the SP is undervalued somewhat but not ridiculously so & obviously it was more undervalued at 68c that it recently hit. Time should improve value, however you don't pay for time it pays you in the form of a discount to the future value.

I suspect once OCA start pulling in the DMF and it builds into the float that SR is talking about, then they will start paying dividends again, rather than just become the investment company SR is hoping for.

Edit. Sorry just updating the numbers. I had the wrong number of retirement units.
2nd edit. Numbers updated now

[SailorRob]

So Oceania’s challenge is to demonstrate they can actually ‘rmake it work’ after years of trying

That takes more than words and glossy presentations …I’m sure you agree that takes successful execution of strategic intent eh

Yes. It's virtually impossible that they can't. Paraphrasing Buffett, even my idiot nephew could run it.

[Snoopy]

We have just come through a period of high interest rates and consequently high discount rates which together have a double whammy impact on levered property entities. The first negative impact is higher cash outflows to service debt and the other being lower property values due to higher discount rates. That is easy to understand. But it stays this way 'forever'? Yeah nah. And it has always been that way? Wrong as evidenced by historical prices set by 'Mr Market' for various RV's over the years where they were often in excess of 50% of NTA (so was 'Mr Market' right or wrong then?) and as also evidenced by the current SP of SUM relative to net assets. IOW observable anecdotal evidence directly contradicts conclusions regarding 'forever' and always.

Snoopy's cashflow analyses are so far off being correct, hence the reason for my post on the subject.


Firstly I would like to thank Ferg for his clearly laid out post 18045, showing the pattern over the years of what happens to the cashflows associated with an OCA retirement village villa from construction to subsequent handover down the years. I do not disagree with his work.

However, I do wish to clarify that I was not doing an alternative cashflow analysis myself. I was talking about 'cash perception', and the 'sum of shareholder viewpoint on cash' as seen via the filter of 'the market view', as evidenced by the deeply discounted share price to actual net tangible asset value. We can argue about why the market is pricing OCA in this deeply discounted way. But the fact remains that it is, and no amount of accurate accounting on how the current business model is working changes that. Also I am not making a value judgement on whether the market is right to price OCA this way. I merely observe what comes up on the market feed as a real share price number today.

Some shareholders seem perplexed by why the discount to NTA persists in the share price. Others seem more angry, perhaps fed by a secret fear that they may have got things wrong? I can't account for shareholders feelings about their holdings. But I thought it was worthwhile putting up a possible explanation why things are as they are (my post 17994 https://www.sharetrader.co.nz/showthread.php?9856-OCA-Oceania-Group-retirement-villages&p=1036498&viewfull=1#post1036498)

I don't withdraw that post, except the bit about the float being worth zero, because I forgot to include the income stream from those deferred management fees!

SNOOPY

[Daytr]

Firstly I would like to thank Ferg for his clearly laid out post 18045, showing the pattern over the years of what happens to the cashflows associated with an OCA retirement village villa from construction to subsequent handover down the years. I do not disagree with his work.

However, I do wish to clarify that I was not doing an alternative cashflow analysis myself. I was talking about 'cash perception', and the 'sum of shareholder viewpoint on cash' as seen via the filter of 'the market view', as evidenced by the deeply discounted share price to actual net tangible asset value. We can argue about why the market is pricing OCA in this deeply discounted way. But the fact remains that it is, and no amount of accurate accounting on how the current business model is working changes that. Also I am not making a value judgement on whether the market is right to price OCA this way. I merely observe what comes up on the market feed as a real share price number today.

Some shareholders seem perplexed by why the discount to NTA persists in the share price. Others seem more angry, perhaps fed by a secret fear that they may have got things wrong? I can't account for shareholders feelings about their holdings. But I thought it was worthwhile putting up a possible explanation why things are as they are (my post 17994 https://www.sharetrader.co.nz/showthread.php?9856-OCA-Oceania-Group-retirement-villages&p=1036498&viewfull=1#post1036498)

I don't withdraw that post, except the bit about the float being worth zero, because I forgot to include the income stream from those deferred management fees!

SNOOPY

Hi Snoop, as per my previous post, the DMFs is where the market misprice is imo.
However the misprice isn't as big as some might think it is, again imo.

[Whio]

Deleted message.

[Ferg]

It’s good we’ve sussed the whys and wherefores of why Oceania trading at close to 50% of this thing called NTA.

Summerset has essentially the same business model, has a float/equity ratio that’s about the same as Oceania but trades at more than 1x NTA

Wonder why? All the discussion re Oceania doesn’t answer that question

Au contraire. The issue du jour has been discussed by others such as Baa_Baa & percy: unsold stock.
Overlay high interest rates and we are where we are.


I hesitate to ask this because Ferg is usually very accurate with his figures. But departing OCA residents pay a huge 30% deferred management fee AND get a large refurbishment bill on top of that? Surely not?

SNOOPY
Fair cop. Some RVs charge some reinstatement and refurbishment costs so I over-egged that one. My bad.

[davflaws]

Kia ora koutou
I really appreciate the thoughtful discussion on this thread, both for the depth of the analysis, and the courteous and respectful tone of the posts, particularly when the posters find themselves in disagreement.
Thank you all very much
Noho ora mai
D

[Lego_Man]

Just bought my last slug of OCA and RYM today - full size position now. Buckling up for the ride, average price on both is roughly where spot is now.

[SailorRob]

Just bought my last slug of OCA and RYM today - full size position now. Buckling up for the ride, average price on both is roughly where spot is now.

Was reading a fund letter this morning, UK based. Did 38% last year, had a pretty big Ryman position, 5.2% from memory.

Not often I see NZX holdings in the 50 odd letters I read each quarter.

[Bikeguy]

Just bought my last slug of OCA and RYM today - full size position now. Buckling up for the ride, average price on both is roughly where spot is now.

Respected, I have done the same with RYM, believe they are now on top of their debt situation and have cut their cloth to suit the medium term market

[Lego_Man]

Respected, I have done the same with RYM, believe they are now on top of their debt situation and have cut their cloth to suit the medium term market

I'm 2/3rds OCA 1/3rd RYM. The addition of Ryman was mainly due to the fact that as the most internationally known name, they're in a good position to attract foreign fund flows if sentiment turns (as SR has alluded to). So a bit of a play on forecast supply dynamic for the stock.

[bull....]

Snoopy & others - if you want to understand the cash flows then below is a summary.

DayTr mentioned the 30% but I'm not sure you understood it correctly. 30% is not the capital growth of the unit price over 5-7 years, that is the management fee deduction from the ORA that is retained by OCA. It's not that it sounds credible, it is the contractual deduction before on-charging refurbishment costs on departure. This 30% deduction from the ORA is before any capital gains on resales. So running some numbers:



Let's say OCA builds a unit at a cost of $1m
OCA sells said unit for $1.2m with a 'realised gain' of $200k (aka 'development margin')
Over the first 3 years, OCA takes and keeps 30% of the ORA value as 'management fees'. Given the difference in timing of management fees charged against the ORA versus their release to the P&L, such deferrals of income recognition are referred to as 'deferred management fees' or DMF.
Resident departs in say 6 years
Unit is refurbished at a cost of say $150k
Resident is repaid their ORA of $1.2m - $360k management fee - $150k refurbishment = $690k repaid in year 6/7 (note this is repaid from the proceeds received from the incoming resident, more on that below)
After 6 years inflation at say 3% p.a. the unit now resells for say $1.4m in year 7 to a new resident
Incoming resident pays $1.4m, OCA books a 'resale gain' of $200k (being new ORA of $1.4m less previous ORA value of $1.2m) - ignoring for now any sharing of capital gains with the departing resident. Note there is no double counting.
New resident has 30% of their $1.4m deducted over their first 3 years of occupation
and so on. as the cycle repeats


Run that through a cash flow model. Note the cash is not yet dropping out the bottom in total for OCA given they have used the retained cash to build another unit etc. IOW they are reinvesting that float to make more money.

Cash flows for modelling:
Year 0 has a cash outflow of -$1m for construction
Year 1 sees a cash inflow of +$1.2m
Years 1-3 sees 30% of the ORA 'earned' in the P&L but the cash is already in the bank account (consequently the ORA liability reduces by 30% over this time)
Year 6 sees the resident depart and there is a cash outflow of -$150k for refurb
Year 7 sees the new resident come in and pay +$1.4m (another cash inflow to OCA)
Year 7 sees the departing resident repaid their ORA less management fees less refurb = -$690k
Total cash banked from property transactions over the period years 0-7 (it's actually the same figures for years 8-12 assuming the resident stays 6 years) is a nett inflow of {-$1m + $1.2m - $150k - $690k + $1.4m} = +$760k
So from the property perspective in years 7-12 OCA has $760k in the bank, an asset worth at least $1.4m (ignoring inflationary gains in years 8-12 for now) and an ORA liability of {70% of $1.4m=} $980k for nett assets of $1.18m.
Nett assets of $1.18m is made up of initial gain of $200k + {30% of $1.2m retained=} $360k + {resale gain of} $200k + {30% of $1.4m retained=} $420k = $1.18m

I put up a detailed post on this elsewhere. Once the development stops, there is plenty of cash being produced on the assumption a) stocks are sold, and b) property continues to increase in value over the long term. I know I have not mentioned opex. Some opex is on-charged to clients for a nett cash cost of zero to OCA whilst other opex is funded from the management fees. History shows not all of the management fees are consumed by opex and there is in fact retained earnings from these.

I hope that helps.

enjoy reading your posts ferg.

i dont normally go into fundamentals on companies on this site as im usually time constrained but a question on your cashflow model as i factor other things into my valuation model

agree with the your simple explanation of yrs but a question on yr 1-3 which is where a lot of interpretation and as winner mentioned guessing comes in on the part of directors in regards to valuations and cashflows. it appears your 30% ORA does not take into account overheads and costs above the weekly fee's charged ( weekly fee's do not cover all cost overhead's therefore some of the ORA is used to cover shortfall is my opinion) also div's can be paid from ORA if development margins are low.

[Bjauck]

I hesitate to ask this because Ferg is usually very accurate with his figures. But departing OCA residents pay a huge 30% deferred management fee AND get a large refurbishment bill on top of that? Surely not?

SNOOPY This is what the Oceania website states:

You do not pay for refurbishment costs when you leave.https://oceaniahealthcare.co.nz/faq/will-i-get-capital-gains-or-losses-when-i-leave

Similarly with Ryman’s and others.

MetLifecare say that they are responsible for refurbishment costs except if there is more than “ fair wear and tear” and or if there are “agreed reinstatement costs”.

[mistaTea]

This is what the Oceania website states:

You do not pay for refurbishment costs when you leave.https://oceaniahealthcare.co.nz/faq/will-i-get-capital-gains-or-losses-when-i-leave

Similarly with Ryman’s and others.

I doubt they would sell many units if they double dipped!

[Bjauck]

I doubt they would sell many units if they double dipped!I guess it would depend on the original cost of the ORA, for the quality of unit, and the comparison with the costs of ORAs in similar villages that did not charge a refurbishment fee. Villages offering a share in capital gains may think it would justify a refurbishment fee. The code of practice would need to be referenced too.

[mistaTea]

I guess it would depend on the original cost of the ORA, for the quality of unit, and the comparison with the costs of ORAs in similar villages that did not charge a refurbishment fee. Villages offering a share in capital gains may think it would justify a refurbishment fee. The code of practice would need to be referenced too.

Yes all true.

But I note that none of the posters who claim to deeply understand OCA corrected Ferg’s assumptions and cashflow analysis.

It took Snoopy to, well…snoop around.

Which brings me back to my earlier point - though we are all intelligent, we aren’t as smart as we like to think we are. And definitely not smarter than ‘everyone else’.

Perhaps there are other holes in our OCA knowledge. Hmmmn. Mr Market might not be such a twit after all?

The cashflow analysis is completely different now.

[SailorRob]

Yes all true.

But I note that none of the posters who claim to deeply understand OCA corrected Ferg’s assumptions and cashflow analysis.

It took Snoopy to, well…snoop around.

Which brings me back to my earlier point - though we are all intelligent, we aren’t as smart as we like to think we are. And definitely not smarter than ‘everyone else’.

Perhaps there are other holes in our OCA knowledge. Hmmmn. Mr Market might not be such a twit after all?

The cashflow analysis is completely different now.


Who has claimed to deeply understand OCA? Certainly not I, in fact I have posted the very opposite that I do not have a deep understanding or even any understanding of the minute detail.

Maverick and others may have convinced you that they deeply understand OCA from the detail of their work, but I have not once seen them claim they do.

Please provide one quote from this thread of anyone claiming to deeply understand OCA. Just one.

Now, if someone had claimed they deeply understand OCA (which they haven't, but let's play a game), then what makes you think they have even read Fergs post - like Mav - has he read it? And then what makes you think they would want to correct him? There are numerous reasons why they may not want to.

Myself, I didn't read Fergs post properly nor ponder the detail.

So it's a very large jump for you to assume that due to people claiming they deeply understand OCA when they haven't, and then subsequently they have read the post, and further they have wished to correct.

Believe me we are NOT all intelligent as has clearly been shown.

To then jump further to claim that Mr market understands all of this and discounts it perfectly is another foolish proposition.

With OCA I farm out the detail to an analyst partner who is at least as all over it as Mav if not more. He carries all his figures around in a A4 notebook. When I got my hands on one of Craigs proprietary analysis of OCA and offered it to him, he seemed confused as to why I'd think he would want it and just said 'Oh I'd rather use my numbers'. This reminded me of Buffett who would NEVER want to see another analysts report.

Hopefully 2cups can sign up soon and will be able to back up what I am saying.

So speaking of holes - there's a few for you. SkyTV and OCA are very different propositions. One persons experience thinking they are smarter than everyone else and leading others to follow off the cliff does not mean that it translates to other individuals and companies.

The cash flow analysis isn't 'different now'. It's the same as it always has been.

Free Capital.

[SailorRob]

Hmmmn. Mr Market might not be such a twit after all?


If Mr Market ain't 'such a twit'...

Then by definition, Liz Coutts, myself and Mav are.

You go with Mr Market, we are cool as we are for now thanks very much.

[mistaTea]

Who has claimed to deeply understand OCA? Certainly not I, in fact I have posted the very opposite that I do not have a deep understanding or even any understanding of the minute detail.

Maverick and others may have convinced you that they deeply understand OCA from the detail of their work, but I have not once seen them claim they do.

Please provide one quote from this thread of anyone claiming to deeply understand OCA. Just one.

Now, if someone had claimed they deeply understand OCA (which they haven't, but let's play a game), then what makes you think they have even read Fergs post - like Mav - has he read it? And then what makes you think they would want to correct him? There are numerous reasons why they may not want to.

Myself, I didn't read Fergs post properly nor ponder the detail.

So it's a very large jump for you to assume that due to people claiming they deeply understand OCA when they haven't, and then subsequently they have read the post, and further they have wished to correct.

Believe me we are NOT all intelligent as has clearly been shown.

To then jump further to claim that Mr market understands all of this and discounts it perfectly is another foolish proposition.

With OCA I farm out the detail to an analyst partner who is at least as all over it as Mav if not more. He carries all his figures around in a A4 notebook. When I got my hands on one of Craigs proprietary analysis of OCA and offered it to him, he seemed confused as to why I'd think he would want it and just said 'Oh I'd rather use my numbers'. This reminded me of Buffett who would NEVER want to see another analysts report.

Hopefully 2cups can sign up soon and will be able to back up what I am saying.

So speaking of holes - there's a few for you. SkyTV and OCA are very different propositions. One persons experience thinking they are smarter than everyone else and leading others to follow off the cliff does not mean that it translates to other individuals and companies.

The cash flow analysis isn't 'different now'. It's the same as it always has been.

Free Capital.

I see. Ok, some fair points.

Although there is something that cannot be escaped…

If it turns out you actually don’t understand OCA all that well then you cannot say the market has mispriced it.

And please don’t resort to baa baa and balance tactics by trying to bring up SKT when I have said something you don’t like.

Stick to addressing the issue. Given how much you post and tear everyone else apart it is just laughable that Ferg’s post was the one you just glossed over.

Don’t bullsh1t a bullsh1tter.

Because it is starting to sound like you are full of sh1t mate.

[Greekwatchdog]

In the end who really cares what the share price is today? If you investment Philosophy is a long term investor then todays, tomorrows etc market price is completely irrelevant.

The only time todays price is relevant is if your investment Philosophy is some sort of short term trader.

Can't wait until May for the year end result so we have numbers in front of us then we can discuss with more clarity. Can't see history changing over the next 4 months with any investor news from the board to chew on

[SailorRob]

I see. Ok, some fair points.

Although there is something that cannot be escaped…

If it turns out you actually don’t understand OCA all that well then you cannot say the market has mispriced it.

And please don’t resort to baa baa and balance tactics by trying to bring up SKT when I have said something you don’t like.

Stick to addressing the issue. Given how much you post and tear everyone else apart it is just laughable that Ferg’s post was the one you just glossed over.

Don’t bullsh1t a bullsh1tter.

Because it is starting to sound like you are full of sh1t mate.


I have had an inbox flooding with messages about you and the SKT debacle and other issues that I wasn't previously aware of. Grim stuff indeed.

Again, massive flaw in your logic. I said that I do not deeply understand OCA. I did not say that I do not understand it all that well. Two very different things. I do not need to deeply understand the internal dynamics just as I don't for Berkshire to be convinced that it is mispriced.

I understand Buffett understands Berkshire and is trustworthy. He only buys back shares when they are conservatively estimated to trade well under intrinsic value. Nobody can value it as well as him. Thus when he buys big - I am convinced they are mispriced WITHOUT understanding deeply the company.

While I do not understand the trees of OCA I believe I understand the forrest better than almost anyone.

If I am so full of $hit then why did you follow me into Berkshire and constantly email me about details about the company you clearly didnt understand, and still don't and tried to make out you're some sort of Occidental and Berkshire expert and how it was such a no brainer and the market was so wrong?

'it is just laughable that Ferg’s post was the one you just glossed over', Is it really just laughable or is this another MASSIVE hole in your logic? Could it be that I am working 12 Hours a day refitting a yacht and then driving another hour on top and I didn't have time to catch up properly that day as there was a massive amount of detailed posts on the thread?

[mistaTea]

In the end who really cares what the share price is today? If you investment Philosophy is a long term investor then todays, tomorrows etc market price is completely irrelevant.

The only time todays price is relevant is if your investment Philosophy is some sort of short term trader.

Can't wait until May for the year end result so we have numbers in front of us then we can discuss with more clarity. Can't see history changing over the next 4 months with any investor news from the board to chew on

Yes you are absolutely correct.

[SailorRob]

In the end who really cares what the share price is today? If you investment Philosophy is a long term investor then todays, tomorrows etc market price is completely irrelevant.

The only time todays price is relevant is if your investment Philosophy is some sort of short term trader.

Can't wait until May for the year end result so we have numbers in front of us then we can discuss with more clarity. Can't see history changing over the next 4 months with any investor news from the board to chew on


Agree with the sentiment but I care DEEPLY what the share price is today and I want it lower. Much lower.

Market price today is extremely relevant to me, far too high for my liking.

I do get what you are saying though, but the closer to free it is today the better for me.

[SailorRob]

Yes you are absolutely correct.


Think it through a bit harder. Today's pricing is far from irrelevant....

[Greekwatchdog]

Agree with the sentiment but I care DEEPLY what the share price is today and I want it lower. Much lower.

Market price today is extremely relevant to me, far too high for my liking.

I do get what you are saying though, but the closer to free it is today the better for me.

Then I suggest you keep buying at these levels SR. I reckon we have 4 months of $0.70's until result time unless there is favourable sentiment n these stocks or some sort of annoucement.

[mistaTea]

Think it through a bit harder. Today's pricing is far from irrelevant....

Ok, yes.

But you have admitted you don’t know what a fair price is.

You have literally just said you do not understand OCA in detail.

Therefore you cannot possibly predict a DCF with any kind of precision or certainty. You literally cannot, despite all of your bold posts in the past quoting Buffett about how to establish the value of a business.

Therefore you cannot know what the business is ‘worth’.

Therefore you cannot say that the market has mispriced the business.

Now let’s see how you tackle that one without resorting to “bu…bu…bu…sky TV! And …err… people have said mean things about you to me!”

I mean, Jesus H Christ!

[SailorRob]

Then I suggest you keep buying at these levels SR. I reckon we have 4 months of $0.70's until result time unless there is favourable sentiment n these stocks or some sort of annoucement.

Yes have been, but what I want is low prices for much longer, until 2040 at least as long as the low price is a function of misunderstanding of future cash flows. Then I can invest at 20% returns whenever I choose and hopefully the company can use cash to buy back shares and if a dividend is reinstated I can reinvest that too.

[Greekwatchdog]

Yes have been, but what I want is low prices for much longer, until 2040 at least as long as the low price is a function of misunderstanding of future cash flows. Then I can invest at 20% returns whenever I choose and hopefully the company can use cash to buy back shares and if a dividend is reinstated I can reinvest that too.

LMFAO. Umm some of the long term investors will be deceased by then so tell you the truth and would disagree with your thought here. Personally I would like to see it rise from here as I have more than enough as my accountant keeps reminding me..

[SailorRob]

Ok, yes.

But you have admitted you don’t know what a fair price is.

You have literally just said you do not understand OCA in detail.

Therefore you cannot possibly predict a DCF with any kind of precision or certainty. You literally cannot, despite all of your bold posts in the past quoting Buffett about how to establish the value of a business.

Therefore you cannot know what the business is ‘worth’.

Therefore you cannot say that the market has mispriced the business.

Now let’s see how you tackle that one without resorting to “bu…bu…bu…sky TV! And …err… people have said mean things about you to me!”

I mean, Jesus H Christ!


I don't think I admitted I don't know what a fair price is. I've taken a stab at where I feel intrinsic is North of.

I have never 'predicted' a DCF on anything in my life nor will I. Nobody can do a DCF with precision and certainty. That is NOT the game. Certainly not for Buffett.

I don't know what the business is worth, nobody does. I have a rough idea.

Nobody has said anything mean about you. Just presented me with a lot of facts that are on public record.

I have no idea how tall that tree over there is but if someone is telling me that they are taller than the tree I know they are wrong.

I have no idea of the weight of that fat person, but I know they ain't skinny.

[SailorRob]

LMFAO. Umm some of the long term investors will be deceased by then so tell you the truth and would disagree with your thought here. Personally I would like to see it rise from here as I have more than enough as my accountant keeps reminding me..


If you expect to be dead in 2040 then you have to be aware that certain equity investments are not suitable. 16 years isn't long in the world of equities - you can go through 16 years PLUS of multiple contraction and then when you need to be liquidating you might not like it.

MANY global markets have gone sideways for more than 20 years while business fundamentals have improved.

[SailorRob]

Ok, yes.

But you have admitted you don’t know what a fair price is.

You have literally just said you do not understand OCA in detail.

Therefore you cannot possibly predict a DCF with any kind of precision or certainty. You literally cannot, despite all of your bold posts in the past quoting Buffett about how to establish the value of a business.

Therefore you cannot know what the business is ‘worth’.

Therefore you cannot say that the market has mispriced the business.

Now let’s see how you tackle that one without resorting to “bu…bu…bu…sky TV! And …err… people have said mean things about you to me!”

I mean, Jesus H Christ!


Didn't I give a clear example with Berkshire as to how I KNOW the business is mispriced without knowing any of the stuff you have accused me of not knowing?

Do I need to do a DCF or understand the business deeply to know that STU was mispriced when I bought it for less than the value of steel on shelf less all liabilities?

No.

[Greekwatchdog]

If you expect to be dead in 2040 then you have to be aware that certain equity investments are not suitable. 16 years isn't long in the world of equities - you can go through 16 years PLUS of multiple contraction and then when you need to be liquidating you might not like it.

MANY global markets have gone sideways for more than 20 years while business fundamentals have improved.

SR, No one knows when there time is up, including you.

Whilst I applaud your Philosophy. I would suggest you are dreaming of having these prices for such a long period of time.

[SailorRob]

SR, No one knows when there time is up, including you.

Whilst I applaud your Philosophy. I would suggest you are dreaming of having these prices for such a long period of time.


Correct but I need to plan for statistical expectations.

16 years is nothing at all.

My Father is still alive and for me at his age it is currently 1977... So a lot of things could happen yet in my life. 1991 is 2040 suddenly. Still a long way to go.

1991. Think about that.

Not dreaming at all. I want to be able to buy cheap for much longer than 16 years.

[SailorRob]

Ok, yes.

But you have admitted you don’t know what a fair price is.

You have literally just said you do not understand OCA in detail.

Therefore you cannot possibly predict a DCF with any kind of precision or certainty. You literally cannot, despite all of your bold posts in the past quoting Buffett about how to establish the value of a business.

Therefore you cannot know what the business is ‘worth’.

Therefore you cannot say that the market has mispriced the business.

Now let’s see how you tackle that one without resorting to “bu…bu…bu…sky TV! And …err… people have said mean things about you to me!”

I mean, Jesus H Christ!


Give me something remotely challenging to respond to, this is too easy.

[Greekwatchdog]

Correct but I need to plan for statistical expectations.

16 years is nothing at all.

My Father is still alive and for me at his age it is currently 1977... So a lot of things could happen yet in my life. 1991 is 2040 suddenly. Still a long way to go.

1991. Think about that.

Not dreaming at all. I want to be able to buy cheap for much longer than 16 years.

Good Luck SR with your views.....Hopefully it all works out for you

[SailorRob]

Good Luck SR with your views.....Hopefully it all works out for you


Im just saying that this would be like you telling my Dad in 1977 that he was full of it wanting to keep buying into a company cheap until 1991 - when he is still alive now.

1991 is a long time ago. The 16 years gap would hardly be remembered.

[SailorRob]

Good Luck SR with your views.....Hopefully it all works out for you


Math always works - whether I live or not though is another question. I try to keep the odds in my favour.

[SailorRob]

Good Luck SR with your views.....Hopefully it all works out for you


Oh man I've just finally realised how I can explain this to everyone in a way they can understand.

Imagine if you had an option to buy OCA for 39c for the next 16 years. Would that be cool?

Or an option to buy for 75c for the next 16 years no matter what the price does.... Valuable.

But if you are confident in the actual value of the business improving while the stock doesn't then this is the exact same thing.

[SailorRob]

I have more than enough as my accountant keeps reminding me..


He/She has absolutely no idea what they are talking about. Assuming you have a house etc? What % of your net worth is in OCA?

Now if you had a private business like a local small business then your accountant would say nothing - would they say oh you shouldn't own the local hardware store, even though way more risk and way more % of net worth.

Ask yourself why your accountant is advising you for a wage.

[Greekwatchdog]

He/She has absolutely no idea what they are talking about. Assuming you have a house etc? What % of your net worth is in OCA?

Now if you had a private business like a local small business then your accountant would say nothing - would they say oh you shouldn't own the local hardware store, even thought way more risk and way more % of net worth.

Ask yourself why your accountant is advising you for a wage.

He is not, trust me and he certainly isn't my Financial advisor. He is a little concerned about the size of the investment compared to ARV, and SUM. He knows his place.

[mistaTea]

I don't think I admitted I don't know what a fair price is. I've taken a stab at where I feel intrinsic is North of.

I have never 'predicted' a DCF on anything in my life nor will I. Nobody can do a DCF with precision and certainty. That is NOT the game. Certainly not for Buffett.

I don't know what the business is worth, nobody does. I have a rough idea.

Nobody has said anything mean about you. Just presented me with a lot of facts that are on public record.

I have no idea how tall that tree over there is but if someone is telling me that they are taller than the tree I know they are wrong.

I have no idea of the weight of that fat person, but I know they ain't skinny.

Ok fair enough mate. So you have a hunch.

It’s all I wanted to clear up.

Can I offer you a lap dance or something so you can love me again?

[Baa_Baa]

Don’t bullsh1t a bullsh1tter.

What strange thing to say about yourself, if you want to be taken seriously? The path to redemption from your SKT debacle will not be improved by admitting you are BS'tr.


I have had an inbox flooding with messages about you and the SKT debacle and other issues that I wasn't previously aware of. Grim stuff indeed.

If I am so full of $hit then why did you follow me into Berkshire and constantly email me about details about the company you clearly didnt understand, and still don't and tried to make out you're some sort of Occidental and Berkshire expert and how it was such a no brainer and the market was so wrong?


Because it is starting to sound like you are full of sh1t mate. [about OCA]

And then, you bite the hand that feeds. Extraordinary! Do you have any investment ideas, or just try to befriend someone who does, follow them and then subsequently sh1t on them?

You seem more and more like a troll who is just lonely, out of ideas and wanting to wind up anyone on OCA who does have a clue about it. So far you've insulted everyone who does have some knowledge, unlike yourself, albeit not all of the answers as no one does.

[SailorRob]

And then, you bite the hand that feeds. Extraordinary! Do you have any investment ideas, or just try to befriend someone who does, follow them and then subsequently sh1t on them?


Confirming this is precisely what happened.

And no mistaTea... I don't have a 'hunch' that the fatso ain't skinny. I know for sure, just don't know the weight.

[SailorRob]

Certainly a fair point to raise as to why the market prices something differently to what a group of people think and exploring reasons for this.

But the logic being used is hugely flawed, based on personal experience which is then extrapolated to everyone else.

All we've heard is that Mr Market isn't a twit and if you wanna go up against him, I tried and got smashed and I'm super smart so you will get destroyed by Mr Market as well so look out.

Explore valid reasons why this business wont be able to spit out significant future free cash flows in relation to it's equity or market cap by all means and we can discuss.

[mistaTea]

Confirming this is precisely what happened.

And no mistaTea... I don't have a 'hunch' that the fatso ain't skinny. I know for sure, just don't know the weight.


You recommended IBKR to me (which was awesome btw). But that’s about as far as it goes.

You also mentioned BRK which is a company I am already familiar with. The idea that I just rushed into BRK on your say so is absurd. If that were true then I would have also bought into OCA.

Think, man!

I own 16 US stocks - of which one is a relatively small sizing of BRK.B.

Apart from OXY (which I have absolutely followed Buffett into) you have no idea what the other 14 are as we have never discussed it. I certainly have not thought of you when wondering what to buy.

The idea that I have flocked to you for stock ideas is just incredible.

I do appreciate the tip about IBKR. But that is it.

[mistaTea]

The hand that feeds me!!

Christ that made me giggle.

[SailorRob]

The hand that feeds me!!

Christ that made me giggle.


Nothing to be ashamed of mate, you have been fed.

[mistaTea]

Nothing to be ashamed of mate, you have been fed.

I am grateful about the IBKR recommendation though mate.

That platform is an absolute game changer and I wouldn’t be using it if it weren’t for you. That is a fact.

So thank you for the feed.

[Rawz]

I am grateful about the IBKR recommendation though mate.

That platform is an absolute game changer and I wouldn’t be using it if it weren’t for you. That is a fact.

So thank you for the feed.

What’s good about IBKR?

[mistaTea]

What’s good about IBKR?

Easy access to overseas markets and transaction fees are ridiculously low.

It’s all I use at the moment.

[winner69]

Pretty obvious mate.

Proven model with the highest 10 EPS growth of any company in the world pretty much.

CAGR of nearly 50% for a decade.

They have shown they can make it work.

May as well post this chart again …updated

What happens when one ‘makes it work’ and one doesn’t ……the punters rewards the one that ‘makes it work’

Never before has the OCA share price been so low to the SUM share price as it is now.

Good thing it can’t go to 0%

Remember 2024 is ‘it’s our year’ …go OCA and up the Wahs

[mike2020]

That graph. A picture paints a thousand words huh. Can we just pin it on the redevelopment costs versus plain old development?

Remember when RYM was the market darling? I briefly remember an oft quoted, now past member calling SELL on SUM just before it really headed north, was under 6 bucks back in 2019/20 off the top off my head. 50% RYM at the time.

[Daytr]

I am grateful about the IBKR recommendation though mate.

That platform is an absolute game changer and I wouldn’t be using it if it weren’t for you. That is a fact.

So thank you for the feed.

Seems to on-going old fashioned school yard bullying on this thread with anyone who dares question.

Putting themselves up whilst putting others down is an age old tactic for those who don't have a better argument.

Anyway, re IBKR, I just had a quick look on line.
Anyone got any comparisons to CMC?

I.e someone that has used both?
It appears there are more fees on IBKR, I.e CMC doesn't charge brokerage for US companies, but it does for Australian.

Funding & spreads are the key costs to consider though.

On CMC you are trading CFDs rather than the actual shares, but everything in relation to the underlying share is mirrored.

Anyway I would be interested in anyone's feedback.

[Valuegrowth]

How about Tiger Broker? Wich New Zealand broker is ideal(should pick) for buying foreign stocks in Asia, Europe, Africa, USA and Canada? Thanks.

Sorry I have posed in a wrong thread. Admin Pease delete this post. Thanks.

[SailorRob]

Seems to on-going old fashioned school yard bullying on this thread with anyone who dares question.

Putting themselves up whilst putting others down is an age old tactic for those who don't have a better argument.

Anyway, re IBKR, I just had a quick look on line.
Anyone got any comparisons to CMC?

I.e someone that has used both?
It appears there are more fees on IBKR, I.e CMC doesn't charge brokerage for US companies, but it does for Australian.

Funding & spreads are the key costs to consider though.

On CMC you are trading CFDs rather than the actual shares, but everything in relation to the underlying share is mirrored.

Anyway I would be interested in anyone's feedback.


Please don't discuss CMC here, this is for kids. It's not a brokerage it's a gambling site that trades contracts that are based on underlying equities and you own nothing.

No serious investor would ever touch this crap.

IBKR is a professional platform, that fund managers and companies use. It is the real deal not some stupid gambling rubbish. You can actually own shares.

Read the fine print for CMC for gods sake.

[SailorRob]

May as well post this chart again …updated

What happens when one ‘makes it work’ and one doesn’t ……the punters rewards the one that ‘makes it work’

Never before has the OCA share price been so low to the SUM share price as it is now.

Good thing it can’t go to 0%

Remember 2024 is ‘it’s our year’ …go OCA and up the Wahs


Why can't it go to 0%?

How about a detailed analysis on why you perceive one has made it work and the other has not?

How about some detail on the position of each business at the time of IPO?

How can the same model be made to work so well by one and such a fail for the other?

[SailorRob]

On CMC you are trading CFDs rather than the actual shares, but everything in relation to the underlying share is mirrored. Anyway I would be interested in anyone's feedback


I men what do you say...

[Daytr]

I men what do you say...

Have you been sniffing turps fumes in the bowels of your vessel?

[SailorRob]

Have you been sniffing turps fumes in bowels of your vessel?


Thinners and 2 part epoxy paints.

But even high as I am on these substances... I would never think that anyone would bring up CFD's on this site.

[Daytr]

Thinners and 2 part epoxy paints.

But even high as I am on these substances... I would never think that anyone would bring up CFD's on this site.

That's because you have little experience outside your own little world, but despite that seem compelled to comment on anything & everything.
Nice chatting as always.

[SailorRob]

That's because you have little experience outside your own little world, but despite that seem compelled to comment on anything & everything.
Nice chatting as always.


I have no experience doing certain things with other men but I know it would hurt.

Look, we're not interested in trading bits of paper that supposedly represent price moves in underlying shares. Why would we?

Just own the damn stock.

One thing with IRBK - no NZX. Which is a massive lesson in itself.

[gulf]

Give it a break !

[Daytr]

I have no experience doing certain things with other men but I know it would hurt.

Look, we're not interested in trading bits of paper that supposedly represent price moves in underlying shares. Why would we?

Just own the damn stock.

One thing with IRBK - no NZX. Which is a massive lesson in itself.

No NZX on CMC either.
Well I don't pay any brokerage so if you are a trader which I am on this platform then CFDs make a lot of sense.

Most of my investment stocks I.e longer term hold in my investment portfolio, I do own the stocks & its not through CMC.

[winner69]

Why can't it go to 0%?

How about a detailed analysis on why you perceive one has made it work and the other has not?

How about some detail on the position of each business at the time of IPO?

How can the same model be made to work so well by one and such a fail for the other?

All ahis been answered on this thread many times over so won’t waste time regurgitating all that

Would say that OCA promise a lot but rarely deliver, many punters don’t like that

This quote a few pages back seems to be a good explanation as any -

In the absence of a track record of accomplishment, you should take a CEO’s plans as hopeful intent. That doesn’t mean they are lying, just that we really don’t necessarily know what they can or cannot do. There is a particular danger if they use language that resonates with you. More than once in my investment career did I fall for someone who said all the right things, except that they hadn’t done them — in the past, or as it turned out, in the future.”

[winner69]

Have you been sniffing turps fumes in bowels of your vessel?

Reminded me of this poster I saw at Portsmouth Maritime Musuem

[winner69]

Getting heaps of Oceania ads popping up on mobile and iPad saying I need to buy an unit

They must be having trouble selling what they have?

[Rawz]

Getting heaps of Oceania ads popping up on mobile and iPad saying I need to buy an unit

They must be having trouble selling what they have?

Time to pack your bags and head to the home? Those ad algos are very smart and know what the punter needs

[Bjauck]

Time to pack your bags and head to the home? Those ad algos are very smart and know what the punter needsYour browser cookies track what you search for and read about. Maybe they are not smart enough to distinguish wanting to buy a unit rather than wondering whether to invest or divest in the company. I get tons of adverts for Summerset because I was looking for a relative who was considering moving to a village (any brand). Also I searched for the terms of ORAs on all major operators websites.

As a holder in both SUM and OCA I am glad to see the ads as it helps with brand awareness….

[SailorRob]

Would say that OCA promise a lot but rarely deliver, many punters don’t like that


What exactly haven't they delivered?

A higher share price than your purchase so you are not a bag holder?

What has the asset growth CAGR been since IPO and how has it been funded?

What has the equity growth CAGR been since IPO?

What has the float CAGR growth been since IPO?

Considering the number of external shocks that have happened since IPO, could it be that management have actually delivered world class results?

Remember sales are just moving around balance sheet items.

[bull....]

1. Why in the age of diversification would I go “all in”
I don’t necessarily agree with the idea that diversifying into many different assets makes for a less risky portfolio. Sure, for the majority people it makes total sense, as they can only lose so much on any given position. But if you are investing under Graham's definition (defined as anything that upon thorough analysis promises safety of principle and an adequate return) and you are very confident in your analysis plus there is a sufficient margin of safety there is no reason why you shouldn’t feel comfortable having very large positions as a percentage of your total portfolio.


The idea that you should put money into your 30th best idea instead of your best one is absurd. The exception to this IMO is if you enjoy the intellectual exercise of being a shareholder in many companies and keeping up to date with how the companies are all going through annual reports and such. But I think it’s fair to say to expect worse results with 30 stocks, but also less volatile, than had you gone with your best 10 stocks.




2. Why OCA?
Put simply I think OCA is a great business selling for dirt cheap.


The great thing about the RV business model is the generation of float. Float is the cash that the retirement villages receive from the customers through an occupational rights agreement. This cash is then reinvested back into developing more property, where they can continue building the float up as well as making a profit through deferred management fees. Float can be viewed as an interest-free, non-callable loan that will never be paid down.
https://lh7-us.googleusercontent.com/Hn5V3s6srPkq5IMPvjfnSkRdsy_XpID65mxsbTVEmj61dmDjic B-2xtJTcc7CMEP3jl13ymg4HB_9A9Kk9yfjem1Cv8oABTtw0yHeV 3Eks_8x2EN-kxZV1j98quAhPR0Hio4vULWGYE1-nOK7h9C5OY
CAGR of 15.3% growth since 2012
CAGR of 20.8% since 2017


There is a large number of unsold but finished property that are being sold down, along with property constantly being developed. Conservatively let's say the float can continue to be grown at 15% P.A for the next 10 years, with a return on capital of 4%.


Via a spreadsheet I have calculated that in 10 years a sum of 1.3 billion will have been earnt, discounted (10% p.a) to 826 million. Plus it would easily go for a P/E of 15, which would go for 2.9 billion or discounted to 1.2 billion. Overall, I estimate that Oceania has a NPV of at least 2 billion calculated using extremely conservative estimates. There is so much margin of safety at these prices it’s ridiculous.




3. Why only OCA in the RV sector?
Mostly because OCA is/was the cheapest in relation to both float and equity, and I figure no one RV has a significant edge over the other and I imagine their growth should be somewhat equal.


I can’t seem to find it but I had calculated a price to float/equity ratio for all the companies to see which was trading at the steepest discount. From memory it went OCA, ARV, RYM, SUM, RAD, with OCA being significantly cheaper than all others. RAD had a horrific capital structure when compared to the rest.



This is a very basic overview of my thoughts on OCA, there's alot more that could be discussed like insider ownership. I hope my post generates some healthy debate, If you think I’m wrong or right tell me your reasons why!

interesting graph . if only what you say was true . the price would be $10 not 73c

[winner69]

interesting graph . if only what you say was true . the price would be $10 not 73c


No bull ……not $10 …..more like $9.90

[bull....]

No bull ……not $10 …..more like $9.90

oh yes winner your right. i forgot to discount the helier because it is not really worth anything at the moment. sort of what snoopy was getting at you know worth 50% less now than cost of build

[Snoopy]

2. Why OCA?
Put simply I think OCA is a great business selling for dirt cheap.

The great thing about the RV business model is the generation of float. Float is the cash that the retirement villages receive from the customers through an occupational rights agreement. This cash is then reinvested back into developing more property, where they can continue building the float up as well as making a profit through deferred management fees. Float can be viewed as an interest-free, non-callable loan that will never be paid down.


Double counting? Wouldn't it be more correct to say that the DMF income is part of the float accumulation. It is not an 'extra' income stream.



https://lh7-us.googleusercontent.com/Hn5V3s6srPkq5IMPvjfnSkRdsy_XpID65mxsbTVEmj61dmDjic B-2xtJTcc7CMEP3jl13ymg4HB_9A9Kk9yfjem1Cv8oABTtw0yHeV 3Eks_8x2EN-kxZV1j98quAhPR0Hio4vULWGYE1-nOK7h9C5OY
CAGR of 15.3% growth since 2012
CAGR of 20.8% since 2017

There is a large number of unsold but finished property that are being sold down, along with property constantly being developed. Conservatively let's say the float can continue to be grown at 15% P.A for the next 10 years, with a return on capital of 4%.


You are taking a property market growth rate from one of the most highly inflationary periods in the NZs property market history, a decade where prices were driven up by lower and lower interest rates, and 'conservatively' expect the resulting price rise effect to continue into the indefinite future? Even as house prices today are at their least affordable compared to any time in history? I can't see anything 'conservative' about that assumption set. On the contrary, those assumptions look extremely aggressive.



Via a spreadsheet I have calculated that in 10 years a sum of 1.3 billion will have been earned, discounted (10% p.a) to 826 million. Plus it would easily go for a P/E of 15, which would go for 2.9 billion or discounted to 1.2 billion. Overall, I estimate that Oceania has a NPV of at least 2 billion calculated using extremely conservative estimates. There is so much margin of safety at these prices it’s ridiculous.


It would only 'easily go for a PE of 15' because you believe your own future growth assumptions. If you think the property development side of the business will grow that much, why won't all of these extra profits be siphoned across to shore up the consummately growing care facilities, as is the case now? Zero growth in eps since listing as an indicator, surely doesn't deserve a market PE of 15?

You seem to be mounting a 'build it and they will come' argument. Could the reason for the large unsold stock be that they have built ahead of demand and the market isn't as large as (from people who can afford it) as OCA presumed? What percentage of our aging population will be able to afford to buy into up market retirement villages in the future?



3. Why only OCA in the RV sector?
Mostly because OCA is/was the cheapest in relation to both float and equity, and I figure no one RV has a significant edge over the other and I imagine their growth should be somewhat equal.

I can’t seem to find it but I had calculated a price to float/equity ratio for all the companies to see which was trading at the steepest discount. From memory it went OCA, ARV, RYM, SUM, RAD, with OCA being significantly cheaper than all others. RAD had a horrific capital structure when compared to the rest.


What about the price to care assets ratio? Why didn't you calculate that?

SNOOPY

[Daytr]

Double counting? Wouldn't it be more correct to say that the DMF income is part of the float accumulation. It is not an 'extra' income stream.



You are taking a property market growth rate from one of the most highly inflationary periods in the NZs property market history, a decade where prices were driven up by lower and lower interest rates, and 'conservatively' expect the resulting price rise effect to continue into the indefinite future? Even as house prices today are at their least affordable compared to any time in history? I can't see anything 'conservative' about that assumption set. On the contrary, those assumptions look extremely aggressive.



It would only 'easily go for a PE of 15' because you believe your own future growth assumptions. If you think the property development side of the business will grow that much, why won't all of these extra profits be siphoned across to shore up the consummately growing care facilities, as is the case now? Zero growth in eps since listing as an indicator, surely doesn't deserve a market PE of 15?

You seem to be mounting a 'build it and they will come' argument. Could the reason for the large unsold stock be that they have built ahead of demand and the market isn't as large as (from people who can afford it) as OCA presumed? What percentage of our aging population will be able to afford to buy into up market retirement villages in the future?



What about the price to care assets ratio? Why didn't you calculate that?

SNOOPY

Totally agree Snoopy.
Over optimistic valuations implied.
Rather than becoming this investment company that has been painted it's likely OCA returns to paying dividends, lowering the multiple implied.

[Blue Skies]

Getting heaps of Oceania ads popping up on mobile and iPad saying I need to buy an unit

They must be having trouble selling what they have?



While that might well be true, & I notice quite a heavy OCA schedule on TV, buying air time at the moment is comparatively cheap as media discount post Christmas when so many businesses temp' closed & people on holiday.
Ad's on mobile & iPad reinforcing the TV campaign.
Also start of the year a time when many make a few plans/goals for the year ahead.

[bull....]

OCA might have to book a loss on there assets for sale if this is any guide

Consistent with announcements made in November 2023, Vital has also sold five aged care assets leased to Hall & Prior for NZ$65m reflecting a ~1% discount to the 30 June 2023 book value

https://www.nzx.com/announcements/424733

[winner69]

Just had a glance at stocks listed on the competition spreadsheet

Couldn’t help but notice that OCA is ranked 145 …..out of 179

Just a slow start to the year I reckon ….‘it’s our year’ they say

[Baa_Baa]

Just had a glance at stocks listed on the competition spreadsheet

Couldn’t help but notice that OCA is ranked 145 …..out of 179

Just a slow start to the year I reckon ….‘it’s our year’ they say

Gee, OCA down 2 cents, the sky is falling ... we're all doomed. :scared:

[SailorRob]

Gee, OCA down 2 cents, the sky is falling ... we're all doomed. :scared:

Man I am so sick of Whinger 69 it's not funny. Such a massive pathetic bag holder.

[SailorRob]

Just had a glance at stocks listed on the competition spreadsheet

Couldn’t help but notice that OCA is ranked 145 …..out of 179

Just a slow start to the year I reckon ….‘it’s our year’ they say

I asked earlier but can anyone at all point me to one single decent post by Whinger 69 on any thread?

[davflaws]

I asked earlier but can anyone at all point me to one single decent post by Whinger 69 on any thread?

This is not helpful or useful. If I go on to the 'Elections' or "Off Market" forums I expect abusive and unhelpful posts. The quality of interaction and discussion on the NZX forum is generally higher, and the forum is correspondingly more valuable. Lets try to keep it that way by treating people we disagree with courteously and respectfully. If conflict and putdowns float your boat, go over to the 'Elections' forum and fill your boots.

[Curly]

This is not helpful or useful. If I go on to the 'Elections' or "Off Market" forums I expect abusive and unhelpful posts. The quality of interaction and discussion on the NZX forum is generally higher, and the forum is correspondingly more valuable. Lets try to keep it that way by treating people we disagree with courteously and respectfully. If conflict and putdowns float your boat, go over to the 'Elections' forum and fill your boots.
I concur 100%. It has become tiresome and boring.

[SailorRob]

Double counting? Wouldn't it be more correct to say that the DMF income is part of the float accumulation. It is not an 'extra' income stream SNOOPY


A total misunderstanding of the entire business model!

DMF reduces the float...

People this is not difficult but god damn it seems to be.

[SailorRob]

It would only 'easily go for a PE of 15' because you believe your own future growth assumptions. If you think the property development side of the business will grow that much, why won't all of these extra profits be siphoned across to shore up the consummately growing care facilities, as is the case now? Zero growth in eps since listing as an indicator, surely doesn't deserve a market PE of 15?


SNOOPY


As Mav has carefully explained this business would be extremely cheap at a PE of 15 with NO growth...

Go back and read his post about how the numbers stack in 2030 with NO growth....

Even I would pay 15 x

[limmy]

OCA has had a decent run starting from November. It's now trending down on the T.A. charts.

[Snoopy]

Double counting? Wouldn't it be more correct to say that the DMF income is part of the float accumulation. It is not an 'extra' income stream.




A total misunderstanding of the entire business model!

DMF reduces the float...

People this is not difficult but god damn it seems to be.


I am not familiar with exactly how the 'deferred management fees' are treated in the OCA accounts. But I do know that DMFs are calculated as being a portion of the value of the property when the right to occupy is purchased. So taking the 'helicopter view' whether you regard DMFs are a 'deferred capital payment' or a 'deferred charge for services' it comes out of the value of the property in the end either way. Therefore I contend you could regard the DMF as part of the float, even if accountants prefer to put that money in another box. Similar to the float, the DMF outstanding is a perpetual free loan to OCA, because one DMF is replaced by an equivalent new DMF as soon as the right to occupy a property switches hands. That's how I see things anyway.

SNOOPY

[bull....]

I am not familiar with exactly how the 'deferred management fees' are treated in the OCA accounts. But I do know that DMFs are calculated as being a portion of the value of the property when the right to occupy is purchased. So taking the 'helicopter view' whether you regard DMFs are a 'deferred capital payment' or a 'deferred charge for services' it comes out of the value of the property in the end either way. Therefore I contend you could regard the DMF as part of the float, even if accountants prefer to put that money in another box. Similar to the float, the DMF outstanding is a perpetual free loan to OCA, because one DMF is replaced by an equivalent new DMF as soon as the right to occupy a property switches hands. That's how I see things anyway.

SNOOPY

i do this

market value of property = est of FV of DMF and cap gain upon resale. eg the helier will be valued at a very low value at this point of time based on DCF measure.
Of course each property is valued differently based on such things as life expectancy of the tenants future price appreciation of the location , type of property etc etc etc to name a few.

[SailorRob]

I am not familiar with exactly how the 'deferred management fees' are treated in the OCA accounts. But I do know that DMFs are calculated as being a portion of the value of the property when the right to occupy is purchased. So taking the 'helicopter view' whether you regard DMFs are a 'deferred capital payment' or a 'deferred charge for services' it comes out of the value of the property in the end either way. Therefore I contend you could regard the DMF as part of the float, even if accountants prefer to put that money in another box. Similar to the float, the DMF outstanding is a perpetual free loan to OCA, because one DMF is replaced by an equivalent new DMF as soon as the right to occupy a property switches hands. That's how I see things anyway.

SNOOPY

Don't have the time to correct all this or teach you, but a quick note, DMF does not 'come out of the value of the property' it is derived from the value. Very different things. Coming out of... There is nothing coming out...

Forget accounting, pretend you own the whole business and follow the money.

Honestly you'd be way better off indexing, you'll get far better results and have far more time.

[Baa_Baa]

Hey Snoopy, as one of the best FA’s, you’re usually way more onto the fundamentals than it seems you are here. Might I suggest a deep dive into the RVs, get upto speed with their business models and relative financials, before continuing to post without this lack of basic understanding? Just saying, I’m beginning to question your motives for showing any attention to OCA, or what it’s doing to your reputation

[Rawz]

Snoopy & others - if you want to understand the cash flows then below is a summary.

DayTr mentioned the 30% but I'm not sure you understood it correctly. 30% is not the capital growth of the unit price over 5-7 years, that is the management fee deduction from the ORA that is retained by OCA. It's not that it sounds credible, it is the contractual deduction before on-charging refurbishment costs on departure. This 30% deduction from the ORA is before any capital gains on resales. So running some numbers:



Let's say OCA builds a unit at a cost of $1m
OCA sells said unit for $1.2m with a 'realised gain' of $200k (aka 'development margin')
Over the first 3 years, OCA takes and keeps 30% of the ORA value as 'management fees'. Given the difference in timing of management fees charged against the ORA versus their release to the P&L, such deferrals of income recognition are referred to as 'deferred management fees' or DMF.
Resident departs in say 6 years
Unit is refurbished at a cost of say $150k
Resident is repaid their ORA of $1.2m - $360k management fee - $150k refurbishment = $690k repaid in year 6/7 (note this is repaid from the proceeds received from the incoming resident, more on that below)
After 6 years inflation at say 3% p.a. the unit now resells for say $1.4m in year 7 to a new resident
Incoming resident pays $1.4m, OCA books a 'resale gain' of $200k (being new ORA of $1.4m less previous ORA value of $1.2m) - ignoring for now any sharing of capital gains with the departing resident. Note there is no double counting.
New resident has 30% of their $1.4m deducted over their first 3 years of occupation
and so on. as the cycle repeats


Run that through a cash flow model. Note the cash is not yet dropping out the bottom in total for OCA given they have used the retained cash to build another unit etc. IOW they are reinvesting that float to make more money.

Cash flows for modelling:
Year 0 has a cash outflow of -$1m for construction
Year 1 sees a cash inflow of +$1.2m
Years 1-3 sees 30% of the ORA 'earned' in the P&L but the cash is already in the bank account (consequently the ORA liability reduces by 30% over this time)
Year 6 sees the resident depart and there is a cash outflow of -$150k for refurb
Year 7 sees the new resident come in and pay +$1.4m (another cash inflow to OCA)
Year 7 sees the departing resident repaid their ORA less management fees less refurb = -$690k
Total cash banked from property transactions over the period years 0-7 (it's actually the same figures for years 8-12 assuming the resident stays 6 years) is a nett inflow of {-$1m + $1.2m - $150k - $690k + $1.4m} = +$760k
So from the property perspective in years 7-12 OCA has $760k in the bank, an asset worth at least $1.4m (ignoring inflationary gains in years 8-12 for now) and an ORA liability of {70% of $1.4m=} $980k for nett assets of $1.18m.
Nett assets of $1.18m is made up of initial gain of $200k + {30% of $1.2m retained=} $360k + {resale gain of} $200k + {30% of $1.4m retained=} $420k = $1.18m

I put up a detailed post on this elsewhere. Once the development stops, there is plenty of cash being produced on the assumption a) stocks are sold, and b) property continues to increase in value over the long term. I know I have not mentioned opex. Some opex is on-charged to clients for a nett cash cost of zero to OCA whilst other opex is funded from the management fees. History shows not all of the management fees are consumed by opex and there is in fact retained earnings from these.

I hope that helps.

Excellent post. I learned so much from this

[bottomfeeder]

Dont think too much about DMF. Accounting standards are quite robust and comparatively give a true and fair view of the financisl position of the industry. Shouldnt analyse things too closely.

[Baa_Baa]

Excellent post. I learned so much from this

Ferg is a brilliant guru financial analyst, his analysis and gracious sharing of it with us is outstanding and benevolent. We are all blessed by his generosity.

[Maverick]

Excellent post. I learned so much from this
Thanks Rawz for reposting Ferg`s excellent post.
I`ve been away and missed it until now.

The bit that needs a little more colour is the difference between building apartment's over villas. You say it takes year 1 to build a unit and then in year 2 it gets sold. While spot on for villas , that`s not right for OCA apartments.

Apartments take over 2 years to build and 1.5 -2.5 years to sell down...so all up from breaking dirt to a mature tower is about 5 years.

This is a key difference for OCA from its competitors doing mostly villas. This delayed gratification is also why RYM got tripped up with its cashflows in 2023.

This 5 year process v`s 2 years for villas is why when OCA listed in 2017 it still hasn`t yet shown any improved P & L after all this time. Its that simple.

Thanks for sharing Ferg. Brilliantly laid out ( sorry I cant give you another rep point, you deserve it)

[kiora]

Thanks Rawz for reposting Ferg`s excellent post.
I`ve been away and missed it until now.

The bit that needs a little more colour is the difference between building apartment's over villas. You say it takes year 1 to build a unit and then in year 2 it gets sold. While spot on for villas , that`s not right for OCA apartments.

Apartments take over 2 years to build and 1.5 -2.5 years to sell down...so all up from breaking dirt to a mature tower is about 5 years.

This is a key difference for OCA from its competitors doing mostly villas. This delayed gratification is also why RYM got tripped up with its cashflows in 2023.

This 5 year process v`s 2 years for villas is why when OCA listed in 2017 it still hasn`t yet shown any improved P & L after all this time. Its that simple.

Thanks for sharing Ferg. Brilliantly laid out ( sorry I cant give you another rep point, you deserve it)

Esp when ripping down apartments to rebuild bigger & better on same site even takes longer time?

[winner69]

Hey Snoopy, as one of the best FA’s, you’re usually way more onto the fundamentals than it seems you are here. Might I suggest a deep dive into the RVs, get upto speed with their business models and relative financials, before continuing to post without this lack of basic understanding? Just saying, I’m beginning to question your motives for showing any attention to OCA, or what it’s doing to your reputation

BaaBaa, that’s a mean spirited post ….sounds like you telling Snoopy to pi$$ off unless he agrees with you and others. Hooe not the case. I’ll leave it at that

I get the feeling that Snoopy is trying to work out how operating expenses fit into the jigsaw …like do DMF actually cover these? Been some vague assumptions around this but nothing specific.

Good on him for trying …keep at it Snoopy

[Bjauck]

BaaBaa, that’s not a very nice post….sounds like you telling Snoopy to pi$$ off unless he agrees with you and others. Hooe not the case. I’ll leave it at that

I get the feeling that Snoopy is trying to work out how operating expenses fit into the jigsaw …like do DMF actually cover these? Been some vague assumptions around this but nothing specific. Many have different degrees of understanding, even the knowledgeable posters can sometimes claim not to understand where a piece fits in the accounts or company jigsaw. Denigrating posters because you don't like what they post, they disagree or because you think they fail to understand does create a toxic thread. I wonder how many potential posters are turned off from posting because of this personalised toxicity.

[SailorRob]

BaaBaa, that’s a mean spirited post ….sounds like you telling Snoopy to pi$$ off unless he agrees with you and others. Hooe not the case. I’ll leave it at that

I get the feeling that Snoopy is trying to work out how operating expenses fit into the jigsaw …like do DMF actually cover these? Been some vague assumptions around this but nothing specific.

Good on him for trying …keep at it Snoopy

No...

He was trying to save him embarrassing himself.

Frustration at a lack of basic understanding.

[Rawz]

Thanks Rawz for reposting Ferg`s excellent post.
I`ve been away and missed it until now.

The bit that needs a little more colour is the difference between building apartment's over villas. You say it takes year 1 to build a unit and then in year 2 it gets sold. While spot on for villas , that`s not right for OCA apartments.

Apartments take over 2 years to build and 1.5 -2.5 years to sell down...so all up from breaking dirt to a mature tower is about 5 years.

This is a key difference for OCA from its competitors doing mostly villas. This delayed gratification is also why RYM got tripped up with its cashflows in 2023.

This 5 year process v`s 2 years for villas is why when OCA listed in 2017 it still hasn`t yet shown any improved P & L after all this time. Its that simple.

Thanks for sharing Ferg. Brilliantly laid out ( sorry I cant give you another rep point, you deserve it)

Shesh Mav when you add that bit in I ask,, why bother building apartments???

Villa's seem so much easier!!

[mistaTea]

Many have different degrees of understanding, even the knowledgeable posters can sometimes claim not to understand where a piece fits in the accounts or company jigsaw. Denigrating posters because you don't like what they post, they disagree or because you think they fail to understand does create a toxic thread. I wonder how many potential posters are turned off from posting because of this personalised toxicity.

Aye, there are definitely a couple of thugs dominating this forum.

Leaping at the opportunity to scrag anyone who has a different view or even just making an effort to learn about the business.

You either believe their view completely, or you are a dumb arse who should just index and stop posting.

Oh Phaedrus! Come back - we need you!

[bull....]

No...

He was trying to save him embarrassing himself.

Frustration at a lack of basic understanding.

so its a crime to try to understand and discuss. i would say you lack understanding about some parts of the business but i dont throw it in your face

[SailorRob]

Aye, there are definitely a couple of thugs dominating this forum.

Leaping at the opportunity to scrag anyone who has a different view or even just making an effort to learn about the business.

You either believe their view completely, or you are a dumb arse who should just index and stop posting.

Oh Phaedrus! Come back - we need you!

Yep virtually everyone including 95% of professionals are FAR better off indexing.

[SailorRob]

so its a crime to try to understand and discuss. i would say you lack understanding about some parts of the business but i dont throw it in your face

Please try, I would welcome it.

[bull....]

Please try, I would welcome it.

well you should for starters offer your knowledge to snoopy's questions. go ahead surprise us.

[SailorRob]

well you should for starters offer your knowledge to snoopy's questions. go ahead surprise us.

I thought you were going to throw my lack of understanding in my face?

Instead you want me to answer questions?

I'd be highly appreciative of anyone who can cast shadow on Mavs general 2032 numbers, or my big picture, as that would show me I'm wrong and allow capital allocation elsewhere.

As with Berkshire, nobody can even come close.

I rate your level of general understanding of business and investment in the bottom 5% of all sharetrader posters so I would be quite surprised if you could throw anything in my face, even though I throw bovine discharge at you regularly.

[SailorRob]

well you should for starters offer your knowledge to snoopy's questions. go ahead surprise us.

If someone says Berkshire is going bankrupt this year, or Bull is a good insightful investor, I'm not going to argue with them. Pointless.

If Snoopy puts in the effort to understand the business and asks relevant questions I will engage.

So far he has posted massive missives that are off the mark, gets corrected then moves to the next.

I urge you to go look at his post on 2023 returns where he highlighted his investment history. Massive long term underperformance, can't even see why people would want to inves ex NZ.

[Balance]

Amazing thread - 18,613 posts viewed 4.5m times.

Looking exactly like PEB - 21,004 posts viewed 7m times but that's over 18 years vs 9 years for OCA.

Says a lot about the type of investors in OCA!

[bull....]

I thought you were going to throw my lack of understanding in my face?

Instead you want me to answer questions?

I'd be highly appreciative of anyone who can cast shadow on Mavs general 2032 numbers, or my big picture, as that would show me I'm wrong and allow capital allocation elsewhere.

As with Berkshire, nobody can even come close.

I rate your level of general understanding of business and investment in the bottom 5% of all sharetrader posters so I would be quite surprised if you could throw anything in my face, even though I throw bovine discharge at you regularly.

lol hahha i didnt expect anything else from insecure sailor.

anyway you owe xmen a lap dance ..... lol he is even smarter than you

[bottomfeeder]

Buying opportunity at .69 coming up soon. For a trader the .69 to .75 range is easy pickings at the moment and has been for a while.

[winner69]

Amazing thread - 18,613 posts viewed 4.5m times.

Looking exactly like PEB - 21,004 posts viewed 7m times but that's over 18 years vs 9 years for OCA.

Says a lot about the type of investors in OCA!

On the picking competition spreadsheet rankings OCA 170th and PEB 171st ….out of 180 (179 if you don’t count GEO)

Hmmmm

[winner69]

Snoopy - if you want more insights into OCA numbers the Reconciliation between NPAT and Operating Cash Flow is quite interesting.

[Snoopy]

2. Why OCA?
Put simply I think OCA is a great business selling for dirt cheap.


The great thing about the RV business model is the generation of float. Float is the cash that the retirement villages receive from the customers through an occupational rights agreement. This cash is then reinvested back into developing more property, where they can continue building the float up as well as making a profit through deferred management fees. Float can be viewed as an interest-free, non-callable loan that will never be paid down.

https://lh7-us.googleusercontent.com/Hn5V3s6srPkq5IMPvjfnSkRdsy_XpID65mxsbTVEmj61dmDjic B-2xtJTcc7CMEP3jl13ymg4HB_9A9Kk9yfjem1Cv8oABTtw0yHeV 3Eks_8x2EN-kxZV1j98quAhPR0Hio4vULWGYE1-nOK7h9C5OY
CAGR of 15.3% growth since 2012
CAGR of 20.8% since 2017


There is a large number of unsold but finished property that are being sold down, along with property constantly being developed. Conservatively let's say the float can continue to be grown at 15% P.A for the next 10 years, with a return on capital of 4%.


Via a spreadsheet I have calculated that in 10 years a sum of 1.3 billion will have been earnt, discounted (10% p.a) to 826 million. Plus it would easily go for a P/E of 15, which would go for 2.9 billion or discounted to 1.2 billion. Overall, I estimate that Oceania has a NPV of at least 2 billion calculated using extremely conservative estimates. There is so much margin of safety at these prices it’s ridiculous.


3. Why only OCA in the RV sector?
Mostly because OCA is/was the cheapest in relation to both float and equity, and I figure no one RV has a significant edge over the other and I imagine their growth should be somewhat equal.

I can’t seem to find it but I had calculated a price to float/equity ratio for all the companies to see which was trading at the steepest discount. From memory it went OCA, ARV, RYM, SUM, RAD, with OCA being significantly cheaper than all others. RAD had a horrific capital structure when compared to the rest.

This is a very basic overview of my thoughts on OCA, there's alot more that could be discussed like insider ownership. I hope my post generates some healthy debate, If you think I’m wrong or right tell me your reasons why!


What drew me into this thread of late was ValueNZ's request for a healthy debate. Personally I thought his laying down the case for an investment in OCA was excellent. That doesn't mean I agreed with all his points. But talking around such issues is the purpose of 'healthy debate' - right?

To those who accuse me of not doing enough homework on OCA, and now getting some of the detail right I plead guilty. But then again, why should I put hours and hours into researching details of something which I am not a shareholder, when there are plenty of companies in which I am a shareholder that demand more of my attention? For this reason my comment on OCA tend to be more macro level.

The first macro question I tend to look at in any business these days is cashflow. Frankly this is not a strong point for OCA, nor any of the other listed retirement villages operators for that matter. Instead what I read about here on this thread is a strong focus on the growth of assets under management and how the free money from the float increases this, the vast demographic tailwinds and the very large portfolio of unsold stock ('high demand' and 'unsold stock' I see as an uncomfortable bedfellows in any analysis BTW). Then we have the graphs such as ValueNZ's above rising asymptotically skywards which makes all the OCA believers feel 'warm and fuzzie'. But next the OCA groupies get to bemoan how stupid Mr Market is for pricing theirr shares at such a huge discount to asset value.

My suggestion is that if you focus on cashflow, the reason for the markets discount to net asset backing becomes obvious. If there are months and months build rate of OCA units out there that are not sold, this suggests to me that the build rate is significantly ahead of demand. Granted demand may catch up. But in the meantime the 'holding' of these assets has to be paid for, with real cash. Given this I think it is reasonable to question the demand model as projected by ValueNZ in his graph, and in particular those input values with supply growing at 15% p.a. for ten years.

If the argument is that the cashflow can 'come right' if development is paused, and the existing retirement villages under construction are finished that is fine. But in that situation you are looking at a mature company that cannot justify a market PE rating of 15 or above as touted. Overall, I think it is fair to question the assumptions behind these growth models.

The other thing that strikes me about this thread is that there is very little discussion on the ever increasing costs of running these business. One thing I can tell you is that the elderly I know choose their retirement village as a last step in their life's accommodation chain. Once in a retirement village they don't want to move again. And that means the continuum of care, up to hospital level care, is not an expense item that retirement villages can contract out of. I see no modelling of these increasing care costs at all from the OCA groupies. And the government does not seem to be coming to the party to help residents properly fund these ever increasing costs.

As a non investor in the retirement industry, I want to hear from others how these challenges are being met. Instead I read about the property ponzi and how rich I will become investing in all of this retirement village real estate at some point far off in the future. Meanwhile the development cash burns, and no tax is paid because no village steady state profits are being made. It really isn't that hard to see why OCA shares trade at a discount, to those on the outside at least.

SNOOPY

[SailorRob]

On the picking competition spreadsheet rankings OCA 170th and PEB 171st ….out of 180 (179 if you don’t count GEO)

Hmmmm

Hmmmm what Whinger 69?

[SailorRob]

What drew me into this thread of late was ValueNZ's request for a healthy debate. Personally I thought his laying down the case for an investment in OCA was excellent. That doesn't mean I agreed with all his points. But talking around such issues is the purpose of 'healthy debate' - right?

To those who accuse me of not doing enough homework on OCA, and now getting some of the detail right I plead guilty. But then again, why should I put hours and hours into researching details of something which I am not a shareholder in, when there are plenty of companies in which I am a shareholder that demand more of my attention? For this reason my comment on OCA tend to be more macro level.

The first macro question I tend to look at in any business these days is cashflow. Frankly this is not a strong point for OCA, nor any of the other listed retirement villages operators for that matter. Instead what I read about here on this thread is a strong focus on the growth of assets under management and how the free money from the float increases this, the vast demographic tailwinds and the very large portfolio of unsold stock. Then we have the graphs such as ValueNZ's above rising asymptotically skywards which makes all the OCA believers feel 'warm and fuzzie'. Then the OCA groupies get to bemoan how stupid Mr Market is for pricing your shares at such a huge discount to asset value.

My suggestion is that if you focus on cashflow, the reason for the markets discount to net asset backing becomes obvious. If there are months and months build rate of OCA units out there that are not sold, this suggests to me that the build rate is significantly ahead of demand. Granted demand may catch up. But in the meantime the 'holding' of these assets has to be paid for, with real cash. Given this I think it is reasonable to question the demand model as projected by ValueNZ in his graph, and in particular those input values with supply growing at 15% pa for ten years.

If the argument is that the cashflow can 'come right' if development is paused and the existing retirement villages under construction are finished that is fine. But in that situation you are looking at a mature company that cannot justify a market PE rating of 15 or above as touted. Overall, I think it is fair to question the assumptions behind these growth models.

The other thing that strikes me about this thread is that there is very little discussion on the ever increasing costs of running these business. One thing I can tell you is that the elderly I know choose their retirement village as a last step in their life's accommodation chain. Once in a retirement village they don't want to move again. And that means the continuum of care, up to hospital level care, is not an expense item that retirement villages can contract out of. I see no modelling of these increasing care costs at all from the OCA groupies. And the government does not seem to be coming to the party to help residents properly fund these ever increasing costs.

As a non investor in the retirement industry, I want to hear from others how these challenges are being met. Instead I read about the property ponzi and how rich I will become investing in all of this retirement village real estate at some point far off in the future. Meanwhile the development cash burns, and no tax is paid because no village steady state profits are being made. It really isn't that hard to see why OCA shares trade at a discount, to those on the outside at least.

SNOOPY

Ummmmmmm

Cashflow is the strongest point

As discussed

Mind boggling cash flow.

Nothing better anywhere.

[bull....]

What drew me into this thread of late was ValueNZ's request for a healthy debate. Personally I thought his laying down the case for an investment in OCA was excellent. That doesn't mean I agreed with all his points. But talking around such issues is the purpose of 'healthy debate' - right?

To those who accuse me of not doing enough homework on OCA, and now getting some of the detail right I plead guilty. But then again, why should I put hours and hours into researching details of something which I am not a shareholder, when there are plenty of companies in which I am a shareholder that demand more of my attention? For this reason my comment on OCA tend to be more macro level.

The first macro question I tend to look at in any business these days is cashflow. Frankly this is not a strong point for OCA, nor any of the other listed retirement villages operators for that matter. Instead what I read about here on this thread is a strong focus on the growth of assets under management and how the free money from the float increases this, the vast demographic tailwinds and the very large portfolio of unsold stock ('high demand' and 'unsold stock' I see as an uncomfortable bedfellows in any analysis). Then we have the graphs such as ValueNZ's above rising asymptotically skywards which makes all the OCA believers feel 'warm and fuzzie'. Then the OCA groupies get to bemoan how stupid Mr Market is for pricing your shares at such a huge discount to asset value.

My suggestion is that if you focus on cashflow, the reason for the markets discount to net asset backing becomes obvious. If there are months and months build rate of OCA units out there that are not sold, this suggests to me that the build rate is significantly ahead of demand. Granted demand may catch up. But in the meantime the 'holding' of these assets has to be paid for, with real cash. Given this I think it is reasonable to question the demand model as projected by ValueNZ in his graph, and in particular those input values with supply growing at 15% pa for ten years.

If the argument is that the cashflow can 'come right' if development is paused and the existing retirement villages under construction are finished that is fine. But in that situation you are looking at a mature company that cannot justify a market PE rating of 15 or above as touted. Overall, I think it is fair to question the assumptions behind these growth models.

The other thing that strikes me about this thread is that there is very little discussion on the ever increasing costs of running these business. One thing I can tell you is that the elderly I know choose their retirement village as a last step in their life's accommodation chain. Once in a retirement village they don't want to move again. And that means the continuum of care, up to hospital level care, is not an expense item that retirement villages can contract out of. I see no modelling of these increasing care costs at all from the OCA groupies. And the government does not seem to be coming to the party to help residents properly fund these ever increasing costs.

As a non investor in the retirement industry, I want to hear from others how these challenges are being met. Instead I read about the property ponzi and how rich I will become investing in all of this retirement village real estate at some point far off in the future. Meanwhile the development cash burns, and no tax is paid because no village steady state profits are being made. It really isn't that hard to see why OCA shares trade at a discount, to those on the outside at least.

SNOOPY

well said snoopy. i think you hit the nail on the head the market values these rv's like this because cashflow is not good.

[Balance]

On the picking competition spreadsheet rankings OCA 170th and PEB 171st ….out of 180 (179 if you don’t count GEO)

Hmmmm

The fact that OCA was cobbled together by Macquarie and then, sold out completely by Macquarie in 2020 at a 5c premium to Net Asset Backing indicates a lot about the lack of prospects for growth in OCA?

[Snoopy]

Ummmmmmm

Cashflow is the strongest point

As discussed

Mind boggling cash flow.

Nothing better anywhere.

Maybe, if you believe the asymptotic projections will be matched with asymptotic demand and costs can be kept under control. But let's be clear SR, there is a difference between 'cashflow' and 'potential cashflow'.......

SNOOPY

[Balance]

Ummmmmmm

Cashflow is the strongest point

As discussed

Mind boggling cash flow.

Nothing better anywhere.

Please stop! I already have had my laughs for today!

https://media.tenor.com/KhtaBX-rWXIAAAAM/lmao-laughing.gif

[bull....]

Maybe, if you believe the asymptotic projections will be matched with asymptotic demand and costs can be kept under control. But let's be clear SR, there is a difference between 'cashflow' and 'potential cashflow'.......

SNOOPY

exactly eg helier neg cashflow at open yrs to become truely cash positive.

[SailorRob]

Cheers guys, I've always wondered how they've done all the development without cash flow, a real head scratcher for me.

I must learn how to read a cash flow statement one of these days.

[Daytr]

What I see playing out here is one group of posters looking at the DMF as if it's current cashflow. There is a small amount of that flowing & over time that cashflow stream is going to grow considerably.

In the meantime operating casflow margins are low & the company is sitting on debt & unsold stock whilst building more units, more capital expenditure.

I assume the liability in the balance sheet covers the sum of OCA has to pay back to the owner, less 30%, plus the estimated refurb cost. However what the accounts can't show is the resale of that unit far exceeds the sum of the liability perhaps by circa $300K per unit.

So I estimate once the profile of OCA matures more in a few years that DMF will start generating free cashflow of circa $100M p.a.

That on top of operating margins will build the float which over time will be considerable.
However I do question the multiples of valuation OCA may may have at that time, as rather than becoming an investment company effectively, I would think they will reduce the usage of debt for their capital builds of more units or start paying out dividends or perhaps a mix of the two. Either way I don't see the P.E ratio being maintained as earnings grow.

Companies aren't generally paid a high P.E. without growth. So if OCA decids to rely on the proceeds from the DMF the P.E. imo is likely to reduce as the market capitalisation increases to a maturely valued company.

[Balance]

Cheers guys, I've always wondered how they've done all the development without cash flow, a real head scratcher for me.

I must learn how to read a cash flow statement one of these days.

No brainer - just keep borrowing and keep hoping that property values can only ever go up.


https://media.tenor.com/KhtaBX-rWXIAAAAM/lmao-laughing.gif

[SailorRob]

No brainer - just keep borrowing and keep hoping that property values can only ever go up.


https://media.tenor.com/KhtaBX-rWXIAAAAM/lmao-laughing.gif

So they borrowed to do all the development? Ahh I see.

2.5 billion assets from 400 borrowed

Interesting

[SailorRob]

I estimate once the profile of OCA matures more in a few years that DMF will start generating free cashflow of circa $100M p.a.

On a 500 cap.

Nice, 20% cash return in a 3% world maybe by then.

DMF is current cashflow, actually better than current, it's advanced.

[Balance]

So they borrowed to do all the development? Ahh I see.

2.5 billion assets from 400 borrowed

Interesting

You have no idea, do you?

[Valuegrowth]

If retirement sector consolidate first while paying off debt, then there's hope in this sector. I saw somewhere that they can pay off debts by taking some steps over the coming 5 years. Sector need a turnaround. After reading this thread I,am really confused. I thought retirement village is a simple business that I can understand.Only way I can understand is by looking at it's balance sheet. I am looking forward to monitor their balance sheets, debt level and cash flow.

[Snoopy]

Snoopy - if you want more insights into OCA numbers the Reconciliation between NPAT and Operating Cash Flow is quite interesting.


I see the largest entry in that reconciliation statement is the DMF or 'deferred mangement fee'

"The deferred management fee is recognised on a straight line basis over the longer of the term specified in a resident’s ORA or the average expected occupancy. The expected periods of occupancy are based on historical Group averages, for the relevant accommodation they are estimated to be 7 years for units, 5 years for apartments and 3 years for care suites from the date of occupation."

However, at the portfolio level the DMF can never be settled. Because as soon as one departing resident 'pays up', another embarking resident takes their place and it is the new occupants management fees that are deferred. So OCA is destined to have a perpetual book of 'deferred management fee' debt on the balance sheet which is never collected because it cannot be collected while OCA runs villages accommodating live residents. Yet the DMF is funded from unit occupier capital, and is not varied according the the services the unit occupant receives. So it looks to me like the DMF is a 'capital charge in drag', which makes it, in effect, part of the float in my eyes. SR disagrees though.



Don't have the time to correct all this or teach you, but a quick note, DMF does not 'come out of the value of the property' it is derived from the value. Very different things. Coming out of... There is nothing coming out...


The stark truth of OCA is that day to day expenses (and development expenses) are paid for by borrowings that never reduce, because of the company's growth plans. There is no shame in this. It is how the business plan is designed to work. The only issue is as interest rates go higher, the borrowings compound faster. And if OCA's great friends the bankers don't like it, then they can suggest OCA raise more capital to set off against the ever rising borrowings. The potential problem here is that due to the poor cashflow generation of the OCA model, new equity can only be raised at a discount (crashing the NTA of the shares post capital raising) both of the assets built by shareholder equity and the float. So greatly expanding your whole asset base with the float, -while possibly having to shore it up later with a share issue discounted to the float enhanced net asset value- looks to be a risk that those espousing the float as 'great free development opportunity' did not consider. IOW the float can act as a leveraging force 'both ways'.

SNOOPY

[winner69]

On a 500 cap.

Nice, 20% cash return in a 3% world maybe by then.

DMF is current cashflow, actually better than current, it's advanced.


So they borrowed to do all the development? Ahh I see.

2.5 billion assets from 400 borrowed

Interesting

Sell those 2.5 billion of assets for what they reckon they are worth and repay debt and give the float back to its rightful owners and pay the bill they’d have about $1 billion left

But nice people from Macquarie might come along and say here make it easy for yourself and take our $700k and Liz would say yes that’s a good idea

And then Macquarie can repeat the process

[SailorRob]

You have no idea, do you?

Mate I'm clueless.

How's your day at work going, hope your boss is being nice to you.

[SailorRob]

Sell those 2.5 billion of assets for what they reckon they are worth and repay debt and give the float back to its rightful owners and pay the bill they’d have about $1 billion left

But nice people from Macquarie might come along and say here make it easy for yourself and take our $700k and Liz would say yes that’s a good idea

And then Macquarie can repeat the process


I doubt she would, but if that happens it will be a nice return for me and onto the next.

Margin of safety.

[Balance]

Mate I'm clueless.

How's your day at work going, hope your boss is being nice to you.

My boss is always nice to me. Too nice sometimes!

What do they say?

Do the job you love doing and you never have to work again ever in your life?

[winner69]

On a 500 cap.

Nice, 20% cash return in a 3% world maybe by then.

DMF is current cashflow, actually better than current, it's advanced.


I doubt she would, but if that happens it will be a nice return for me and onto the next.

Margin of safety.

And everybody lives happily ever after ..even Liz

[SailorRob]

My boss is always nice to me. Too nice sometimes!

What do they say?

Do the job you love doing and you never have to work again ever in your life?

I'll take the money thanks.

Plus, with a new government... Your type of job is toast.

[Balance]

I'll take the money thanks.

Well, OCA is not going to do the job and I reckon you spend & waste more time here than anything else while OCA goes nowhere.

And you wrote that you want the sp to go lower, right?

Then, stay clear and just be contented watching it fall as you desire it to, surely!

Why bother trying to enlighten the naive, dumb, non believers and ignorant? You should be encouraging the sellers and discouraging the buyers, surely!

I don’t get it.

[winner69]

REINZ December property sales report

NZ house prices edged a shade lower in December, down around 0.3% mom on a seasonally adjusted basis

Sales volumes remain low but are still trending up.

Not too bad when they nking of impact on OCA …..sales H1 should be higher than last year and prices/margins OK

[bull....]

Well, OCA is not going to do the job and I reckon you spend & waste more time here than anything else while OCA goes nowhere.

And you wrote that you want the sp to go lower, right?

Then, stay clear and just be contented watching it fall as you desire it to, surely!

Why bother trying to enlighten the naive, dumb, non believers and ignorant? You should be encouraging the sellers and discouraging the buyers, surely!

I don’t get it.

cause sailor only recently finished working for his boss , due to redundancy. his investments did not allow for early retirement.
one can understand why retirement was not possible early when you just want stock prices to keep going down and hope in the next 40yrs your hit paydirt with oca

[Daytr]

On a 500 cap.

Nice, 20% cash return in a 3% world maybe by then.

DMF is current cashflow, actually better than current, it's advanced.

Yep exactly re the 20%, but what I am saying as the company revalues then the multiple will slowly reduce so that's likely to reduce to 10% off a higher valuation.

[Snoopy]

Companies aren't generally paid a high P.E. without growth. So if OCA decids to rely on the proceeds from the DMF the P.E. imo is likely to reduce as the market capitalisation increases to a maturely valued company.


Exactly. You either have a growth company which pours all of their earnings into building more and more ILUs but may have capital issues as they proceed along their growth path. Or you have an 'already built set of villages' which starts to throw out quite a bit of cash but grows no faster than inflation (and has no cashflow issues). But you can't take the PER from the former and apply it to the latter.

SNOOPY

[SailorRob]

cause sailor only recently finished working for his boss , due to redundancy. his investments did not allow for early retirement.
one can understand why retirement was not possible early when you just want stock prices to keep going down and hope in the next 40yrs your hit paydirt with oca

Did my redundancy coincide with retirement age?

I didn't realise that, thought I was decades away from retirement age!

Thanks for clearing that up, I'll start looking for a OCA unit for myself.

[SailorRob]

Well, OCA is not going to do the job and I reckon you spend & waste more time here than anything else while OCA goes nowhere.

And you wrote that you want the sp to go lower, right?

Then, stay clear and just be contented watching it fall as you desire it to, surely!

Why bother trying to enlighten the naive, dumb, non believers and ignorant? You should be encouraging the sellers and discouraging the buyers, surely!

I don’t get it.

Much lower yes.

Oh it will do the job just fine, but to make real money I need the price much much lower.

I don't think that I move the market so doesn't matter really.

[Cupsy]

First things first. Welcome to the discussion Cupsy.

SNOOPY

Thank you very much Snoopy, very much appreciated.

[Rawz]

Thank you very much Snoopy, very much appreciated.

Welcome

Whats SailorRob like in real life? as grumpy as he is on sharetrader? lol :p

[bull....]

REINZ December property sales report

NZ house prices edged a shade lower in December, down around 0.3% mom on a seasonally adjusted basis

Sales volumes remain low but are still trending up.

Not too bad when they nking of impact on OCA …..sales H1 should be higher than last year and prices/margins OK

probably why all rv's coming off the boil now. housing uplift is proving very subdued

[Blue Skies]

I have shares in both OCA & SUM & something which really irks me is OCA's TV marketing, the difference between SUM & OCA could not be starker.

One of the driving reasons behind people moving to RV's is loneliness, the kids have all gone & older people, including couples often end up getting quite isolated in their homes.
What they want are the same basic human needs as everyone else, fun, companionship, friendship, some joy & activities to fill their day, and the Summerset ads say thats exactly what we can give you, come & see us & we'll show you how.

On the other hand OCA's ads look like the concepts have been developed by cool young agency people who don't actually relate to or understand the market they're talking to.
The previous OCA ad with the fluffy toy being reeled in on a fishing line was awful, simply patronising & insulting to older people (OCA's target market) , implying the residents were all feeble & senile.
And the current one with the couple playing the piano, how many older people are going to relate positively to that rather melancholy TV ad when they hardly ever see their grown up kids & apart from a few seconds at the very end when the Oceania logo finally appears & easily missed, most people would have no idea what its even promoting.

Instead of telling a story of starting a new chapter in life, making new friends & activities & pastimes & some joy to fill your days, it tells a sad story of an ageing couple their lives slowly diminishing & physically falling apart. Who's going to say, 'that's what I want, how do I get it.' ..... 'well come & talk to us at OCA & we can show you how.' - Not likely!

Come on OCA get a new agency which actually understands and can relate to your target market.

[winner69]

Welcome

Whats SailorRob like in real life? as grumpy as he is on sharetrader? lol :p

Maybe Cupsy is SailorRob?

Whatever welcome to the discussion Cupsy

[Cupsy]

What drew me into this thread of late was ValueNZ's request for a healthy debate. Personally I thought his laying down the case for an investment in OCA was excellent. That doesn't mean I agreed with all his points. But talking around such issues is the purpose of 'healthy debate' - right?
Great comment, imo the idea is to try to learn more and improve, a great way to do that is by listening to what ppl have to say (especially those with differing views) and seeing if any new learnings can be gleaned from them.

To those who accuse me of not doing enough homework on OCA, and now getting some of the detail right I plead guilty. But then again, why should I put hours and hours into researching details of something which I am not a shareholder, when there are plenty of companies in which I am a shareholder that demand more of my attention? For this reason my comment on OCA tend to be more macro level.

The first macro question I tend to look at in any business these days is cashflow. Frankly this is not a strong point for OCA, nor any of the other listed retirement villages operators for that matter. Instead what I read about here on this thread is a strong focus on the growth of assets under management and how the free money from the float increases this, the vast demographic tailwinds and the very large portfolio of unsold stock ('high demand' and 'unsold stock' I see as an uncomfortable bedfellows in any analysis BTW). Then we have the graphs such as ValueNZ's above rising asymptotically skywards which makes all the OCA believers feel 'warm and fuzzie'. But next the OCA groupies get to bemoan how stupid Mr Market is for pricing theirr shares at such a huge discount to asset value
Certainly I can see valueNZ's logic, but I also understand the point you are making here, some of the reading I have been doing imo makes a similar point (value investing by bruce greenwald), one of my perceptions from the book is that value calculated from projected growth is one of the least reliable, on account of you are making future predictions that have yet to happen.

My suggestion is that if you focus on cashflow, the reason for the markets discount to net asset backing becomes obvious. If there are months and months build rate of OCA units out there that are not sold, this suggests to me that the build rate is significantly ahead of demand. Granted demand may catch up. But in the meantime the 'holding' of these assets has to be paid for, with real cash. Given this I think it is reasonable to question the demand model as projected by ValueNZ in his graph, and in particular those input values with supply growing at 15% p.a. for ten years.
Certainly can see your point here.

If the argument is that the cashflow can 'come right' if development is paused, and the existing retirement villages under construction are finished that is fine. But in that situation you are looking at a mature company that cannot justify a market PE rating of 15 or above as touted. Overall, I think it is fair to question the assumptions behind these growth models.

The other thing that strikes me about this thread is that there is very little discussion on the ever increasing costs of running these business. One thing I can tell you is that the elderly I know choose their retirement village as a last step in their life's accommodation chain. Once in a retirement village they don't want to move again. And that means the continuum of care, up to hospital level care, is not an expense item that retirement villages can contract out of. I see no modelling of these increasing care costs at all from the OCA groupies. And the government does not seem to be coming to the party to help residents properly fund these ever increasing costs.

As a non investor in the retirement industry, I want to hear from others how these challenges are being met. Instead I read about the property ponzi and how rich I will become investing in all of this retirement village real estate at some point far off in the future. Meanwhile the development cash burns, and no tax is paid because no village steady state profits are being made. It really isn't that hard to see why OCA shares trade at a discount, to those on the outside at least
I can see your point of view here, especially wrt some of the points you have raised previously in regards to LT3000's post on pricing property based stock investments. winner69 had an interesting point which i'm not sure was answered in regards to this, the question was around why for SUM the market cap is close to asset value, where for OCA it is much lower.
It was an interesting point that made me have a think about it, and the only conclusion i could come up with was that most ppl only care about the reported earnings, as the earnings to market caps for both are within a few percent if im not mistaken (some where around 7 to 10% ish?).
The next question that came to mind (as a learning exerecise) is, if you had to buy one or the other, which would you choose and why?.


SNOOPY

One other point that i'm finding confusing in this topic is who is commenting wrt current price relative to value?, and who is commenting with regard to the business itself with out reference to the the current price?, just an observation.

[Cupsy]

Maybe Cupsy is SailorRob?

Whatever welcome to the discussion Cupsy

Thank you for the welcome winner, and i can assure you I am not sailorRob.

[Cupsy]

Welcome

Whats SailorRob like in real life? as grumpy as he is on sharetrader? lol :p

Thank you you for the welcome Rawz :), not sure how to answer this as i've never considered him grumpy (even from what ive seen on here, although i cant admit to reading all posts.)

[Habits]

I have shares in both OCA & SUM & something which really irks me is OCA's TV marketing, the difference between SUM & OCA could not be starker.

One of the driving reasons behind people moving to RV's is loneliness, the kids have all gone & older people, including couples often end up getting quite isolated in their homes.
What they want are the same basic human needs as everyone else, fun, companionship, friendship, some joy & activities to fill their day, and the Summerset ads say thats exactly what we can give you, come & see us & we'll show you how.

On the other hand OCA's ads look like the concepts have been developed by cool young agency people who don't actually relate to or understand the market they're talking to.
The previous OCA ad with the fluffy toy being reeled in on a fishing line was awful, simply patronising & insulting to older people (OCA's target market) , implying the residents were all feeble & senile.
And the current one with the couple playing the piano, how many older people are going to relate positively to that rather melancholy TV ad when they hardly ever see their grown up kids & apart from a few seconds at the very end when the Oceania logo finally appears & easily missed, most people would have no idea what its even promoting.

Instead of telling a story of starting a new chapter in life, making new friends & activities & pastimes & some joy to fill your days, it tells a sad story of an ageing couple their lives slowly diminishing & physically falling apart. Who's going to say, 'that's what I want, how do I get it.' ..... 'well come & talk to us at OCA & we can show you how.' - Not likely!

Come on OCA get a new agency which actually understands and can relate to your target market.

Very well put, yep that piano ad is obscure and a surprise when the Oceania logo pops up

[SailorRob]

However, at the portfolio level the DMF can never be settled. Because as soon as one departing resident 'pays up', another embarking resident takes their place.



No bruv, they pay up at the beginning, not when they depart....

If course it cannot be settled this is the entire point... It's free money.

You never want to settle these liabilities, you want them to grow to the moon.

[mistaTea]

One other point that i'm finding confusing in this topic is who is commenting wrt current price relative to value?, and who is commenting with regard to the business itself with out reference to the the current price?, just an observation.

Do you believe that the current price of oil is the value of oil?

Or do you think that the current prices are lower or higher than the intrinsic value of oil? If so, why?

My view is the current price is largely reflective of the value of oil (within cooee anyway), given everything that is known now and the corresponding expectations everyone who makes up the market has right now.

I also believe that supply constraints will lead to higher prices longer term. That is my EXPECTATION - and time will tell if my expectation is good or bad. Even if I am proven correct I’m the future, it doesn’t not mean that everyone else is ‘wrong’ today given the current moving parts.

This was essentially the point I raised about market cap and business value some posts back and all Hell broke loose.

[SailorRob]

Do you believe that the current price of oil is the value of oil?

Or do you think that the current prices are lower or higher than the intrinsic value of oil? If so, why?

My view is the current price is largely reflective of the value of oil (within cooee anyway), given everything that is known now and the corresponding expectations everyone who makes up the market has right now.

I also believe that supply constraints will lead to higher prices longer term. That is my EXPECTATION - and time will tell if my expectation is good or bad. Even if I am proven correct I’m the future, it doesn’t not mean that everyone else is ‘wrong’ today given the current moving parts.

This was essentially the point I raised about market cap and business value some posts back and all Hell broke loose.

Intrinsic value of oil? Does it have cash flows? What discount rate?

So you're saying the oil futures curve is incorrect then? As it is showing lower prices long term.

What information do you have that the market doesn't?

[Bobdn]

Cool an oil discussion. Finally something interesting.

Majors need $60 oil to pay for their operations, buy backs and dividends. I saw that on CNBC. For some, it could be as low as $45 USD I thought.

They're still making money hand over fist, therefore, above $70 USD. I'm think of extending my tilt to OIH. It's in a "down trend" so maybe I'll do nothing.

That's all I have to say on oil. I'll quietly back out...

[mistaTea]

Intrinsic value of oil? Does it have cash flows? What discount rate?

So you're saying the oil futures curve is incorrect then? As it is showing lower prices long term.

What information do you have that the market doesn't?

Yes the oil produces cashflow to the owners of the oil field based on the market value (expectations) at the time.

Just like the inanimate building owned by OCA produces cash flows dependent on the market value of the buildings at the time of sale, resale etc.

And my expectations of longer term oil prices could be way off. I am not the one harping on here about how my view is the only view and everyone else is wrong.

[Cupsy]

I see the largest entry in that reconciliation statement is the DMF or 'deferred mangement fee'

The stark truth of OCA is that day to day expenses (and development expenses) are paid for by borrowings that never reduce, because of the company's growth plans. There is no shame in this. It is how the business plan is designed to work. The only issue is as interest rates go higher, the borrowings compound faster. And if OCA's great friends the bankers don't like it, then they can suggest OCA raise more capital to set off against the ever rising borrowings. The potential problem here is that due to the poor cashflow generation of the OCA model, new equity can only be raised at a discount (crashing the NTA of the shares post capital raising) both of the assets built by shareholder equity and the float. So greatly expanding your whole asset base with the float, -while possibly having to shore it up later with a share issue discounted to the float enhanced net asset value- looks to be a risk that those espousing the float as 'great free development opportunity' did not consider. IOW the float can act as a leveraging force 'both ways'.

SNOOPY

Hi Snoopy, really interesting post here and to be honest, i'm struggling to fully digest it, but would it be possible for you to expand on it especially wrt the following?;


So greatly expanding your whole asset base with the float, -while possibly having to shore it up later with a share issue discounted to the float enhanced net asset value-

[SailorRob]

Yes the oil produces cashflow to the owners of the oil field based on the market value (expectations) at the time.

Just like the inanimate building owned by OCA produces cash flows dependent on the market value of the buildings at the time of sale, resale etc.

And my expectations of longer term oil prices could be way off. I am not the one harping on here about how my view is the only view and everyone else is wrong.

Right, you're talking about an oil field. You mentioned oil the commodity.

[mistaTea]

Right, you're talking about an oil field. You mentioned oil the commodity.

The two are inextricable.

The commodity only has any ‘value’ so long as it can be extracted somehow and used for something.

The same as the buildings you own via OCA.

[Cupsy]

Do you believe that the current price of oil is the value of oil?

Or do you think that the current prices are lower or higher than the intrinsic value of oil? If so, why?

My view is the current price is largely reflective of the value of oil (within cooee anyway), given everything that is known now and the corresponding expectations everyone who makes up the market has right now.

I also believe that supply constraints will lead to higher prices longer term. That is my EXPECTATION - and time will tell if my expectation is good or bad. Even if I am proven correct I’m the future, it doesn’t not mean that everyone else is ‘wrong’ today given the current moving parts.

This was essentially the point I raised about market cap and business value some posts back and all Hell broke loose.

That is for sure an interesting perspective, and i'll admit i've never thought about it in the context you are suggesting. To answer your question, instinctively I would have much more faith in the pricing system of oil being fairly close to intrinsic value based on it being a commodity with reasonably known supply and demand data? I would have less faith in a listed company price being bang on to intrinsic value, based on the range of different complexities involved with any given company(more unknowns?, more moving balls?), and my impression (rightly or wrongly) is that retail investors are not investing in oil as compared to listed companies?.

[mistaTea]

That is for sure an interesting perspective, and i'll admit i've never thought about it in the context you are suggesting. To answer your question, instinctively I would have much more faith in the pricing system of oil being fairly close to intrinsic value based on it being a commodity with reasonably known supply and demand data? I would have less faith in a listed company price being bang on to intrinsic value, based on the range of different complexities involved with any given company(more unknowns?, more moving balls?), and my impression (rightly or wrongly) is that retail investors are not investing in oil as compared to listed companies?.

I think the two are probably closer than you think.

Oil prices have a lot of moving parts given the commodity underpins our entire existence.

Establishing what oil is ‘worth’ at any given moment is fairly complex I would say.

And with regards to intrinsic value - I suggest that the market cap is within cooee for MOST companies MOST of the time.

I acknowledge there are examples where this does not hold true. But it is a reasonable gauge of a business value (plus or minus) most of the time.

Perhaps OCA is the minority case where the market has just ‘clearly’ got it way wrong.

Perhaps it isn’t.

We must be open to the possibility that the market has priced it correctly given what is known today (which informs everyone’s expectations which ultimately establishes the price).

[SailorRob]

I think the two are probably closer than you think.

Oil prices have a lot of moving parts given the commodity underpins our entire existence.

Establishing what oil is ‘worth’ at any given moment is fairly complex I would say.

And with regards to intrinsic value - I suggest that the market cap is within cooee for MOST companies MOST of the time.

I acknowledge there are examples where this does not hold true. But it is a reasonable gauge of a business value (plus or minus) most of the time.

Perhaps OCA is the minority case where the market has just ‘clearly’ got it way wrong.

Perhaps it isn’t.

We must be open to the possibility that the market has priced it correctly given what is known today (which informs everyone’s expectations which ultimately establishes the price).

Don't let SKYTV the hot stove, scare you from every stove. Many are cold.

One awful experience shouldn't lead you to efficient market madness.

[mistaTea]

Don't let SKYTV the hot stove, scare you from every stove. Many are cold.

One awful experience shouldn't lead you to efficient market madness.

But I have said I do not believe in EMT.

I do not believe that markets are perfectly priced ALL of the time.

Can you really not get the distinction?

[SailorRob]

But I have said I do not believe in EMT.

I do not believe that markets are perfectly priced ALL of the time.

Can you really not get the distinction?

Not really no. I don't think you realise how tiny and insignificant NZX is and how backwards the investors are...

I think OCA is massively mispriced.

Day Traders case is roughly my bear case, a doubling share price and from the double a 10% CAGR.

Things would have to be grim for that to play out but a good bear case.

[mistaTea]

Not really no. I don't think you realise how tiny and insignificant NZX is and how backwards the investors are...

I think OCA is massively mispriced.

Day Traders case is roughly my bear case, a doubling share price and from the double a 10% CAGR.

Things would have to be grim for that to play out but a good bear case.


Aye, and as I have said numerous times - I think you put a strong case for why OCA could be undervalued.

I have just added another perspective on how things could be viewed, and rather than pause to truly consider any possible merit in what I say you chose to belligerent and attempt to gaslight me and others.

I was honestly shocked and stunned at how fast you turned on me over such a small thing.

You have made your case for OCA being a BUY and there are a lot of good points you raise. If your expectations for how the business will perform, float will increase etc prove out you will profit.

Wonderful.

But you might also not be right (or right about everything anyway) and could just be paying a very fair (market) price for the business.

And there’s nothing wrong with that either, say true.

[SailorRob]

Aye, and as I have said numerous times - I think you put a strong case for why OCA could be undervalued.

I have just added another perspective on how things could be viewed, and rather than pause to truly consider any possible merit in what I say you chose to belligerent and attempt to gaslight me and others.

I was honestly shocked and stunned at how fast you turned on me over such a small thing.

You have made your case for OCA being a BUY and there are a lot of good points you raise. If your expectations for how the business will perform, float will increase etc prove out you will profit.

Wonderful.

But you might also not be right (or right about everything anyway) and could just be paying a very fair (market) price for the business.

And there’s nothing wrong with that either, say true.

Exactly... No downside, fair price isn't a terrible outcome.

I'd prefer it much cheaper, only have a 5 or 6% position so I can't be that keen. But at lower prices I'd go much bigger.

[iamaskier]

Pretend you're a real estate agent selling the same house over and over and over and over again. Each time you get a 30% commission (which the buyer pays in this scenario).

Now assume that at the start of this chain you stumped up the original $1m to get the house built and at the end of this chain you still own it.

[SailorRob]

Pretend you're a real estate agent selling the same house over and over and over and over again. Each time you get a 30% commission (which the buyer pays in this scenario).

Now assume that at the start of this chain you stumped up the original $1m to get the house built and at the end of this chain you still own it.

Breath of fresh air.

But it's much better than this even. The million you stumped up, you get that and more back right away. The 30% you get to keep in the end (again and again) but you get the whole lot back while still owning the house.

[iamaskier]

Breath of fresh air.

But it's much better than this even. The million you stumped up, you get that and more back right away. The 30% you get to keep in the end (again and again) but you get the whole lot back while still owning the house.

Yep that's true, and you use that [free] money to start another of these setups and so on and so forth. Quite good.

[mistaTea]

Yep that's true, and you use that [free] money to start another of these setups and so on and so forth. Quite good.

Oh aye. I mean, name one time a Ponzi scheme never worked out in the end!

[mistaTea]

Yep that's true, and you use that [free] money to start another of these setups and so on and so forth. Quite good.

In fact, I see it now.

OCA must actually be worth an almost infinite price based on these happy path assumptions and thinking.

How could one ever pay too much?

[SailorRob]

In fact, I see it now.

OCA must actually be worth an almost infinite price based on these happy path assumptions and thinking.

How could one ever pay too much?

Slow, but you're getting there.

Pretty crazy to compare it to a ponzi.

NZ property market in general is a ponzi however, one that you are massively invested in and will pay the price for.

But OCA model isn't, pretty obviously.

[SailorRob]

Oh aye. I mean, name one time a Ponzi scheme never worked out in the end!

This reminds me of Whinger 69.

[mistaTea]

This reminds me of Whinger 69.

Come on now sailor, surely even you will allow the odd cheeky joke on your forum?

[winner69]

Looking at DMF for F23

In revenues there is $70.2m of DFM (accrued). Add care fees, village fees and other stuff total revenue was $247m (including DMF)

Underlying NPAT was $58.5m which included realised gains on sales/resales of $59.3m.

This implies that day to day operations ran at a small loss

Which also implies that all DMF was consumed ……all gone to help pay for looking after and caring for people and contributing to HQ overheads. Nothing left over. It was a fee after all (paid advance);and not really an ‘asset’.

That’s how I see it anyway…in simple abbreviated way

[bull....]

Looking at DMF for F23

In revenues there is $70.2m of DFM (accrued). Add care fees, village fees and other stuff total revenue was $247m (including DMF)

Underlying NPAT was $58.5m which included realised gains on sales/resales of $59.3m.

This implies that day to day operations ran at a small loss

Which also implies that all DMF was consumed ……all gone to help pay for looking after and caring for people and contributing to HQ overheads. Nothing left over. It was a fee after all and not an asset.

That’s how I see it anyway…in simple abbreviated way

your thinking would blow up the whole argument around the float. heresy to suggest these people are wrong

[winner69]

your thinking would blow up the whole argument around the float. heresy to suggest these people are wrong

In the past when suggested such things I’ve got lambasted so used to it

Better run for the hills and hide then eh bull.

[Balance]

In the past when suggested such things I’ve got lambasted so used to it

Better run for the hills and hide then eh bull.

Macquarie could not wait to get the hell out of Oceania after they reviewed its operating model and the potential (or lack thereof) for billion dollar gains.

And we have posters here thinking that they can win the best with the ‘Millionaires’ factory’?

[bull....]

Macquarie could not wait to get the hell out of Oceania after they reviewed its operating model and the potential (or lack thereof) for billion dollar gains.

And we have posters here thinking that they can win the best with the ‘Millionaires’ factory’?

I think sailor would suggest that they are dumb ar'ses who know nothing about the float

[Rawz]

Looking at DMF for F23

In revenues there is $70.2m of DFM (accrued). Add care fees, village fees and other stuff total revenue was $247m (including DMF)

Underlying NPAT was $58.5m which included realised gains on sales/resales of $59.3m.

This implies that day to day operations ran at a small loss

Which also implies that all DMF was consumed ……all gone to help pay for looking after and caring for people and contributing to HQ overheads. Nothing left over. It was a fee after all (paid advance);and not really an ‘asset’.

That’s how I see it anyway…in simple abbreviated way

So what you are saying is, using that example of the agent selling the house over and over and over again.... he has to pay the cook, gardener and cleaner out of his 30% commission and after those payments there's nothing left for him?

[bull....]

So what you are saying is, using that example of the agent selling the house over and over and over again.... he has to pay the cook, gardener and cleaner out of his 30% commission and after those payments there's nothing left for him?

also the dude forgot to mention where he got the money to buy the house in the first place

[winner69]

So what you are saying is, using that example of the agent selling the house over and over and over again.... he has to pay the cook, gardener and cleaner out of his 30% commission and after those payments there's nothing left for him?

Seems that wasn’t a very good story after all

By the way you left the bottle washer out

[mistaTea]

Seems that wasn’t a very good story after all

By the way you left the bottle washer out

And the Shoe Shine...

[winner69]

Oh aye. I mean, name one time a Ponzi scheme never worked out in the end!

Outrage from rV operators when somebody told Parliament that ORA just a quasi Ponzi scheme

Media report-
An accusation retirement villages operate like "a quasi-Ponzi scheme" is "not only plain wrong, but also reckless and irresponsible", the group representing village operators said.

[mistaTea]

Outrage from rV operators when somebody told Parliament that ORA just a quasi Ponzi scheme

Media report-
An accusation retirement villages operate like "a quasi-Ponzi scheme" is "not only plain wrong, but also reckless and irresponsible", the group representing village operators said.

True.

And what do ye think of the picture they selected for John?

https://businessdesk.co.nz/article/infrastructure/residents-ponzi-claim-reckless-and-irresponsible-rva

I love it and it makes me want to instinctively trust him :t_up:

[winner69]

True.

And what do ye think of the picture they selected for John?

https://businessdesk.co.nz/article/infrastructure/residents-ponzi-claim-reckless-and-irresponsible-rva

I love it and it makes me want to instinctively trust him :t_up:

Nice one mistatea

Hope Oceania have found a new photo of Brent to supply to the media …I got no response when I asked them (whinger eh) to change it because the one they were using was so ‘I’m here to screw you, trust me’

Never mind

[Cupsy]

https://www.sharetrader.co.nz/images/misc/quote_icon.png Originally Posted by winner69 https://www.sharetrader.co.nz/images/buttons/viewpost-right.png (https://www.sharetrader.co.nz/showthread.php?p=1037420#post1037420)Looking at DMF for F23

In revenues there is $70.2m of DFM (accrued). Add care fees, village fees and other stuff total revenue was $247m (including DMF)

Underlying NPAT was $58.5m which included realised gains on sales/resales of $59.3m.

This implies that day to day operations ran at a small loss

Which also implies that all DMF was consumed ……all gone to help pay for looking after and caring for people and contributing to HQ overheads. Nothing left over. It was a fee after all and not an asset.


That’s how I see it anyway…in simple abbreviated way

your thinking would blow up the whole argument around the float. heresy to suggest these people are wrong

Hi Bull, can you explain how what winner has said blows up the argument for float? i do agree with how winner sees things, but isn't he talking about the DMF rather than the complete ORA?

[bull....]

Hi Bull, can you explain how what winner has said blows up the argument for float? i do agree with how winner sees things, but isn't he talking about the DMF rather than the complete ORA?

im confused myself with what your asking
ORA is Occupation right agreement , DMF is a deferred management Fee within the ORA or am i confused ? i think i was talking about DMF

[Maverick]

Looking at DMF for F23

In revenues there is $70.2m of DFM (accrued). Add care fees, village fees and other stuff total revenue was $247m (including DMF)

Underlying NPAT was $58.5m which included realised gains on sales/resales of $59.3m.

This implies that day to day operations ran at a small loss

Which also implies that all DMF was consumed ……all gone to help pay for looking after and caring for people and contributing to HQ overheads. Nothing left over. It was a fee after all (paid advance);and not really an ‘asset’.

That’s how I see it anyway…in simple abbreviated wayWinner,
That's a highly concerning post that's made worse by being very logical.

Your view seems to stack up well that OCA aint making anything other than resale and new sales profits. The rest of the business which includes the DMF income is at best breakeven.

Here's my take on it.

Firstly , the market has accepted the underlying profit format since its inception so there must be something to survive that much scrutiny this long. Of course the RYM cashflow drama last year brought laser focus on whether UNPAT is still fit for purpose as real life cash flow is skewed using this measurement.
I personally see UNPAT will continue as the norm with perhaps more focus alongside to measure real cash flow.

That being said , just because it is market standard practice does not “prove” it's right so you could still be onto something here.

Secondly , here's the harder bit, how I see it;

OCA right now has $422m ready to sell and a further $122 work in progress. So all up $544m of stored capital which also includes some new sale profit.

So let's freeze the business today , pretend we can just sell it for current market values. That would yield $544m.
-In that should be stored profit on new sales of $140m. But that's tricky on where to put that because we now don't want to put that into the long term operational profitability of this exercise that excludes any new sales profit. Our quandary is that we have paid staff over previous years from the P+L to generate it.
But it exists. A good problem to have.
-This releases $544m and pays down nearly all debt so that saves say $13m interest p/a.
-Then all that construction and development effort of past years would be adding a lot to corporate operating costs. While some of this will have been capitalized , a lot wouldn't have.
Surely we can halve future corporate costs saving maybe $11m. ( we won't need these folk anymore since we will stop building new stuff).
-Then the big one….if this stock and WIP in theory all got sold today that would immediately yield annual DMF of an extra $32m P/A

So adding up all these savings and extra annuity income gives us an annual income of $56m. This by sheer chance equals the 2023 UNPAT…bizarre..no, I have not tweaked my estimates to make this look good.

Then we have the problem of where to add the extra $140 new sales profit we just got.

So for me . The UNPAT is a good enough measure and RVs are not a ponzi scheme.

Even more important for me as an investment is the addition of the loose extra $140m new sales profit on top of this $56 annuity/operational income and then the “float” that will add more profit as it gains a return somewhere.
As an investment this creates a very high “margin of safety” however things actually do turn out and get measured.

Great thought provoking post Winner.

“2 men think they're Jesus…one of `em must be wrong '' Dire straits
Let's hope in this case Winner … it's you!:)

[winner69]

Hi Mav

Yes it seems that OCA aint making anything other than resale and new sales profits. The rest of the business which includes the DMF income over time makes little or no profit

Whether you look at the full Income Statement, Underlying Earnings calc, Cash Flow or Change in Equity in accounts you come to same conclusion …..it all depends on property values (realised and unrealised)

There are some unknowns in the accounts …like how many expenses are capitalised. Can have a bearing on things if wrong assumptions made.

I’ll give what you say about the future a bit of thinking.

[bull....]

Hi Mav

Yes it seems that OCA aint making anything other than resale and new sales profits. The rest of the business which includes the DMF income over time makes little or no profit

Whether you look at the full Income Statement, Underlying Earnings calc, Cash Flow or Change in Equity in accounts you come to same conclusion …..it all depends on property values (realised and unrealised)

There are some unknowns in the accounts …like how many expenses are capitalised. Can have a bearing on things if wrong assumptions made.

I’ll give what you say about the future a bit of thinking.

the unrealized land should be valued on a hypothetical FV less costs

[SailorRob]

Looking at DMF for F23

In revenues there is $70.2m of DFM (accrued). Add care fees, village fees and other stuff total revenue was $247m (including DMF)

Underlying NPAT was $58.5m which included realised gains on sales/resales of $59.3m.

This implies that day to day operations ran at a small loss

Which also implies that all DMF was consumed ……all gone to help pay for looking after and caring for people and contributing to HQ overheads. Nothing left over. It was a fee after all (paid advance);and not really an ‘asset’.

That’s how I see it anyway…in simple abbreviated way


Whinger,

An investment is worth the sum of its future cash flows, all of them need to be discounted back to present time.

You need to be able to understand the future net cash flows.

Anyone can look at the past, though it appears you are struggling with this too?

R

[Cupsy]

im confused myself with what your asking
ORA is Occupation right agreement , DMF is a deferred management Fee within the ORA or am i confused ? i think i was talking about DMF

Yeah I was confused also, when people have been talking about float, I have been assuming they meant ORA less DMF?