OCA - Oceania Group - retirement villages

[SailorRob]

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’?

They were almost as desperate to get the hell out of OCA as Teitei is to get out of Sylait bonds.

[Cupsy]

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



HI Winner, when you talk about resale and new sales profits, are you meaning capital gains over and above the previous occupational rights agreements (resale capital gains) and capital gains on new builds (development margins)?, or the cash from occupational rights agreements themselves be it resale or new?

[mistaTea]

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

Just to be clear…

Though you keep saying the value of a business is it’s DCF (absolutely correct)…

You have confirmed that you are unable to do a DCF for OCA. That is beyond your ability.

The implication being that you do not know what the business is worth.

Your argument being that you don’t need to know what it is worth, because you have a strong sense of what it is NOT worth (the current SP).

Just in the same way that you can fat shame someone without knowing their exact weight.

That does sum it up, correct?

[SailorRob]

Just to be clear…

Though you keep saying the value of a business is it’s DCF (absolutely correct)…

Correct

You have confirmed that you are unable to do a DCF for OCA. That is beyond your ability.

Correct - No human alive or dead can do it, Buffett would tell you he couldn't and if he and Charlie (while he was alive) tried they would come up with different numbers.

The implication being that you do not know what the business is worth.

Not exactly - nobody does, but reasonably close.

Your argument being that you don’t need to know what it is worth, because you have a strong sense of what it is NOT worth (the current SP).

No that is not my argument. I have rough estimate of what it's worth to me using my discount rate. I don't need to know precisely what it's worth. I have a strong sense that it's not worth current SP, but you stretch this to me saying I have no idea what it's worth which is wrong.

Just in the same way that you can fat shame someone without knowing their exact weight.

That does sum it up, correct?


Not really but a good attempt.

[mistaTea]

Not really but a good attempt.

Just one other thing to clarify…

You are not able to predict the cashflows…

Yet you then say you have a rough idea based on your discount rate.

But what are you discounting since you do not know the cashflows?

And please don’t think this is me being cheeky or an arse… I genuinely want to know.

Are you running scenarios based on possible future CF and coming up with a range? That would make sense to me.

In which case you can’t say you can’t do a DCF.

Btw, I believe Warren does do a DCF with TV calc - it’s just in his super computer head. When he was younger especially, he could quickly run scenarios and crunch the numbers to come up with a likely value range all in his head. Maybe a few scribbles and notes on the annual report.

So he never did formal DCF using a spreadsheet or anything like that. But he is trigg, and has been able to do all sorts of complex valuations in his head.

[SailorRob]

Just one other thing to clarify…

You are not able to predict the cashflows…

I nor anyone else can predict the cash flows exactly, but we can estimate them reasonably accurately.

Yet you then say you have a rough idea based on your discount rate.

But what are you discounting since you do not know the cashflows?

My estimate of cash flows which will be wrong but ball park

And please don’t think this is me being cheeky or an arse… I genuinely want to know.

Are you running scenarios based on possible future CF and coming up with a range? That would make sense to me.

Yes correct.

In which case you can’t say you can’t do a DCF.

I cant do one that will be accurate and mine will differ to another due to discount rates.

Btw, I believe Warren does do a DCF with TV calc - it’s just in his super computer head. When he was younger especially, he could quickly run scenarios and crunch the numbers to come up with a likely value range all in his head. Maybe a few scribbles and notes on the annual report.

Yes this is true.

So he never did formal DCF using a spreadsheet or anything like that. But he is trigg, and has been able to do all sorts of complex valuations in his head.

Agreed.



Yep, super basic... look at current cap and figure out roughly what can be returned now in cash per year and then a rough estimate of how sustainable this is and if it will grow, by how much and over what time and most importantly how much capital will it take to grow and where will this come from.

So even with no growth from here you will do pretty well.

For you to do poorly the return on total capital would have to be extremely low.

[mistaTea]

Yep, super basic... look at current cap and figure out roughly what can be returned now in cash per year and then a rough estimate of how sustainable this is and if it will grow, by how much and over what time and most importantly how much capital will it take to grow and where will this come from.

So even with no growth from here you will do pretty well.

For you to do poorly the return on total capital would have to be extremely low.

Ok cool. And understood.

I would just point out then that it is inaccurate to say you can’t do a DCF for OCA.

You may or may not be able to do one that is ACCURATE… but you are clearly doing some sort of DCF to enable you to end up with some sort of valuation range.

This valuation range is higher than the current SP and you feel provides you with a satisfactory margin of safety.

All good.

[mistaTea]

To reinforce the notion of the Buffett super computer…

Some years ago I remember reading a shareholder account.

I can’t remember if this was a BRK shareholder or back in one of the partnerships.

Anyway, this bloke had a meeting with Warren. As it went on, Buffett picked up a document and started scanning it.

Out of the blue, the shareholder asked him: “Warren, what’s 99 times 99?”

Without hesitating, or looking up Warren replied “9801”.

I mean, Jesus Christ. Maybe we should all just index!!!

[Baa_Baa]

A conventional maths mindset might think you need to know your 99 times table? But Buffet would do it the easy way that anyone can do in their head … (100*99)-99

He should have asked a more difficult question.

[mistaTea]

A conventional maths mindset might think you need to know your 99 times table? But Buffet would do it the easy way that anyone can do in their head … (100*99)-99

He should have asked a more difficult question.

The way you describe the mechanics is quite possibly how Buffett did it BB.

Only at the speed of light…

Although, it has been said that Buffett has a kind of photographic memory for numbers. And has actually memorised a vast range of timetables.

He has never come out and said that he has a photographic memory. But he has said that some things he is able to readily recall.

Either way, he is a phenomenon. SR can probably confirm or deny what I say.

[bull....]

Ok cool. And understood.

I would just point out then that it is inaccurate to say you can’t do a DCF for OCA.

You may or may not be able to do one that is ACCURATE… but you are clearly doing some sort of DCF to enable you to end up with some sort of valuation range.

This valuation range is higher than the current SP and you feel provides you with a satisfactory margin of safety.

All good.

sailor guess might be $1 valuation another person might be 50c. the joy of DCF
even the directors do there guess each report

[Champion]

Hi Mav,

But wouldn't the new sales also incur most cost for operating the business and looking after the occupants? Or have you accounted it somewhere? Thanks.




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.

[winner69]

Hi Mav,

But wouldn't the new sales also incur most cost for operating the business and looking after the occupants? Or have you accounted it somewhere? Thanks.

Indeed Champion

As they get bigger Revenues (including DMF) increase but so do Operating Expenses ……..lately expenses up greater rate than revenues

An important consideration when looking into the future and doing the DCF

[Habits]

Indeed Champion

As they get bigger Revenues (including DMF) increase but so do Operating Expenses ……..lately expenses up greater rate than revenues

An important consideration when looking into the future and doing the DCF

DMF of 30 percent of the valuation/buy in price sounds like a tremendous return for OCA. If residents stay an average 6 years its a yield of 5 percent, which is still good but not great

[Maverick]

Hi Mav,

But wouldn't the new sales also incur most cost for operating the business and looking after the occupants? Or have you accounted it somewhere? Thanks.
Your`ve got two costs there , 1 new sales , 2. Looking after occupants.



New sales.

Apart from earthworks at Frankton , all OCA current projects are bolted onto existing villages.
So let's use Hamilton for an example of a large complex. They have always had one sales person, she worked hard initially ( and of course still does) getting the thing rolling from empty with low sales but now it's running with a nice momentum, achieving significantly greater sales volume. I doubt she will have to work even harder nor get a second salesperson when the adjacent building gets finished for sale( tower3 ). Once they get to the inevitable waiting list stage I should imagine she will be comfortable handling the whole village without needing more staff.
Nelson for example is a much smaller village and sales are now handled by the village manager. There's a waiting list so sales almost run themselves, the full time sales person they initially had when it was delivered empty is no longer a specific role there.

Last HY we had a huge jump in village operating costs ( up a whopping 30%). During this time Heleir and ChCh opened which would have contributed significantly to this. We only have 1 new villages opening from scratch going forward now ( ages away too).

2.Looking after occupants.
Care is cost intensive but not apartments. We are only talking about apartments in this context. So lets ignore care for now.
I can't see many extra hours proportionally needed for window cleaners, cleaners or lawn mower guys who are already looking after these complexes.

The other large cause of expenses jumping I understand is rates and especially insurance. These will rise more for sure and plenty too with new towers even on the same site. But these costs should be met by a corresponding increase in weekly fee that the resident pays ( that fee also covers the services mentioned in the last paragraph).

OCA fix fees for life so there will be a lag as older contracts cant be instantly repriced for cost increases. But the new ones should meet these extra costs accordingly. So yes, these cost rises will go up due to inflation and more services required but they will be equally met by incoming residents fixed weekly fees to match.

My numbers exercise yesterday was merely a back of envelope response to Winner's observation that villages seem to make no money from operations outside of resales and new sales.

To briefly sum up without repeating yesterday's math, I was trying to say …

While Winner's observations are indeed correct right now, the huge pile of unsold new stock that has been achieved during these last years of costs needs to be also recognized into the equation to give a true picture. When those are sold down there will be plenty of profit from operations.

So can we actually sell this sh*tload of stock for this to work?
The great news , say again, GREAT NEWS right now for OCA comes from the recent SUM resale figures and also from Tony Alexander's recent housing data.
From these we can now be assured that oldies are moving around again in a normal pre covid housing market. That is where a new village sells down over 24 months. That SUM resale figure was outstanding, up 30% . Almost unbelievable but it would seem there has become a build up of oldies who are now simultaneously emerging from sitting on their hands over the last few unsettling years.

OCA have this sh*tload of stock ready for sale at the perfect time as potential residents are now getting out, about and on with their lives.

If you're curious , I have new apartment sales figures for this period HY2 up at about 55, could even go as high as 65 but that's just too off the charts to believe until I see it for real. This is one of the key reasons OCA is going to finally deliver a great result in May. ( and yes , it's sustainable).

Hope that helps Champion.

[Cupsy]

DMF of 30 percent of the valuation/buy in price sounds like a tremendous return for OCA. If residents stay an average 6 years its a yield of 5 percent, which is still good but not great

HI Habits,
you may have missed post #18231 by Winner (See below).


winner69 (https://www.sharetrader.co.nz/member.php?4303-winner69) #18231 (https://www.sharetrader.co.nz/showthread.php?9856-OCA-Oceania-Group-retirement-villages&p=1037420&viewfull=1#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 (paid advance);and not really an ‘asset’.

That’s how I see it anyway…in simple abbreviated way



Winner makes a pretty good point here IMO.

[Cupsy]

Your`ve got two costs there , 1 new sales , 2. Looking after occupants.



New sales.

Apart from earthworks at Frankton , all OCA current projects are bolted onto existing villages.
So let's use Hamilton for an example of a large complex. They have always had one sales person, she worked hard initially ( and of course still does) getting the thing rolling from empty with low sales but now it's running with a nice momentum, achieving significantly greater sales volume. I doubt she will have to work even harder nor get a second salesperson when the adjacent building gets finished for sale( tower3 ). Once they get to the inevitable waiting list stage I should imagine she will be comfortable handling the whole village without needing more staff.
Nelson for example is a much smaller village and sales are now handled by the village manager. There's a waiting list so sales almost run themselves, the full time sales person they initially had when it was delivered empty is no longer a specific role there.

Last HY we had a huge jump in village operating costs ( up a whopping 30%). During this time Heleir and ChCh opened which would have contributed significantly to this. We only have 1 new villages opening from scratch going forward now ( ages away too).

2.Looking after occupants.
Care is cost intensive but not apartments. We are only talking about apartments in this context. So lets ignore care for now.
I can't see many extra hours proportionally needed for window cleaners, cleaners or lawn mower guys who are already looking after these complexes.

The other large cause of expenses jumping I understand is rates and especially insurance. These will rise more for sure and plenty too with new towers even on the same site. But these costs should be met by a corresponding increase in weekly fee that the resident pays ( that fee also covers the services mentioned in the last paragraph).

OCA fix fees for life so there will be a lag as older contracts cant be instantly repriced for cost increases. But the new ones should meet these extra costs accordingly. So yes, these cost rises will go up due to inflation and more services required but they will be equally met by incoming residents fixed weekly fees to match.

My numbers exercise yesterday was merely a back of envelope response to Winner's observation that villages seem to make no money from operations outside of resales and new sales.

To briefly sum up without repeating yesterday's math, I was trying to say …
While Winner's observations are indeed correct right now, the huge pile of unsold new stock that has been achieved during these last years of costs needs to be also recognized into the equation to give a true picture. When those are sold down there will be plenty of profit from operations.
So can we actually sell this sh*tload of stock for this to work?
The great news , say again, GREAT NEWS right now for OCA comes from the recent SUM resale figures and also from Tony Alexander's recent housing data.
From these we can now be assured that oldies are moving around again in a normal pre covid housing market. That is where a new village sells down over 24 months. That SUM resale figure was outstanding, up 30% . Almost unbelievable but it would seem there has become a build up of oldies who are now simultaneously emerging from sitting on their hands over the last few unsettling years.

OCA have this sh*tload of stock ready for sale at the perfect time as potential residents are now getting out, about and on with their lives.

If you're curious , I have new apartment sales figures for this period up at about 55, could even go as high as 65 but that's just too off the charts to believe until I see it for real. This is one of the key reasons OCA is going to finally deliver a great result in May. ( and yes , it's sustainable).

Hope that helps Champion.



Thanks for the post maverick, amazing detail!.
I'm interested to know how you handle the "float", the only logical way i've been able to think of it is in terms of non development of units as I struggle to grasp the details, rather than this my thought process keeps wanting to look at it as a pile of cash that could be held in the bank on term-deposit or put into some other form of passive investment. This is probably the completely wrong way to look at it, so any insights from you would be very welcome.

[Habits]

Thanks good breakdown, and shows that Govt/ retirement village commision has no justification for thinking RVs are creaming it at the expense of residents.

If OCA sold all its stock on hand that could make a big difference to the bottom line through greater DMF

[winner69]

Good stuff Mav ….55 plus apartment sales this period will need see a big jump in underlying earnings with those hugecrealised gains

One thing even if they come up short it’ll happen eventually eh

Maybe time to buy and not miss out on inevitable rise in share price before the May announcement …..could even get to $1.10 ..and if 65 apartment sales could go $1.20 plus

[Maverick]

Thanks for the post maverick, amazing detail!.
I'm interested to know how you handle the "float", the only logical way i've been able to think of it is in terms of non development of units as I struggle to grasp the details, rather than this my thought process keeps wanting to look at it as a pile of cash that could be held in the bank on term-deposit or put into some other form of passive investment. This is probably the completely wrong way to look at it, so any insights from you would be very welcome.
Cupsy,
Welcome to the forum. It's delightful to see a brave new fella wanting to join in and contribute.
The “float “ is currently used as free cash to develop the next set of buildings. It has no return other than saving paying bond holders or banks for borrowings. When this expansion process finishes or reduces then the surplus float can be used to get a return from wherever OCA wants. They can't expand into infinity so will become available one day.
This will be years away but in my mind some cash hungry business will take OCA over before then for this money source. But that's YEARS AWAY.

Here`s a question to mess with you a bit about floats…
Habits post above says the 5% return apartments yield isn't that flash, that's true.
But of the mere 5% return they will be getting…how much of this invested capital is OCA actually putting in to gain this 5% ?
So what value do you put on a company making 5% return using entirely someone else`s money?
Dont even try to work that out.

5% on other people's money is a damn fine return after all.

Cupsy, Don't get hung up on the float if you're learning. Not todays problem. Stick with Unpat until you get that sorted.

Winner, I dont know if you just plucked those share prices out of the air or whether you have developed a pretty good spreadsheet ( I quietly suspect you do) but my workings agree with you almost perfectly.
Lets hope we are both be right on this one :)

[winner69]

Winner, I dont dont know if you just plucked those share prices out of the air but my workings are very similar to achieving those price expectations. We can both be right on this one

:)

Based on increased book value from gains and some debt reduction ……even then still a discount to NTA

[Baa_Baa]

Good stuff Mav ….55 plus apartment sales this period will need see a big jump in underlying earnings with those hugecrealised gains

One thing even if they come up short it’ll happen eventually eh

Maybe time to buy and not miss out on inevitable rise in share price before the May announcement …..could even get to $1.10 ..and if 65 apartment sales could go $1.20 plus

Love it when you talk sense, all the esoteric fundamentals this and that is imo all completely academic now.

It's all about sales, selling down the back log, we're at the tail end of the current development transformation. It's payback time. I'd like to see 50+ in 2H at least, maybe even Mav's upside projections towards 65. Then it's all on for FY24/25, I'm expecting to see Helier especially boost sales and substantial inroads into the backlog H1 and at least, ideally more than, half of all backlog sold down by EOY FY24/25. Might be a big ask, but that's what I'd be KPI'ing the sales team on.

Maybe this is the year that the insider shareholders (and they have collectively a very large holding), demand to see some ROI on their investment as the transformation strategy delivers, and a path to sustained growth in EPS. Their history on EPS is abysmal. To add to those expectations, I expect associated with very strong sales, substantial cashflows, a new dividend payout policy at least matching no-risk bank deposits, and a DRP.

No pressure OCA, time to deliver to your shareholders.

[Maverick]

Love it when you talk sense, all the esoteric fundamentals this and that is imo all completely academic now.

It's all about sales, selling down the back log, we're at the tail end of the current development transformation. It's payback time. ... I expect associated with very strong sales, substantial cashflows, a new dividend payout policy at least matching no-risk bank deposits, and a DRP.





Your`e just talking dirty now BaaBaa..." take me to bed and loooooose me forever".

You`ve said it before and you are right on the money.. Sales sales sales... That`s exactly what will turn this ship around. Plenty of evidence is out there now that its happening ...This is the year when it all comes together.

[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


A fee paid in advance is a massive asset. It is important to understand this along with Mav's careful explanation on how the DMF/expense ratio must mathematically play out in future.

The ticket to riches is;

Expanding multiples to growing earnings, where earnings grow either without much additional capital and/or with cheap/free capital.

Any business can say they are earning x right now as they plough capital into god knows what and say 'oh no that's not an expense, we're capitalising it' and then we need to wait for years to see what that capital expenditure does (usually makes a loss).

Here we need to look at what has been invested, what assets have been created and from where the capital has come from and at what cost and what will happen in the future with these assets. I think Mav has explained pretty clearly and hasn't seen anyone challenge his outlook.

[SailorRob]

It has no return other than saving paying bond holders or banks for borrowings.

It has no return right now, but what capital expenditure does?

The return will be what the assets it is used to build can return in cash and that needs to be discounted back to present.

[Cupsy]

Cupsy,
Welcome to the forum. It's delightful to see a brave new fella wanting to join in and contribute.
The “float “ is currently used as free cash to develop the next set of buildings. It has no return other than saving paying bond holders or banks for borrowings.

Hi Mav, thank you very much for the welcome.
So am i incorrect in thinking the "float" does have a return based on the new assets it is helping build (which in turn will grow the float)?, If i borrowed the money to build a unit i would not only have to service the debt but pay back the principle. Are the new assets not the return along with an increased ORA take?

[Maverick]

Hi Mav, thank you very much for the welcome.
So am i incorrect in thinking the "float" does have a return based on the new assets it is helping build (which in turn will grow the float)?, If i borrowed the money to build a unit i would not only have to service the debt but pay back the principle. Are the new assets not the return along with an increased ORA take?



To my mind the float is just free cash able to be used for whatever investing ideas, in this case by OCA for the purpose of expanding their villages further.
What you and Sailor are projecting beyond this is the extra returns from those prepaid villages down the track. ( i acknowledge this is absolutely key to principles of building very high long term returns ,- money making money - compounding returns the 8th wonder etc ) but I still think that is erroneous for today as whatever those returns on money invested now into the future is their own separate category,

the float today is simply a free cash resource nothing more.Something a bank would offer but for an interest rate.
Basically..lets not get too ahead of ourselves those free funds invested now should owe us anything in the future. we know the market just doesn't give a f@#k at this point in time. So again I'd suggest you forget trying to quantify the float as the market only looks 12 months ahead and while the free float iis real it just wont be understood, let alone appreciated untill 5-10 years from now. Sailor and maybe you seem ahead of your time .

BaaBaa is right when he uses the word esoteric
This year is only about sales, sales, Sales , so plenty of time ahead to trouble yourself about floats and the end game which still looks just as good way out there as I have tried to explain ….basically this is not musical chairs that you have to be first to the exit…it just works all the way through.

After all that diatribe…yes , you are right , the compounding results many years from now are outstanding but in reality, are you really prepared to invest and wait this out to utopia? By my observation almost nobody is .

[Daytr]

A fee paid in advance is a massive asset. It is important to understand this along with Mav's careful explanation on how the DMF/expense ratio must mathematically play out in future

What is the fee you are referring to that is paid in advance?


To my mind the float is just free cash able to be used for whatever investing ideas, in this case by OCA for the purpose of expanding their villages further.
What you and Sailor are projecting beyond this is the extra returns from those prepaid villages down the track. ( i acknowledge this is absolutely key to principles of building very high long term returns ,- money making money - compounding returns the 8th wonder etc ) but I still think that is erroneous for today as whatever those returns on money invested now into the future is their own separate category,

the float today is simply a free cash resource nothing more.Something a bank would offer but for an interest rate.
Basically..lets not get too ahead of ourselves those free funds invested now should owe us anything in the future. we know the market just doesn't give a f@#k at this point in time. So again I'd suggest you forget trying to quantify the float as the market only looks 12 months ahead and while the free float iis real it just wont be understood, let alone appreciated untill 5-10 years from now. Sailor and maybe you seem ahead of your time .

Well the DMF is better than a free loan from a bank as it's OCA's cash, so it's not being paid back. But yes as it builds could be utilized rather than bank debt & incurring interest.

[SailorRob]

What is the fee you are referring to that is paid in advance?


Management fee.

Winner is saying the fee isn't profit making (currently) as so isn't worth a tin of crap, or isn't an asset. I said a fee paid in advance even if break even is a massive asset.

So if I provide you a service that I know I will break even on, but you pay me years in advance then I need to factor in the time value of having that money before I provide the service.

[SailorRob]

To my mind the float is just free cash able to be used for whatever investing ideas, in this case by OCA for the purpose of expanding their villages further.
What you and Sailor are projecting beyond this is the extra returns from those prepaid villages down the track. ( i acknowledge this is absolutely key to principles of building very high long term returns ,- money making money - compounding returns the 8th wonder etc ) but I still think that is erroneous for today as whatever those returns on money invested now into the future is their own separate category,

the float today is simply a free cash resource nothing more.Something a bank would offer but for an interest rate.
Basically..lets not get too ahead of ourselves those free funds invested now should owe us anything in the future. we know the market just doesn't give a f@#k at this point in time. So again I'd suggest you forget trying to quantify the float as the market only looks 12 months ahead and while the free float iis real it just wont be understood, let alone appreciated untill 5-10 years from now. Sailor and maybe you seem ahead of your time .

BaaBaa is right when he uses the word esoteric
This year is only about sales, sales, Sales , so plenty of time ahead to trouble yourself about floats and the end game which still looks just as good way out there as I have tried to explain ….basically this is not musical chairs that you have to be first to the exit…it just works all the way through.

After all that diatribe…yes , you are right , the compounding results many years from now are outstanding but in reality, are you really prepared to invest and wait this out to utopia? By my observation almost nobody is .


Maybe we are overthinking this maybe not.

To compare with the insurance world, the float is invested to make a return, however you are saying this is not applicable to OCA right now.

Well what then if the insurance company didn't invest their float to 'make a return' but instead invested it into growing the insurance operation and increasing the float generation in future periods. What then would the return on the original float be?

This is what they are doing.

[SailorRob]

Good stuff Mav ….55 plus apartment sales this period will need see a big jump in underlying earnings with those hugecrealised gains

One thing even if they come up short it’ll happen eventually eh

Maybe time to buy and not miss out on inevitable rise in share price before the May announcement …..could even get to $1.10 ..and if 65 apartment sales could go $1.20 plus


So I don't think that it's credible that the market has entirely missed that OCA sales will have picked up by the May report and will be caught so offside that as they realise the reality before the report or after the report, we will see a 57 to 70% rise in the share price.

As much as I am not an efficient market bumboy I can tell you now that this won't happen.

How can the market miss that sales will have picked up and earnings along with it. The degree of which perhaps, but this isn't hard to see?

[Habits]

Good stuff Mav ….55 plus apartment sales this period will need see a big jump in underlying earnings with those hugecrealised gains

One thing even if they come up short it’ll happen eventually eh

Maybe time to buy and not miss out on inevitable rise in share price before the May announcement …..could even get to $1.10 ..and if 65 apartment sales could go $1.20 plus

There's hope after all that my 80,000 OCA will finally pay-off and turn to gold flakes. Thanks Winner. But isn't there also a graph somewhere comparing OCAs shareprice with SUM and shows OCA heading to oblivion. Here's hoping they can change that trend and its heading the right direction again.

[winner69]

There's hope after all that my 80,000 OCA will finally pay-off and turn to gold flakes. Thanks Winner. But isn't there also a graph somewhere comparing OCAs shareprice with SUM and shows OCA heading to oblivion. Here's hoping they can change that trend and its heading the right direction again.

BlackPeter says that trend about to change and OCA share price will start to outperform the SUM shareprice …ie go up faster

All about OCA started later doing things than SUM and the 6 year learning period is over ……it’s all looking bright from here on in

[Valuegrowth]

There's hope after all that my 80,000 OCA will finally pay-off and turn to gold flakes. Thanks Winner. But isn't there also a graph somewhere comparing OCAs shareprice with SUM and shows OCA heading to oblivion. Here's hoping they can change that trend and its heading the right direction again.
After W29 comment, I also feel like buying some OCA, but I want to see some sign of turnaround is coming and debt is going down. 10 years back I found a company with high debt, and I saw coming turnaround clearly and parked majority of my funds there. Later it became a kind of a cash cow and currently I am enjoying high dividends and capital gain. In short, only thing I want see from OCA is more cash and less debt. Cash flow is king.

[winner69]

So I don't think that it's credible that the market has entirely missed that OCA sales will have picked up by the May report and will be caught so offside that as they realise the reality before the report or after the report, we will see a 57 to 70% rise in the share price.

As much as I am not an efficient market bumboy I can tell you now that this won't happen.

How can the market miss that sales will have picked up and earnings along with it. The degree of which perhaps, but this isn't hard to see?

Yep, 57% and 70% big gains ……but remember they’ve been there before so just retracing past journeys

Easier to get to somewhere where you’ve been before …..you’ll understand that from your sailing experiences eh

[SailorRob]

Yep, 57% and 70% big gains ……but remember they’ve been there before so just retracing past journeys

Easier to get to somewhere where you’ve been before …..you’ll understand that from your sailing experiences eh


I get that, but to say that the market is not seeing what we are between now and May and will be so stunned by the revelation in May that they are leaving 70% on the table in 3 Months...

Hell I'm with misatea here.

[winner69]

I get that, but to say that the market is not seeing what we are between now and May and will be so stunned by the revelation in May that they are leaving 70% on the table in 3 Months...

Hell I'm with misatea here.

Summerset full year numbers end February will provide some colour around how margins are going. Could excite market with flow on impact on Oceania

Also Arvida will probably produce an update early April which could excite the market a bit and indicate that Oceania will achieve what Mav reckons they will do

Next few months Tony will rave about how property market has turned up and Sharon will remind us rate cuts coming soon …..so all looking good for stocks supposedly dependent on property market and interest rates

And if course the Warriors will have had a few wins under their belt ….this is our year

[Maverick]

So I don't think that it's credible that the market has entirely missed that OCA sales will have picked up by the May report and will be caught so offside that as they realise the reality before the report or after the report, we will see a 57 to 70% rise in the share price.

As much as I am not an efficient market bumboy I can tell you now that this won't happen.

How can the market miss that sales will have picked up and earnings along with it. The degree of which perhaps, but this isn't hard to see?
Good morning Sailor, top of the mornin to ya,

I wasn't going to post today or for a while after getting a bit caught up with it yesterday…you know , there's other stuff to do in life, but your post raises a very valid point.
Target $1.10 - $1.20 in 4 months seems just unrealistic. I have to agree, it just doesn't look right on a chart.

Here's my expectations of UNPAT .
This jump in HY2 is driven from 3 key areas; increased govt care funding, gaining resale volumes and selling 55 apartments .
HY1 made 7.7 cps ( annualized)
HY2 should make 10.8 cps ( annualized)
Therefore the full year = 9.6cps

The lowest PE this company has got to is PE 9.1 (now) from a high of PE 19 in 2021.

If I look at the FY 9.6cps and apply today's woeful PE 9.1 , I get a SP of $0.87 in May.
If we only consider the HY2 of 10.8cps at PE9.1 then its a SP of $0.98

87c-98c in May looks realistic as the share price would ascend to that price at the same steady inverted speed it fell over 2022. So perhaps this is more realistic. But the issue is… would we really still only give a PE of 9.1 to a company that just grew profit by 18% annually?

The “ anchor” we now seem to have locked in cement is that we accept this share is now worth 70c-74c …that's just the new norm or fact we are entrenched into now. I suggest all of us, including myself, emotionally “feel” it. ( the root of your post).
This anchor will change again - remember the days of the anchor being $1.40-$1.60 …same company making the same profit as now. It took 2 years to reform to this new anchor at 70-74c. Purley on market mood. Profit hasn't changed.

So If we slowly rise at the same gradient ( inverted) that we fell then from here we should get to $1.20 by Christmas. No sooner. This would look right and balanced on a chart.

But by Christmas I have even similar profits anticipated as HY2 2024 . How this share price travels from here is probably more suited to someone like BaaBaa to opine. This is out of my lane.

My area is on a spreadsheet. I'm happy with my work and confident we will get “miracle no1” - that is OCAs profit is going to go up nicely…but Miracle No2 is figuring out how the emotionally driven market will react. Especially with such an entrenched anchor of 70-75c.

My own guess on Miracle No2 is that we will see $.90-$1.00 in May and $ 1.20-$1.30 by Christmas.
( FYI, if my P+L math are close that would put OCA on a PE of 10 in November but also bare in mind the profit would have grown 2 HY periods in a row by then from 2023 by 40%).

[Bjauck]

There's hope after all that my 80,000 OCA will finally pay-off and turn to gold flakes. Thanks Winner. But isn't there also a graph somewhere comparing OCAs shareprice with SUM and shows OCA heading to oblivion. Here's hoping they can change that trend and its heading the right direction again.
Those graphs are great for mapping history. Like the chart that showed that the Sum price seemed to track at around 50% of the RYM SP - until it didn’t!

[Cupsy]

“Maverick (https://www.sharetrader.co.nz/member.php?16078-Maverick) #18276 (https://www.sharetrader.co.nz/showthread.php?9856-OCA-Oceania-Group-retirement-villages&p=1037648&viewfull=1#post1037648)
After all that diatribe…yes , you are right , the compounding results many years from now are outstanding but in reality, are you really prepared to invest and wait this out to utopia? By my observation almost nobody is .”



Just a clarification with this, I’m not attempting to compound out results into the future, this is something I don’t want to be doing as it requires future predictions (future growth predictions in this case) which are a potential source of error IMO. I was simply curious what it may or may not be worth as it stands currently.


“Maverick (https://www.sharetrader.co.nz/member.php?16078-Maverick) #18276 (https://www.sharetrader.co.nz/showthread.php?9856-OCA-Oceania-Group-retirement-villages&p=1037648&viewfull=1#post1037648)
the float today is simply a free cash resource nothing more.Something a bank would offer but for an interest rate.Basically..lets not get too ahead of ourselves those free funds invested now should owe us anything in the future.”

I guess this is where my logic was wanting to head with my original question to you, if that amount of float were simply put in a term deposit it would owe us something, the interest return on the money. Which I guess is where I end up in the quagmire of confusion, does it have zero value or does it have some value and what is the reasoning for the answer. Surely if it generates no value currently, you would simply put it in something like a term deposit and earn a return on it.
And when you are borrowing money as a cash resource, you must believe you can make a return of the interest rate required for the money plus some margin on top of that (i.e you believe the money you are borrowing has a value).

[SailorRob]

Good morning Sailor, top of the mornin to ya,

I wasn't going to post today or for a while after getting a bit caught up with it yesterday…you know , there's other stuff to do in life, but your post raises a very valid point.
Target $1.10 - $1.20 in 4 months seems just unrealistic. I have to agree, it just doesn't look right on a chart.

Here's my expectations of UNPAT .
This jump in HY2 is driven from 3 key areas; increased govt care funding, gaining resale volumes and selling 55 apartments .
HY1 made 7.7 cps ( annualized)
HY2 should make 10.8 cps ( annualized)
Therefore the full year = 9.6cps

The lowest PE this company has got to is PE 9.1 (now) from a high of PE 19 in 2021.

If I look at the FY 9.6cps and apply today's woeful PE 9.1 , I get a SP of $0.87 in May.
If we only consider the HY2 of 10.8cps at PE9.1 then its a SP of $0.98

87c-98c in May looks realistic as the share price would ascend to that price at the same steady inverted speed it fell over 2022. So perhaps this is more realistic. But the issue is… would we really still only give a PE of 9.1 to a company that just grew profit by 18% annually?

The “ anchor” we now seem to have locked in cement is that we accept this share is now worth 70c-74c …that's just the new norm or fact we are entrenched into now. I suggest all of us, including myself, emotionally “feel” it. ( the root of your post).
This anchor will change again - remember the days of the anchor being $1.40-$1.60 …same company making the same profit as now. It took 2 years to reform to this new anchor at 70-74c. Purley on market mood. Profit hasn't changed.

So If we slowly rise at the same gradient ( inverted) that we fell then from here we should get to $1.20 by Christmas. No sooner. This would look right and balanced on a chart.

But by Christmas I have even similar profits anticipated as HY2 2024 . How this share price travels from here is probably more suited to someone like BaaBaa to opine. This is out of my lane.

My area is on a spreadsheet. I'm happy with my work and confident we will get “miracle no1” - that is OCAs profit is going to go up nicely…but Miracle No2 is figuring out how the emotionally driven market will react. Especially with such an entrenched anchor of 70-75c.

My own guess on Miracle No2 is that we will see $.90-$1.00 in May and $ 1.20-$1.30 by Christmas.
( FYI, if my P+L math are close that would put OCA on a PE of 10 in November but also bare in mind the profit would have grown 2 HY periods in a row by then from 2023 by 40%).



The only thing you haven't clarified is which Christmas.

[winner69]

Those graphs are great for mapping history. Like the chart that showed that the Sum price seemed to track at around 50% of the RYM SP - until it didn’t!

Couta’s Theorem had that constant 50% lasting for some time ..but it turned turtle

That OCA/SUM relationship going to turn soon according to most (and maybe common sense)

If the % reverts back to 2018 OCA share price about 20% of SuM …….jeez OCA at 2 bucks in a couple of years time sounds good ….even higher if SUM goes up as well

This is our year

[winner69]

Good stuff Mav …..so F24 earnings growth could be 20%/25% and F25 growth could well be way over 30% (will be clear by how much when H1 announced in November)

Great that OCA seems to have finally broken the habit of selling heaps more things and making about the same (or less)

The market has to recognise this eh ….and reward punters …..Forbar will help out I hope

[winner69]

Instead of all this talk about the ‘float’ etc we should concentrated on things like Embedded Value and Annuity EBITDA to get a better feel for how rich we’ll become.

[Valuegrowth]

Instead of all this talk about the ‘float’ etc we should concentrated on things like Embedded Value and Annuity EBITDA to get a better feel for how rich we’ll become.My indicator for building long term wealth is none other than balancesheet. We find everything by looking at balance sheets(at least for10 years): Cash Flow growth, business expansion, Market share,Dividend growth, Improvement in financial ratios. Strong balance sheet firms are gems. Number don’t lie. If a weak balance sheet is gong to beat strong balance sheet firms then I will jump there. Any idea of future balance sheet of OCA. Cheers.

[bull....]

My indicator for building long term wealth is none other than balancesheet. We find everything by looking at balance sheets(at least for10 years): Cash Flow growth, business expansion, Market share,Dividend growth, Improvement in financial ratios. Strong balance sheet firms are gems. Number don’t lie. If a weak balance sheet is gong to beat strong balance sheet firms then I will jump there. Any idea of future balance sheet of OCA. Cheers.

its doesnt pass buffetts magic sauce test.

[Balance]

69c with two big sellers taking turns to help out the retail bidders?

What does the chart say, I wonder.

[Greekwatchdog]

69c with two big sellers taking turns to help out the retail bidders?

What does the chart say, I wonder.

Let me guess, Capital Raise?

[Balance]

Let me guess, Capital Raise?

Think so?

Is that what the chart suggests?

[Greekwatchdog]

Think so?

Is that what the chart suggests?

o idea I am not a chartist. Your the one picking it a while ago

[Balance]

o idea I am not a chartist. Your the one picking it a while ago

They should have done the CR and got it out of the way then?

Sp has gone nowhere.

[Baa_Baa]

They should have done the CR and got it out of the way then?

Sp has gone nowhere.

Do you think they need to raise capital and that that is the reason for the depressed share price? Looking at the balance sheet and the debt interest rates and repayments periods, I'm not seeing any stress that would warrant a cap raise.

[Balance]

Do you think they need to raise capital and that that is the reason for the depressed share price? Looking at the balance sheet and the debt interest rates and repayments periods, I'm not seeing any stress that would warrant a cap raise.

I guess the suspension of dividends and asset sales program suggest otherwise?

Banks probably happier now so maybe no need for CR.

[SailorRob]

Man this is awesome. Free money. Cannot believe my luck sometimes.

[Baa_Baa]

I guess the suspension of dividends and asset sales program suggest otherwise?

Banks probably happier now so maybe no need for CR.

Yeah, good point, they wouldn't put those properties on market unless they didn't fit the OCA strategy moving to independent living, villas, apartments etc. I don't think selling them is a direct response to balance sheet issues, there aren't any. Selling them or quitting the leases will free up a lot of capital and expenditure, but I don't see that as directly responding to a not-stressed balance sheet.

The suspension of dividends however seems to be a response to the sector pressure to reduce debt, even though debt isn't really a problem (imo). That said, the dividends were not attractive against risk free bank rates, so maybe a pause for thought, about what it takes to attract investors in the current market? No dividend at all is not helping that!

In any event, I don't think a cap raise is remotely likely. It's just not necessary. I'd give more thought to being vulnerable to a takeover as the market has priced this under 50% of NTA. A PE could go after OCA easily, do their thing stripping out costs and flog it off in a few years for a two/three bagger. The question for shareholders then, would be at what price they would give away their shares?

[SailorRob]

Yeah, good point, they wouldn't put those properties on market unless they didn't fit the OCA strategy moving to independent living, villas, apartments etc. I don't think selling them is a direct response to balance sheet issues, there aren't any. Selling them or quitting the leases will free up a lot of capital and expenditure, but I don't see that as directly responding to a not-stressed balance sheet.

The suspension of dividends however seems to be a response to the sector pressure to reduce debt, even though debt isn't really a problem (imo). That said, the dividends were not attractive against risk free bank rates, so maybe a pause for thought, about what it takes to attract investors in the current market? No dividend at all is not helping that!

In any event, I don't think a cap raise is remotely likely. It's just not necessary. I'd give more thought to being vulnerable to a takeover as the market has priced this under 50% of NTA. A PE could go after OCA easily, do their thing stripping out costs and flog it off in a few years for a two/three bagger. The question for shareholders then, would be at what price they would give away their shares?

I hope they're not doing anything to try and attract investors.

They should only be maximising shareholders value, even if it makes people spew.

[Rawz]

Man this is awesome. Free money. Cannot believe my luck sometimes.

Haha good one

[SailorRob]

Haha good one

Sorry what?

[Baa_Baa]

I hope they're not doing anything to try and attract investors.

They should only be maximising shareholders value, even if it makes people spew.

I agree, though maximising shareholders value is important to retain the shareholders that they already have, and I suspect a lot of them are somewhere between wanting regular dividend income and wanting an increase in the share price. Neither of which are happening right now.

Every share bought is a share sold, and at this price there are still plenty of shareholders who are not happy and feeding (selling into) the market. This constant weakness in share price (market cap) is making OCA vulnerable to outside big money interests.

What price would you agree to sell your OCA if some PE waded in with a buyout offer? It could happen. That's why I would like to see OCA more appropriately priced mark to market. To remove this vulnerability. I don't want to sell any of my OCA, let alone be forced to, to some predator PE at multiples lower than it's FV.

[Champion]

Your`ve got two costs there , 1 new sales , 2. Looking after occupants.


2.Looking after occupants.
Care is cost intensive but not apartments. We are only talking about apartments in this context. So lets ignore care for now.



Hi Mav, thanks for your sharing your thoughts. Regarding your comments about ignoring care for now - isn't the care suites what OCA used to differentiate themselves and also their core strategy? And if that part is not making profit (due to the high operating cost), then OCA is unlikely to do well?

Apologies if it has been discussed before, I am a newbie despite spending some time on this forum, I am a bit slow on how to analyse businesses.

[bull....]

Hi Mav, thanks for your sharing your thoughts. Regarding your comments about ignoring care for now - isn't the care suites what OCA used to differentiate themselves and also their core strategy? And if that part is not making profit (due to the high operating cost), then OCA is unlikely to do well?

Apologies if it has been discussed before, I am a newbie despite spending some time on this forum, I am a bit slow on how to analyse businesses.

Care diffently needs to be taken into account for valuation of OCA. DCF is the only method i would use in valuing OCA. nobody on this forum has provided a DCF valuation that i can recall ( i wont be ethier ) talking only about sales and cost means only a piece of the puzzle really its all about cash valuation into perpetuity valuation eg DCF

eg DCF supplemented by the direct comparison approach and taking into account positive cash should be generated into perpetuity
the capitalisation rate used can have a very material effect on valuation of assets and valuation of OCA

I would ignore NTA at all times it is not the true figure. probably a liquidation figure would be more accurate. why because company est and assumes the future and this might be biased

eg Each property they own should be valued indepentantly on DCF basis to get a true figure. In reality though this is never done by valuers as this would take way to long and cost OCA big bucks so the guestimate FV

[winner69]

Hi Mav, thanks for your sharing your thoughts. Regarding your comments about ignoring care for now - isn't the care suites what OCA used to differentiate themselves and also their core strategy? And if that part is not making profit (due to the high operating cost), then OCA is unlikely to do well?

Apologies if it has been discussed before, I am a newbie despite spending some time on this forum, I am a bit slow on how to analyse businesses.

Oceania made about $10k profit per bed for care last financial year …..and on top of that they get capital gains of about $6k per bed on resales

All good eh

[SailorRob]

I agree, though maximising shareholders value is important to retain the shareholders that they already have, and I suspect a lot of them are somewhere between wanting regular dividend income and wanting an increase in the share price. Neither of which are happening right now.

Every share bought is a share sold, and at this price there are still plenty of shareholders who are not happy and feeding (selling into) the market. This constant weakness in share price (market cap) is making OCA vulnerable to outside big money interests.

What price would you agree to sell your OCA if some PE waded in with a buyout offer? It could happen. That's why I would like to see OCA more appropriately priced mark to market. To remove this vulnerability. I don't want to sell any of my OCA, let alone be forced to, to some predator PE at multiples lower than it's FV.

Exceptional points Baa_Baa, I couldn't agree more with this.

[Maverick]

Hi Mav, thanks for your sharing your thoughts. Regarding your comments about ignoring care for now - isn't the care suites what OCA used to differentiate themselves and also their core strategy? And if that part is not making profit (due to the high operating cost), then OCA is unlikely to do well?

Apologies if it has been discussed before, I am a newbie despite spending some time on this forum, I am a bit slow on how to analyse businesses.

Firstly well done, after lurking all this time to now braving up to get amongst it,

You've asked a simple question but the answer really needs a small book to answer.

Yes, OCA’s perceived point of difference is care (it is actually called Oceania Healthcare) but as far as investors go , that's not the case, well not any more.

OCA was mostly a bunch of old care villages 6 years ago but things have changed just a tad when you look at their building portfolio then and now. Consider, why are they selling off 12 pure care villages when care is their apparent point of difference?

Listen to Brent on any interview and it's crystal clear who they are targeting and they know exactly where they want to be .

Care used to make overall about $35m, that's 6 years ago, a few things have changed and they now make about $22m. Here's a bit if history;

-They smashed down care beds at a frightening level.
-They rebuild caresuits which, by nature, then take years to refill.
-Many relocated residents still live on in the new care suites at friendly rates making them unavailable for full fare residents.
-Low staffing availability during covid has meant sales were restricted
-Government fees have been systematically reduced during this entire time.

Care hasnt been a roller coaster, it's been more like a freedive.

Now individually consider where all these issues are currently and you will quickly see the relentless dive part is over and my math says we are heading back to the surface.

OCA is a different animal to what it was. There is no point in analyzing its history to death like I have at this point, a waste of your time and unnecessary. It would take large amount of effort and you would have only worked out what OCA was , not what it is currently morphing into today.

Sorry to use another analogy but this fits well as to what i'm saying. I've studied and lived this RV oddity during all the phases and really know it. What these stages include are the caterpillar it historically was, the chrysalis transformation it has been for the last 5 years ( with covid and govt underfunding layers piled on) in and now the emerging butterfly is where we currently are.

Some more stuff to think about . The real profits were always going to come from selling fancy apartments on the ground of the old rest homes. This care aspect significantly helps win the residents in a highly competitive market. OCA are right to keep the offering of care, the public who can , buy an expensive apartment in order to gain access it should that become necessary ( thats not literally true but you get the idea)

Care will eventually make a reasonable return, the model works on paper and now in fleshing out in reality. Its been a hell of a difficult run but fortunately the tide has well and truly turned.

Champion, you say you are a newbie. Not sure if you mean “posting” or trying to understand OCA. Why not have a close look at SUM alongside OCA, it is understandable, uncomplex and should get you a handle on teh industry through it.
I know this beast very well too and spent some time on it after its latest figures. I can see a 10% UPAT rise next month. I think the analysts are a little light on their expectations so some nice reward could be there for you too. You will get a good handle on how these RV’s work and you'll make some money hopefully.
(and when interest costs fall, hopefully this year, they will benefit).

I'll stick with OCA, the stars have finally all aligned this year and as the butterfly finally emerges from its shell.

The collective market doesn't believe it yet and probably won't until it sees it on the bottom line and that's totally understandable given the last 5 years.

[winner69]

Shaun fit to play first game …that’s a relief …Up the Wahs …this is our year

And the year for OCA

The stars are aligned

[Daytr]

Management fee.

Winner is saying the fee isn't profit making (currently) as so isn't worth a tin of crap, or isn't an asset. I said a fee paid in advance even if break even is a massive asset.

So if I provide you a service that I know I will break even on, but you pay me years in advance then I need to factor in the time value of having that money before I provide the service.

Certainly helps with cashflow, but in the scheme of things it's not a biggie.

[Champion]

Champion, you say you are a newbie. Not sure if you mean “posting” or trying to understand OCA. Why not have a close look at SUM alongside OCA, it is understandable, uncomplex and should get you a handle on teh industry through it.
I know this beast very well too and spent some time on it after its latest figures. I can see a 10% UPAT rise next month. I think the analysts are a little light on their expectations so some nice reward could be there for you too. You will get a good handle on how these RV’s work and you'll make some money hopefully.
(and when interest costs fall, hopefully this year, they will benefit).

I'll stick with OCA, the stars have finally all aligned this year and as the butterfly finally emerges from its shell.

The collective market doesn't believe it yet and probably won't until it sees it on the bottom line and that's totally understandable given the last 5 years.



I am a newbie in share investment in general. I have started passive investing (in smartshare a couple of years ago), and holding some OCA (alongside with a couple other NZ shares) but very very small amount. Purchased some time ago mostly by 'gut feel' and to get myself in the market to learn, and now trying to learn how to pick/analyse stock. And yes, I am also looking at SUM along side with OCA as you have suggested, which is useful.

Thanks again for your explanation.

[SailorRob]

Certainly helps with cashflow, but in the scheme of things it's not a biggie.

Correct. It's massive.

And what isn't appreciated is how much bigger it is in a 5% world than the world since IPO.

[Daytr]

Correct. It's massive.

And what isn't appreciated is how much bigger it is in a 5% world than the world since IPO.

I assume the MF is paid monthly in advance?
If so it's worth the interest on 2 months of MF.
However I don't know any business of this sort that would allow occupiers to pay in arrears.
So as I said in the scheme of things, not a biggie.

[winner69]

I assume the MF is paid monthly in advance?
If so it's worth the interest on 2 months of MF.
However I don't know any business of this sort that would allow occupiers to pay in arrears.
So as I said in the scheme of things, not a biggie.

DMF paid today (for future) doesn’t cover as much in way of costs in future years …inflation etc

[iamaskier]

I assume the MF is paid monthly in advance?
If so it's worth the interest on 2 months of MF.
However I don't know any business of this sort that would allow occupiers to pay in arrears.
So as I said in the scheme of things, not a biggie.

The DMF is the portion (up to 30%) of the ORA the residents estate doesn't get back at the end. So it's all paid in advance. Note the DMF is a different stream of income to the weekly fee that residents also pay.

At the moment it seems clear that the weekly fee doesn't cover all the expenses, so there's a question around how much of the DMF gets chewed up looking after the resident during their stay.

[SailorRob]

I assume the MF is paid monthly in advance?
If so it's worth the interest on 2 months of MF.
However I don't know any business of this sort that would allow occupiers to pay in arrears.
So as I said in the scheme of things, not a biggie.


I'd be spending at least 2 minutes doing some basic research before posting publicly.

Let us know how many millions we are talking and over what time period.

This isn't a game on a cellphone with red and green lights flashing at you (CMC 'trading')

[Daytr]

Well I asked you that & either you don't know or can't be bothered answering. I'm not a shareholder currently so no I haven't done the research.

[SailorRob]

Well I asked you that & either you don't know or can't be bothered answering. I'm not a shareholder currently so no I haven't done the research.


Yep don't have the time. I don't know exactly but would take me less than 5 minutes to find out the exact numbers. You should look into it.

The time to do the research is before you are a shareholder.

[777]

Yep don't have the time. I don't know exactly but would take me less than 5 minutes to find out the exact numbers. You should look into it.

The time to do the research is before you are a shareholder.

You are the hero then.

[SailorRob]

You are the hero then.

Cheers.

You could put some work in and you'd find your results will improve a lot. Nothing comes easy as you have found out.

[mistaTea]

"When you locate a bargain, you must ask, 'Why me, God? Why am I the only one who could find this bargain?'"
—Charlie Munger (1924-2023)

[SailorRob]

"When you locate a bargain, you must ask, 'Why me, God? Why am I the only one who could find this bargain?'"
—Charlie Munger (1924-2023)

There are many of us...

Asked myself that every single time I've bought Berkshire.

The world's indisputed greatest investor of all time by an order of magnitude, Buffett, who understands Berkshire better than anyone and has a reputation for extraordinary honesty, told everyone that he would only repurchase shares when the were selling well below intrinsic value, conservatively estimated.

He then started buying back bucket loads. And nothing happened. In fact often the price fell. So I loaded the boat.

Efficient markets.

So the best of the best said this is wayyyy cheap, I'm buying... It's a bargain. And that opportunity existed for months if not more than a year.

All you had to be was awake.

But for SkyTV it would be a great question. Way too difficult to estimate future cash flows.

[thedrunkfish]

There are many of us...

Asked myself that every single time I've bought Berkshire.

The world's indisputed greatest investor of all time by an order of magnitude, Buffett, who understands Berkshire better than anyone and has a reputation for extraordinary honesty, told everyone that he would only repurchase shares when the were selling well below intrinsic value, conservatively estimated.

He then started buying back bucket loads. And nothing happened. In fact often the price fell. So I loaded the boat.

Efficient markets.

So the best of the best said this is wayyyy cheap, I'm buying... It's a bargain. And that opportunity existed for months if not more than a year.

All you had to be was awake.

But for SkyTV it would be a great question. Way too difficult to estimate future cash flows.

Mate who are you trying to impress? Nobody cares.

[SailorRob]

Mate who are you trying to impress? Nobody cares.

I'll bet there are people who care about what you've done to your trading account!

Keep up the great posts you have been laying down, I'm learning a lot.

[mistaTea]

There are many of us...

Asked myself that every single time I've bought Berkshire.

The world's indisputed greatest investor of all time by an order of magnitude, Buffett, who understands Berkshire better than anyone and has a reputation for extraordinary honesty, told everyone that he would only repurchase shares when the were selling well below intrinsic value, conservatively estimated.

He then started buying back bucket loads. And nothing happened. In fact often the price fell. So I loaded the boat.

Efficient markets.

So the best of the best said this is wayyyy cheap, I'm buying... It's a bargain. And that opportunity existed for months if not more than a year.

All you had to be was awake.

But for SkyTV it would be a great question. Way too difficult to estimate future cash flows.

Ok SR.

I just thought it was a great message delivered in a way that only Charlie could do.

And does tie back to some of my earlier posts.

[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.


If the business model doesn't work, then the value becomes irrelevant.

if the business model does work, then the price you pay must stack up against the value you perceive to exist.

Some here measure 'value' strictly against net asset backing. But that thinking ignores the business model completely IMV. I think the issue here is that many consider the RV sector in general an extension of their own experience in the housing market. But once you have an average sized mortgage, you will struggle for any privately owned rental house in a big city to generate positive cashflow. However, at least with a house, there are always alternative buyers willing to live in it, even if as a seller you do not get quite the price you want if you sell it. This is not the case in a retirement village, where most, I suspect, would run foul of council by laws if an RV owner decided to break their RV up for private occupant sale. If the RV assets do not have an alternative use, then the investment interest switches to the cashflow generated by those assets. The fact that those houses that make up the RV would cost more to build at today's building rates becomes irrelevant. And that means the NTA is irrelevant too.

SNOOPY

[SailorRob]

If the business model doesn't work, then the value becomes irrelevant.

if the business model does work, then the price you pay must stack up against the value you perceive to exist.

Some here measure 'value' strictly against net asset backing. But that thinking ignores the business model completely IMV. I think the issue here is that many consider the RV sector in general an extension of their own experience in the housing market. But once you have an average sized mortgage, you will struggle for any privately owned rental house in a big city to generate positive cashflow. However, at least with a house, there are always alternative buyers willing to live in it, even if as a seller you do not get quite the price you want. This is not the case in a retirement village, where most, I suspect, would run foul of council by laws if an owner decided to break them up for private occupant sale. If the RV assets do not have an alternative use, then the investment interest switches to the cashflow generated by those assets. The fact that those houses that make up the RV would cost more to build at today's building rates becomes irrelevant. And that means the NTA is irrelevant too.

SNOOPY


Net Assets means nothing with the exception of some unique circumstances such as assets being cash and cash you can get you hands on.

Hell, there is a little company in the US called Apple Computers that trades at 50 x net assets. The assets 'value' don't mean a lot.

Imagine the cash flows a privately owned rental house would provide when you borrowed ALL the money for free indefinitely.

[SailorRob]

Ok SR.

I just thought it was a great message delivered in a way that only Charlie could do.

And does tie back to some of my earlier posts.


Your earlier posts are of public record just as the SkyTV ones. They will be interesting to view in future periods.

[Snoopy]

I see the largest entry in that reconciliation statement is the DMF or 'deferred management 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'.



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 (emboldened bit above)?;



Further explanation as follows. If assets are trading on the market as a discount, then they can only be 'shored up' by issuing new shares at that same discount (or most likely a slightly greater discount). That statement applies to all assets owned by the company whether those assets were built from shareholder equity, debt or the float. The float, because it never has to be repaid by the company, allows more village assets to be built, at zero capital cost to the RV shareholder (a positive thing). If there was no float, then the total value of the retirement village assets on the balance sheet would be consummately less.

However, if the banking syndicate of the RV becomes uneasy about the debt on the company balance sheet, and the portfolio of assets is required to be shored up with new capital, then that 'new capital' will offset the debt position on the books of all the company's debt, including the float. That is because the banks would have a different view of the float. The alternative banking view being that if the RV company was not a going concern, then that float would have to be repaid as the RV company is wound up.

The fact that the RV company has more assets than it otherwise would have with no float, means that more capital would also be needed to shore up the company's debt position. And all of the new equity needed to shore up the company would have to be issued at the same discount. This means that post recapitalization, the shareholders original equity must be diluted much more than if the float did not exist. The float is working against the shareholders interest in this circumstance.

My contention then, is that there is no 'free lunch' with the float. It can work both for and against shareholders interests, depending on the circumstances. The float is analogous to other forms of leverage in this way.

SNOOPY

[SailorRob]

Further explanation as follows. If assets are trading on the market as a discount, then they can only be 'shored up' by issuing new shares at that same discount (or most likely a slightly greater discount). That statement applies to all assets owned by the company whether those assets were built from shareholder equity, debt or the float. The float, because it never has to be repaid by the company, allows more village assets to be built, at zero capital cost to the RV shareholder (a positive thing). If there was no float, then the total value of the retirement village assets on the balance sheet would be consummately less.

However, if the banking syndicate of the RV becomes uneasy about the debt on the company balance sheet, and the portfolio of assets is required to be shored up with new capital, then that 'new capital' will offset the debt position on the books of all the company's debt, including the float. That is because the banks would have a different view of the float. The alternative banking view being that if the RV company was not a going concern, then that float would have to be repaid as the RV company is wound up.

The fact that the RV company has more assets than it otherwise would have with no float, means that more capital would also be needed to shore up the company's debt position. And all of the new equity needed to shore up the company would have to be issued at the same discount. This means that post recapitalization, the shareholders original equity must be diluted much more than if the float did not exist. The float is working against the shareholders interest in this circumstance.

My contention then, is that there is no 'free lunch' with the float. It can work both for and against shareholders interests, depending on the circumstances. The float is analogous to other forms of leverage in this way.

SNOOPY

You contradict yourself.

Your contention is clearly that there may or may not be a free lunch.

Not that there is no free lunch.

Banks can't do anything unless the contract is in breach...

What you're saying is if the company is dramatically mismanaged then the float may not be super valuable.

Well no $hit

[Snoopy]

You contradict yourself.
Your contention is clearly that there may or may not be a free lunch.
Not that there is no free lunch.


No, I am saying that if the company chooses to raise new capital for any reason (bank pressure being the most likely) then that new capital will have to be discounted against all existing assets, including those assets built with float money. There will be more discounted capital needed to be raised if the float money has been used to build assets which are valued by the market well below book value (not uncommon in listed RV companies). But, post capital raising, all of that discounted capital raised will dilute the shareholders equity. The float money will not be diluted in any capital raising. So the discounting effect on shareholder equity, from a post capital raised perspective will be much more than if the float did not exist. This is the negative trade off the company is making when it uses the float to build more assets. The negative trade off might never materialise. But it nevertheless exists as a threat if market conditions turn for the worse.

It is similar to the company increasing its borrowing levels. Some borrowing is considered prudent to increase the efficient utilization of shareholder capital. If the business conditions never turn against you, then it makes sense to 'borrow to the max'. But by doing that you increase the risk to the company should business conditions turn. Balancing risk and reward. This is what being in business is about. The float is just another kind of leverage, albeit one that RV shareholders do not pay for if business is going well. But that doesn't remove the downside risk of the float, if business conditions become much less favourable.



Banks can't do anything unless the contract is in breach...


Bank lending contracts are for a fixed period. Once that period is up the bank can change the contract by reducing the maximum debt ratio allowed as an example. Furthermore even within the terms of an existing contract, floating interest rates can change, which means interest cover ratios can change.



What you're saying is if the company is dramatically mismanaged then the float may not be super valuable.

Well no $hit


Property owning companies tend to be highly leveraged by their nature. A change in the wider interest rate environment can affect both well and less well run property companies.

SNOOPY

[Daytr]

Your earlier posts are of public record just as the SkyTV ones. They will be interesting to view in future periods.
So are many of yours.
Stop being a bully.

[SailorRob]

Your earlier posts are of public record just as the SkyTV ones. They will be interesting to view in future periods.


So are many of yours.
Stop being a bully.


Many of my earlier posts are of public record? No mate, I'd say they all are.

Or did you mean that they will be interesting to view in future? If so which ones exactly? And when?

[SailorRob]

No, I am saying that if the company chooses to raise new capital for any reason (bank pressure being the most likely) then that new capital will have to be discounted against all existing assets, including those assets built with float money. There will be more discounted capital needed to be raised if the float money has been used to build assets which are valued by the market well below book value (not uncommon in listed RV companies). But, post capital raising, all of that discounted capital raised will dilute the shareholders equity. The float money will not be diluted in any capital raising. So the discounting effect on shareholder equity, from a post capital raised perspective will be much more than if the float did not exist. This is the negative trade off the company is making when it uses the float to build more assets. The negative trade off might never materialise. But it nevertheless exists as a threat if market conditions turn for the worse.

SNOOPY

As long as you participate pro rata then makes zero difference.

[ThaiJohn]

Get a room will ya...

[Maverick]

Been thinking just how damn unlucky OCA have been these last years.

-Covid arrives with its primary victims also specifically being OCAs primary residents.
-Multiple lockdowns significantly disrupting construction and sales.
-Borders closed for years severely disrupting staffing, therefore costs and care occupancy.
-Steeply falling property values with an unknown bottom of the last 2 years.
-Heavily reduced real estate sales rates and a large increase in “days to sell” the last 1.5 years.
-RYM and ARV induced fear of industry wide capital raises.
-Overhaul of the legal framework of the industry.
-Rising interest rates.
-Market sentiment tanking, effectively halving share prices of the industry.
-Govt has systematically reduced care funding for 5 straight years.
-Construction, contractor and staffing costs increased significantly for a while there.
-Supply of construction materials shortages.
-Cyclone Gabrielle.

Think that about covers the fly by...

Despite my intense work on this company I never foresaw even one of these. Shows me just how much plain old luck is involved in this game. For OCA, the luck has all been bad. I can't think of anything unexpectedly good that has happened for them.

While none of us know of the next “shoe to drop” I am greatly encouraged that firstly OCA has negotiated all of these difficulties ( some through good prescience but mostly good management ) and secondly that each of these obstacles has either fully disappeared or now receding.

Until the next unforeseen drama unfolds it seems that at this very moment we are now mostly back to more normalized/settled times.

OCA is currently sitting on a huge value of finished stock in a market that is now moving again ( for fun , let me put that in context...the value of stock is 58c per share.)

Therefore OCA doesn't need good luck to perform well from here, it just needs the bad luck to take a break.

In my observations, despite us all being now conditioned to only expect more problems, …. Nothing bad actually seems to be in OCAs flightpath right now.

[mike2020]

Thanks Maverick. Not tempting fate at all. It is nice to see that list. If it wasn't for bad luck we'd have no luck?
Did anyone else see the gross realestate commissions from 2023 was less than 2019? Tells a tale.

[Daytr]

Been thinking just how damn unlucky OCA have been these last years.

-Covid arrives with its primary victims also specifically being OCAs primary residents.
-Multiple lockdowns significantly disrupting construction and sales.
-Borders closed for years severely disrupting staffing, therefore costs and care occupancy.
-Steeply falling property values with an unknown bottom of the last 2 years.
-Heavily reduced real estate sales rates and a large increase in “days to sell” the last 1.5 years.
-RYM and ARV induced fear of industry wide capital raises.
-Overhaul of the legal framework of the industry.
-Rising interest rates.
-Market sentiment tanking, effectively halving share prices of the industry.
-Govt has systematically reduced care funding for 5 straight years.
-Construction, contractor and staffing costs increased significantly for a while there.
-Supply of construction materials shortages.
-Cyclone Gabrielle.

Think that about covers it.

Despite my intense work on this company I never foresaw even one of these. Shows me just how much plain old luck is involved in this game. For OCA, the luck has all been bad. I can't think of anything unexpectedly good that has happened for them.

While none of us know of the next “shoe to drop” I am greatly encouraged that firstly OCA has negotiated all of these difficulties ( some through good prescience but mostly good management ) and secondly that each of these obstacles has either fully disappeared or now receeding.

Until the next unforeseen drama unfolds it seems that at this very moment we are now mostly back to more normalized/settled times.

OCA is currently sitting on a huge value of finished stock in a market that is now moving again.

Therefore it doesn't need good luck to perform well from here, it just needs bad luck to just take a break.
In my observations, despite us all being now conditioned to only expect more problems, …. Nothing bad actually seems to be in OCAs flightpath right now.




Hi Mav, your list is pretty much what the whole economy faced or is now facing.
Buy the whole NZX50?

[Bjauck]

Hi Mav, your list is pretty much what the whole economy faced or is now facing.
Buy the whole NZX50?
Partly because NZ is so real estate centred. Retirement stock often seen as a proxy?

A great list of gloom Maverick. However just to put the “steeply falling property prices in perspective”, the QV house price index was 1850 in January 2020 (pre covid), the latest is 2298 in December 2023 (an increase of 24%). The OCA share price was 1.32 on 1.1.2020 currently it is 0.72. NZ house prices are still expensive and seem to be uncorrelated to the OCA share price anyway, although maybe that will turn out to be a timing issue. OCA has all the other issues about which you have posted so well, of course.

OCA’s ORAs were priced such that there was cushion to withstand a falling house price market. Certainly that should apply to the last couple of years, especially since prices are actually up by 24% over the last three years.

[SailorRob]

Hi Mav, your list is pretty much what the whole economy faced or is now facing.
Buy the whole NZX50?

Please Daytrader, read the list again.

Please.

[Daytr]

Please Daytrader, read the list again.

Please.

Here we go then. Sorry Mav but SR asked me to do it.

-Covid arrives with its primary victims also specifically being OCAs primary residents.l Applies to the whole world.
-Multiple lockdowns significantly disrupting construction and sales. Applies to the whole world.
-Borders closed for years severely disrupting staffing, therefore costs and care occupancy. Applied to most of the world
-Steeply falling property values with an unknown bottom of the last 2 years. Applies to the entire NZ property market after 18 months of record price apreciation.
-Heavily reduced real estate sales rates and a large increase in “days to sell” the last 1.5 years. As per above
-RYM and ARV induced fear of industry wide capital raise Should make OCA standout
-Overhaul of the legal framework of the industry. Always a risk & its an on-going risk
-Rising interest rates Record low interest rates followed by rising interest rates which are not historically high & its a global phenomenon.
-Market sentiment tanking, effectively halving share prices of the industry. Symptom not causation or bad luck
-Govt has systematically reduced care funding for 5 straight years. Always a risk, still an on-going risk & as Mav writes started 5 years ago, just quoting him, could be longer.
-Construction, contractor and staffing costs increased significantly for a while there. Welcome to the world post Covid.
-Supply of construction materials shortages. As above
-Cyclone Gabrielle. Impacted large parts of the country and far more in other parts than impact on OCA. Who knows could be a couple more in February, should we invest accordingly?

I am actually positive on OCA, well at this sort of share price I am, I wouldn't be if it was still valued at $1.50 as I wouldn't see much upside in the short to medium term and a market cap of what would be $1.5Bln with marginal operating margins, debt to be serviced, it would be at high risk of price capitulation, which is obviously what we have seen, Easy to say in hindsight of course.

So, OCA hasn't been unlucky, or if so, let's just say the whole world in recent years has been unlucky & if you are using "unlucky" as an excuse on why the share price is where it is perhaps you need to reassess your criteria for success.

Without having even closely following the company, its obvious the biggest issue was of their own making, paying dividends whilst borrowing money to expand. That's poor management and how much debt would have been reduced if this policy hadn't been in place, derisking the company in the process.
Fortunately, that's now been remedied, better late than never.

[SailorRob]

Here we go then. Sorry Mav but SR asked me to do it.

-Covid arrives with its primary victims also specifically being OCAs primary residents.l Applies to the whole world.


I mean what do you even respond to this?

The sailor is rarely if ever lost for words or hasn't the ability to respond quickly and crush the day trader, but damn.

Claiming that COVID-19 impacted the retirement village sector in the same way it affected everything else in the world is like saying a thunderstorm has the same effect on a picnic as it does on a submarine.

Sure, both are affected by the storm, but the experiences and consequences are worlds apart. The retirement village sector was uniquely impacted because it caters to the elderly, who were the most vulnerable demographic to COVID-19. Imagine a scenario where a business specialises in selling ice creams, but suddenly, there's a new health guideline that advises against cold foods.


It's not just about everyone facing the same storm; it's about some being in small boats while others are in large ships. The experiences, challenges, and adaptations required in the retirement village sector were far more acute and critical compared to many other industries.

[Daytr]

I mean what do you even respond to this?

The sailor is rarely if ever lost for words or hasn't the ability to respond quickly and crush the day trader, but damn.

Claiming that COVID-19 impacted the retirement village sector in the same way it affected everything else in the world is like saying a thunderstorm has the same effect on a picnic as it does on a submarine.

Sure, both are affected by the storm, but the experiences and consequences are worlds apart. The retirement village sector was uniquely impacted because it caters to the elderly, who were the most vulnerable demographic to COVID-19. Imagine a scenario where a business specialises in selling ice creams, but suddenly, there's a new health guideline that advises against cold foods.


It's not just about everyone facing the same storm; it's about some being in small boats while others are in large ships. The experiences, challenges, and adaptations required in the retirement village sector were far more acute and critical compared to many other industries.


Yep fair point, however this hasn't been the case in the last 12 months or more.
In the last year the OCA is down 18%, the NZX50 is down 1.3%, Ryman down 10.37% Summerset up 10.9%, ARV down 2.56%
Perhaps this just means OCA currently represents the best value in the sector.

[winner69]

Yep fair point, however this hasn't been the case in the last 12 months or more.
In the last year the OCA is down 18%, the NZX50 is down 1.3%, Ryman down 10.37% Summerset up 10.9%, ARV down 2.56%
Perhaps this just means OCA currently represents the best value in the sector.

Of course OCA represents the best value in the sector

Remember this is our year ……. Up the Wahs ….after years of bad luck both the Warriors and OCA will be the big winners this year

[mistaTea]

Of course OCA represents the best value in the sector

Remember this is our year ……. Up the Wahs ….after years of bad luck both the Warriors and OCA will be the big winners this year

They forgot to mention the other bad luck bit - Mr Market singling out OCA to ‘misprice’ over the last two years while he has not been in such a bad mood with OCA’s competitors.

[winner69]

They forgot to mention the other bad luck bit - Mr Market singling out OCA to ‘misprice’ over the last two years while he has not been in such a bad mood with OCA’s competitors.

True …that Mr Market is a fickle type …or he knows heaps more than most of us

[SailorRob]

True …that Mr Market is a fickle type …or he knows heaps more than most of us


Correct, around 995 - 997/1000 of you would do better to index.

[SailorRob]

They forgot to mention the other bad luck bit - Mr Market singling out OCA to ‘misprice’ over the last two years while he has not been in such a bad mood with OCA’s competitors.


This is good luck, the best luck in fact.

[Daytr]

Of course OCA represents the best value in the sector

Remember this is our year ……. Up the Wahs ….after years of bad luck both the Warriors and OCA will be the big winners this year

Both could be winners Winner!

[mistaTea]

This is good luck, the best luck in fact.

Exactly.

The sooner we get back to you pretending you want the SP to fall further the better I say.

[mistaTea]

Correct, around 995 - 997/1000 of you would do better to index.

I think all of us would do better indexing. In the long run.

[SailorRob]

I think all of us would do better indexing. In the long run.


Well you should study statistics then.

[SailorRob]

I think all of us would do better indexing. In the long run.

It's statistically pretty unlikely for all active investors to underperform market indexes due to the principle of variance in performance. In any diverse group of investors, some will inevitably make decisions that lead to above-average returns, even if by chance. Market indexes represent the average performance, so by definition, there will always be those who perform both below and above this average...

The distribution of investment returns will follow a roughly normal distribution, where some investors will randomly fall on the higher side of performance due to various factors, including different investment strategies, risk tolerance, timing, and sometimes, just pure luck.

Statistically, there will always be a segment that does.

[mistaTea]

Well you should study statistics then.

I mean ‘us’ who are posting on the OCA forum. From what I can tell we should all just index.

But then, indexing is ‘boring’ even though we would all probably end up with more money in the end if we just listened to Bogle.

[SailorRob]

I mean ‘us’ who are posting on the OCA forum. From what I can tell we should all just index.

But then, indexing is ‘boring’ even though we would all probably end up with more money in the end if we just listened to Bogle.


And just what is it that 'you can tell'

[mistaTea]

And just what is it that 'you can tell'

That you post like a man who is yet to know the warmth of a good woman.

[SailorRob]

That you post like a man who is yet to know the warmth of a good woman.


Well that shows how good an analyst you are, but we already knew that.

You post like a man completely beaten into submission by the market, and publicly so. Not just rag dolled once twice or thrice but consistently pummelled until you scurried away terrified to ever touch a stove again. Hot or cold.

There are also implications in your post about what you have settled for in a 'good Woman' that I spare you from the humiliation of exploring.

[Far Kit]

Well that shows how good an analyst you are, but we already knew that.

You post like a man completely beaten into submission by the market, and publicly so. Not just rag dolled once twice or thrice but consistently pummelled until you scurried away terrified to ever touch a stove again. Hot or cold.

There are also implications in your post about what you have settled for in a 'good Woman' that I spare you from the humiliation of exploring.

Whoa, this thread is just feral.

[Rawz]

riveting stuff posted on the OCA thread once again

always a risk clicking into this thread lol

[mike2020]

riveting stuff posted on the OCA thread once again

always a risk clicking into this thread lol

Personally mike2020 has been finding it inspirational. Mike2020 loved Daytr posting in red this morning to match his mood and mike2020 has already questioned his own relationship. Mike2020 hopes we delve further into what a good woman is re OCA and it's share price. Mike2020 has a theory, she is VERY understanding and patient and probably distracted by cats. Many cats.



Mike 2020 probably went a little overboard here

[alokdhir]

riveting stuff posted on the OCA thread once again

always a risk clicking into this thread lol

Good I sold. out of OCA ...long time back ...old now so prefer. more civility and helpful discussions ... blood pressure is not helpful ...lol

[thedrunkfish]

It's statistically pretty unlikely for all active investors to underperform market indexes due to the principle of variance in performance. In any diverse group of investors, some will inevitably make decisions that lead to above-average returns, even if by chance. Market indexes represent the average performance, so by definition, there will always be those who perform both below and above this average...

The distribution of investment returns will follow a roughly normal distribution, where some investors will randomly fall on the higher side of performance due to various factors, including different investment strategies, risk tolerance, timing, and sometimes, just pure luck.

Statistically, there will always be a segment that does.

Man thats a whole heap of big words with absolutley nothing of substance.

[mistaTea]

Man thats a whole heap of big words with absolutley nothing of substance.

Yeah I gave up trying to work out what his point was.

I think he was saying sometimes a few people get lucky on occasion and outperform the index and on that basis smart guys like him should definitely not index.

But people like me definitely should. Well, he is right on the last bit I suppose.

[thedrunkfish]

Yeah I gave up trying to work out what his point was.

I think he was saying sometimes a few people get lucky on occasion and outperform the index and on that basis smart guys like him should definitely not index.

But people like me definitely should. Well, he is right on the last bit I suppose.

It has the ring of AI generated investor clickbait. No mention of Berkshire though. :cool:
.

[SailorRob]

Man thats a whole heap of big words with absolutley nothing of substance.


Like a state employee from palmy then!

[SailorRob]

If the share price of this company completely misses all of Mav's targets and instead takes 2 whole years to hit a LOUSY dollar...

That's an 18% CAGR.

18% PER year.

Doesn't matter what the hell you paid for it.

Fact is that it's 18% from HERE.

[winner69]

If the share price of this company completely misses all of Mav's targets and instead takes 2 whole years to hit a LOUSY dollar...

That's an 18% CAGR.

18% PER year.

Doesn't matter what the hell you paid for it.

Fact is that it's 18% from HERE.

WOW …and it started that journey today ..up 1 of the 28 cents …cool eh

[SailorRob]

WOW …and it started that journey today ..up 1 of the 28 cents …cool eh


Just Math Whiner just Math

[Habits]

If the share price of this company completely misses all of Mav's targets and instead takes 2 whole years to hit a LOUSY dollar...

That's an 18% CAGR.

18% PER year.

Doesn't matter what the hell you paid for it.

Fact is that it's 18% from HERE.

SR what's up.... you've switched 180 from down-ramping to plain old up-ramping

[thedrunkfish]

Like a state employee from palmy then!

My business employs me, not that I need it as I live rent free in your head.

[SailorRob]

My business employs me, not that I need it as I live rent free in your head.

It's OK Bud, I believe you.

[SailorRob]

SR what's up.... you've switched 180 from down-ramping to plain old up-ramping

I don't recall ever down ramping!

[Habits]

I don't recall ever down ramping!

That has to be the biggest case of amnesia ever

[SailorRob]

That has to be the biggest case of amnesia ever

Please repost me down ramping OCA?

Just reply/comment to my post so we can all see.

[Baa_Baa]

Please repost me down ramping OCA?

Just reply/comment to my post so we can all see.

These people will regard any commentary for the current or a lower share price, to be "down-ramping".

It's not all that complicated, you're talking to people who mostly want higher share prices, and possibly only a few people who want to accumulate on share price weakness. This is the Sharetrader website, after all. Hence your commentary is divisive, some agree, others don't. It's not all that complicated, people have to make up their own minds.

Mindset matters, the 'market' is all about share price, while it's important as far as price goes, the importance differs for those who want a higher share price to sell into, from those who don't and want to buy or accumulate into.

Right now, OCA is gift for for both though, cheap entry for a trader, cheap entry or accumulation for a long. Either way, it's cheap.

[SailorRob]

These people will regard any commentary for the current or a lower share price, to be "down-ramping".

It's not all that complicated, you're talking to people who mostly want higher share prices, and possibly only a few people who want to accumulate on share price weakness. This is the Sharetrader website, after all. Hence your commentary is divisive, some agree, others don't. It's not all that complicated, people have to make up their own minds.

Mindset matters, the 'market' is all about share price, while it's important as far as price goes, the importance differs for those who want a higher share price to sell into, from those who don't and want to buy or accumulate into.

Right now, OCA is gift for for both though, cheap entry for a trader, cheap entry or accumulation for a long. Either way, it's cheap.

Agreed, but I have only ever said that I hope the SP goes lower, aside from me wanting more shares.

I have never down ramped the company or given any reasons why I think it will or should go lower

I was skeptical of the speed that Mav highlighted the SP might rise, but that's hardly down ramping.

If anyone can repost a single comment from me down ramping OCA then I'd like to see it.

[Rawz]

If the share price of this company completely misses all of Mav's targets and instead takes 2 whole years to hit a LOUSY dollar...

That's an 18% CAGR.

18% PER year.

Doesn't matter what the hell you paid for it.

Fact is that it's 18% from HERE.

Would be better if it doesnt meet all targets and goes DOWN 18% every year. This sort of strategy is more you I would have thought?

[SailorRob]

Would be better if it doesnt meet all targets and goes DOWN 18% every year. This sort of strategy is more you I would have thought?

Provided its not accompanied by a decline in the business, of course.

There is nobody who wouldn't want that.

Id soon have dividends returning me hundreds of percent more than my purchase price every few months.

Would be crazy after a while, thousands of percent return per year in cash.

5th

Form

Math

After 20 years the share price would be 1.4 cents.

What would the dividend be?

[Baa_Baa]

Agreed, but I have only ever said that I hope the SP goes lower, aside from me wanting more shares.

I have never down ramped the company or given any reasons why I think it will or should go lower

I was skeptical of the speed that Mav highlighted the SP might rise, but that's hardly down ramping.

If anyone can repost a single comment from me down ramping OCA then I'd like to see it.

SailorRob. Let's take a step aside and reflect.

Mostly, people here are only concerned with shareprice, and particularly whether it's making them money (going up), assuming they know how to capitalise on it, they will interpret a statement "I have only ever said that I hope the SP goes lower", as down-ramping, despite your intentions or qualifying your statement. It is what it is, we all have different intent and motivations, yours may be in the minorty here. But not alone. People are quick to accuse.

This is unavoidable, you want the share price to go down, or stay the same, for your reasons, as do some minority, which flies in the face of the majority who are only here to capitalise on share prices rising. No wonder they rebel and rail against you.

Who is right and who is wrong is of no matter, nor is it how long it takes to prove one side is wrong or right. We all make our decisions, what happens or is said here is of little consequence.

Time wounds all heels. The last laugh will be to whom make the greatest spoils. The in-between is of no matter or consequence.

[mistaTea]

SailorRob. Let's take a step aside and reflect.

Mostly, people here are only concerned with shareprice, and particularly whether it's making them money (going up), assuming they know how to capitalise on it, they will interpret a statement "I have only ever said that I hope the SP goes lower", as down-ramping, despite your intentions or qualifying your statement. It is what it is, we all have different intent and motivations, yours may be in the minorty here. But not alone. People are quick to accuse.

This is unavoidable, you want the share price to go down, or stay the same, for your reasons, as do some minority, which flies in the face of the majority who are only here to capitalise on share prices rising. No wonder they rebel and rail against you.

Who is right and who is wrong is of no matter, nor is it how long it takes to prove one side is wrong or right. We all make our decisions, what happens or is said here is of little consequence.

Time wounds all heels. The last laugh will be to whom make the greatest spoils. The in-between is of no matter or consequence.

Sorry mate, I couldn’t quite catch any of that.

Could you take your tongue out of his arse and say it again?

[mike2020]

I have another share I plan on accumulating and I really do want it to drop. SR always made sense to me. Never saw it any other way. Mine is probably more risky than OCA. I intend buying more OCA with the proceeds of another investment as well.

No one had any love for metlife till an offer came along. Who wants that? Never. Let it cycle along in perpetuity.

[Lego_Man]

SailorRob. Let's take a step aside and reflect.

Mostly, people here are only concerned with shareprice, and particularly whether it's making them money (going up), assuming they know how to capitalise on it, they will interpret a statement "I have only ever said that I hope the SP goes lower", as down-ramping, despite your intentions or qualifying your statement. It is what it is, we all have different intent and motivations, yours may be in the minorty here. But not alone. People are quick to accuse.

This is unavoidable, you want the share price to go down, or stay the same, for your reasons, as do some minority, which flies in the face of the majority who are only here to capitalise on share prices rising. No wonder they rebel and rail against you.

Who is right and who is wrong is of no matter, nor is it how long it takes to prove one side is wrong or right. We all make our decisions, what happens or is said here is of little consequence.

Time wounds all heels. The last laugh will be to whom make the greatest spoils. The in-between is of no matter or consequence.


The whole point of investing is to make the squiggly line go from the top left to the bottom right. You can have a view that you would like prices to remain depressed for a while to deploy additional funds, but that's gotta be the exception rather than the rule.

Meanwhile the list of things that are wrong with having a stock be underpriced for a long period is much longer. For starters, there is the obvious risk of a takeover bid coming in well under long term value. The second is that personal circumstances force an investor to capitulate on an investment either partially or in full. At the very least, not all investors will be in a position to add capital into the market, in fact many are drawing down from it.

Lastly, the intense interest in year by year returns for benchmarking purposes is real, even by those who claim to have a long term view (as we can see in a neighbouring thread).

That's likely why begging for lower prices is seen as flippant trolling.

[SailorRob]

The whole point of investing is to make the squiggly line go from the top left to the bottom right. You can have a view that you would like prices to remain depressed for a while to deploy additional funds, but that's gotta be the exception rather than the rule.

Meanwhile the list of things that are wrong with having a stock be underpriced for a long period is much longer. For starters, there is the obvious risk of a takeover bid coming in well under long term value. The second is that personal circumstances force an investor to capitulate on an investment either partially or in full. At the very least, not all investors will be in a position to add capital into the market, in fact many are drawing down from it.

Lastly, the intense interest in year by year returns for benchmarking purposes is real, even by those who claim to have a long term view (as we can see in a neighbouring thread).

That's likely why begging for lower prices is seen as flippant trolling.

Yes, Baa_Baa highlighted the takeover risk recently and I agree.

[SailorRob]

I have another share I plan on accumulating and I really do want it to drop. SR always made sense to me. Never saw it any other way. Mine is probably more risky than OCA. I intend buying more OCA with the proceeds of another investment as well.

No one had any love for metlife till an offer came along. Who wants that? Never. Let it cycle along in perpetuity.

Yeah, there are companies I own where I'd prefer the share price to go up, and that highlights to me that I'm not confident about the businesses.

The more confidence I have in the future cash flows the cheaper I want to be able to buy them even if I already own, or for them to repurchase.

Berkshire is my biggest position and upon Buffett stepping down or dying I would appreciate a 90% decline in the share price.

It will lay waste to my net worth, for a time.

[bull....]

If the share price of this company completely misses all of Mav's targets and instead takes 2 whole years to hit a LOUSY dollar...

That's an 18% CAGR.

18% PER year.

Doesn't matter what the hell you paid for it.

Fact is that it's 18% from HERE.

your probably have more luck investing in Infratil

[winner69]

your probably have more luck investing in Infratil

…esp so as OCA are one of the unlucky ones eh

[Daytr]

Yeah, there are companies I own where I'd prefer the share price to go up, and that highlights to me that I'm not confident about the businesses.

The more confidence I have in the future cash flows the cheaper I want to be able to buy them even if I already own, or for them to repurchase.

Berkshire is my biggest position and upon Buffett stepping down or dying I would appreciate a 90% decline in the share price.

It will lay waste to my net worth, for a time.

If you aren't confident about the business of some of the stocks you own, why are you still invested?

[winner69]

If you aren't confident about the business of some of the stocks you own, why are you still invested?

Because he might get lucky

Our Robbie believes in luck .....suppose he is one of the ucky ones

[SailorRob]

If you aren't confident about the business of some of the stocks you own, why are you still invested?


Thats a good point and one I thought would be raised after I posted.

It comes down to how confident. I should not have said 'not confident' I should have said 'not as confident'.

[SailorRob]

Because he might get lucky

Our Robbie believes in luck .....suppose he is one of the ucky ones


Also strongly believe in wishing.

Wishing certain people would stop whinging but the wishing never works.

[Daytr]

Thats a good point and one I thought would be raised after I posted.

It comes down to how confident. I should not have said 'not confident' I should have said 'not as confident'.

Fair enough.

[Balance]

Of relevance to OCA :

Real estate industry trying to stoke the market up with all kinds of bullish comments about demand etc etc etc.

I talked to a real estate agent friend who works for Barfoot & Thompson who said it is a real struggle out there unless vendors are realistic with their asking prices.

All the talk about migrants pushing up house prices is just a load of BS & crxp with little substance.

The migrants currently pouring into NZ are mostly semi-skilled workers on work visas from India, Philippines and China - they cannot afford to buy a house in NZ, especially Auckland, where the jobs are even if they sell all their possessions in their home countries!

They are renters and that's why the rental market is so tight for family units ((rents have gone up by around $30 to $40 a room (yes, by room) in Auckland in the last year)).

Meanwhile, many of the NZers leaving NZ permanently to go to Australia especially are leaving behind a property or two to sell.

Property prices aren't going to go up in a big hurry until interest rates drop by 2% or more in her opinion.

[Balance]

A property in St Heliers (Maskell Rd) sold at auction today for $1.15m vs CV of $1.575m is a case in point of how far the property market is from bottoming out vs what the real estate industry is trying to talk up out there.

[Leemsip]

Prices are crazy. Top earners can’t afford to buy a nice house in a good area. The promised recession will sort it out I hope

[Daytr]

There is still a massive shortage of housing. Rents have sky rocketed thanks to over 100k of immigrants who aren't allowed to buy until they attain residency.

It was estimated NZ was short circa 30k of houses prior to the huge jump in immigration. That rental hike will translate to buyer demand once the immigrants qualify for residency & can buy property.

From a real estate agent, just had the busiest January they can remember.

[Muse]

From a real estate agent, just had the busiest January they can remember.

that'll be an interesting anecdote to fact check when the REINZ stats come out in ~2 weeks

[Daytr]

that'll be an interesting anecdote to fact check when the REINZ stats come out in ~2 weeks

Yep exactly, could be a blip. Who knows.

[Lego_Man]

Anecdotes are like the proverbial - everyone's got one!

[winner69]

Anecdotes are like the proverbial - everyone's got one!

But then guys like Jeff Bezos say ‘when the anecdotes and the data disagree, the anecdotes are usually right’

[SailorRob]

Of relevance to OCA :

Real estate industry trying to stoke the market up with all kinds of bullish comments about demand etc etc etc.

I talked to a real estate agent friend who works for Barfoot & Thompson who said it is a real struggle out there unless vendors are realistic with their asking prices.

All the talk about migrants pushing up house prices is just a load of BS & crxp with little substance.

The migrants currently pouring into NZ are mostly semi-skilled workers on work visas from India, Philippines and China - they cannot afford to buy a house in NZ, especially Auckland, where the jobs are even if they sell all their possessions in their home countries!

They are renters and that's why the rental market is so tight for family units ((rents have gone up by around $30 to $40 a room (yes, by room) in Auckland in the last year)).

Meanwhile, many of the NZers leaving NZ permanently to go to Australia especially are leaving behind a property or two to sell.

Property prices aren't going to go up in a big hurry until interest rates drop by 2% or more in her opinion.


Hard to disagree. This is all essentially fact.

[SailorRob]

There is still a massive shortage of housing. Rents have sky rocketed thanks to over 100k of immigrants who aren't allowed to buy until they attain residency.

It was estimated NZ was short circa 30k of houses prior to the huge jump in immigration. That rental hike will translate to buyer demand once the immigrants qualify for residency & can buy property.

From a real estate agent, just had the busiest January they can remember.


Yes my agent also had the busiest January they can remember as have many others.

Why?

Appraisals and new listings.

The very opposite of what you might think when an agent says they are busy.

Driving from town to home - around 45 mins, there are more for sale signs up now than you could imagine, seems like more for sale than not for sale.

[Balance]

From a real estate agent, just had the busiest January they can remember.

They must have short memory then as sales activity cannot be as busy as it was during the crazy boom years in Jan 2021 and Jan 2022!

SR is probably on the mark about apprisals & new listings rather than sales.

https://www.1news.co.nz/2024/01/11/december-lowest-month-on-record-for-new-property-listings/

"December was the "lowest month on record" for new property listings, according to today's latest New Zealand Property Report.

Realestate.co.nz, who compiled the data, said the month had 4828 new listings, down 6.4% when compared to December 2022. "

[bull....]

CoreLogic HPI shows average dwelling values are rising but the pace of growth is slowing

https://www.interest.co.nz/property/126156/corelogic-hpi-shows-average-dwelling-values-are-rising-pace-growth-slowing

[Maverick]

With all is chit chat on property market , here's a chart that most of you will find interesting.

It demonstrates many things but the original point of creating it was for me to see how the overall NZ housing sales may be affecting OCA`s ability to sell stock.

Notes on the data;
-This is only new apartments and does not include care suites, villas or resales.
-Housing sales data ( yellow line) comes from Stats NZ and to anticipate Q1 2024 I have simply doubled Q4 2023.( which came out this week)
- Housing sales stats have been multiplied by .001 to fit the graph nicely.
-I have averaged the deliveries ( red line) of the current HY period and previous HY. This both smooths the lumpy numbers a little and allows for OCAs enthusiasm to say something was delivered in a period when in fact occupation can be a little later into the next HY.
- I have anticipated 55 sales for this 2HY24.
-I started with an arbitrary 10 unsold apartments. This is a logical estimate but its accuracy doesn't matter too much as everything is relatively built from this starting point.
-The significant spike in current unsold stock is timing of large deliveries of Helier, Christchurch and Tauranga.

My takeaways ;
-There is definitely an accumulation of unsold stock through 2023CY when the NZ housing sales have slumped to their worst. I do not accept that apartments are not selling due to being unpopular or too expensive as in the past they did sell and the towers delivered pre 2021 are now all full with waiting lists.
- NZ stats say NZ housing sales have now increased 10% Q4 2023 from Q3 2023.
-The Helier is currently a large portion (50%) of available stock.
- It seems likely my expected 55 sales 2HY2024 is going to be light given the significant number of unsold stock and improving NZ sales. Using these data sets alone it could be more like 65 as posted earlier.

It is clear the powder keg of value OCA is now sitting on.

Either OCA can sell these down then everything gets real good, real soon ( balance sheets, cashflows P+L, downstream annuity income) … or if not …
then the model is disastrous.
Fortunately I am physically seeing first hand that sales are going very well and so I remain very confident it is the former.

As BaaBaa has said “ it's all about sales sales sales now”.





https://lh7-us.googleusercontent.com/vwDDxzKb0mI1XxK_lAewSO4zrfV-O_zR7L2XXVBI5LvYGGQ15zgZrCi_mU_cWzWLQMMW209MC54fFs TCxvuVHAO09N-7XfAfpZW7Tv9pT3iV1TMZi5tkQX55jnkV0D497mDRRys7Z9LkP f7YmP6988A

[Daytr]

Yes my agent also had the busiest January they can remember as have many others.

Why?

Appraisals and new listings.

The very opposite of what you might think when an agent says they are busy.

Driving from town to home - around 45 mins, there are more for sale signs up now than you could imagine, seems like more for sale than not for sale.

Nope this a reliable source and they were referring to buyers. That's what's unusual being January, buyers are normally on holiday no too interested.
But it's obviously just anecdotal.

[Daytr]

But then guys like Jeff Bezos say ‘when the anecdotes and the data disagree, the anecdotes are usually right’

Another great saying from back in my trading days. " When the taxi drivers start a yellin, it's time to get a sellin. "

[ValueNZ]

Another great saying from back in my trading days. " When the taxi drivers start a yellin, it's time to get a sellin. "
I have a better saying "Sell when price>discounted future cash flows to perpetuity"

[bull....]

With all is chit chat on property market , here's a chart that most of you will find interesting.

It demonstrates many things but the original point of creating it was for me to see how the overall NZ housing sales may be affecting OCA`s ability to sell stock.

Notes on the data;
-This is only new apartments and does not include care suites, villas or resales.
-Housing sales data ( yellow line) comes from Stats NZ and to anticipate Q1 2024 I have simply doubled Q4 2023.( which came out this week)
- Housing sales stats have been multiplied by .001 to fit the graph nicely.
-I have averaged the deliveries ( red line) of the current HY period and previous HY. This both smooths the lumpy numbers a little and allows for OCAs enthusiasm to say something was delivered in a period when in fact occupation can be a little later into the next HY.
- I have anticipated 55 sales for this 2HY24.
-I started with an arbitrary 10 unsold apartments. This is a logical estimate but its accuracy doesn't matter too much as everything is relatively built from this starting point.
-The significant spike in current unsold stock is timing of large deliveries of Helier, Christchurch and Tauranga.

My takeaways ;
-There is definitely an accumulation of unsold stock through 2023CY when the NZ housing sales have slumped to their worst. I do not accept that apartments are not selling due to being unpopular or too expensive as in the past they did sell and the towers delivered pre 2021 are now all full with waiting lists.
- NZ stats say NZ housing sales have now increased 10% Q4 2023 from Q3 2023.
-The Helier is currently a large portion (50%) of available stock.
- It seems likely my expected 55 sales 2HY2024 is going to be light given the significant number of unsold stock and improving NZ sales. Using these data sets alone it could be more like 65 as posted earlier.

It is clear the powder keg of value OCA is now sitting on.

Either OCA can sell these down then everything gets real good, real soon ( balance sheets, cashflows P+L, downstream annuity income) … or if not …
then the model is disastrous.
Fortunately I am physically seeing first hand that sales are going very well and so I remain very confident it is the former.

As BaaBaa has said “ it's all about sales sales sales now”.





https://lh7-us.googleusercontent.com/vwDDxzKb0mI1XxK_lAewSO4zrfV-O_zR7L2XXVBI5LvYGGQ15zgZrCi_mU_cWzWLQMMW209MC54fFs TCxvuVHAO09N-7XfAfpZW7Tv9pT3iV1TMZi5tkQX55jnkV0D497mDRRys7Z9LkP f7YmP6988A

As all big property developers know its about cashflow cashflow.
sales to keep the lights on

[bull....]

the helier not really going to produce meaningful cashflow for donkey years.
anyway test the lows again anyone ?

[SailorRob]

the helier not really going to produce meaningful cashflow for donkey years.
anyway test the lows again anyone ?

The gift that keeps on giving.

[Maverick]

the helier not really going to produce meaningful cashflow for donkey years.
anyway test the lows again anyone ?
Why are saying that Bull? seriously , I'm keen to understand your point.

Its Helier that IS going to get the cashflow turned around. Brent said the updated sales numbers at the AGM , he also commented that it was selling faster than anticipated. And from what I have verified from visiting .Those comments and my numbers say it will all be sold within 1.5-2 years in this environment. That's all cashflow coming in instead of outflow as it has been.

Your comments dont line up with my observations and workings...?

[davflaws]

Your comments dont line up with my observations and workings...?

About which I am enormously glad.

[Daytr]

I have a better saying "Sell when price>discounted future cash flows to perpetuity"

Doesn't quite have the same ring to it....

[SailorRob]

Why are saying that Bull? seriously , I'm keen to understand your point.

Its Helier that IS going to get the cashflow turned around. Brent said the updated sales numbers at the AGM , he also commented that it was selling faster than anticipated. And from what I have verified from visiting .Those comments and my numbers say it will all be sold within 1.5-2 years in this environment. That's all cashflow coming in instead of outflow as it has been.

Your comments dont line up with my observations and workings...?

Surely you don't take this fool seriously Mav!

The man that can make money from any chart anywhere anytime.

He's so full of it not even funny.

[RTM]

Surely you don't take this fool seriously Mav!

The man that can make money from any chart anywhere anytime.

He's so full of it not even funny.

I am looking forward to Bull’s answer.

[Greekwatchdog]

I am looking forward to Bull’s answer.

And I second that, thou to be honest I am rather looking forward to full year result

[bull....]

Why are saying that Bull? seriously , I'm keen to understand your point.

Its Helier that IS going to get the cashflow turned around. Brent said the updated sales numbers at the AGM , he also commented that it was selling faster than anticipated. And from what I have verified from visiting .Those comments and my numbers say it will all be sold within 1.5-2 years in this environment. That's all cashflow coming in instead of outflow as it has been.

Your comments dont line up with my observations and workings...?

you may have mis-understood what i was trying to say
you are correct in what you say about sales and i was agreeing with what you said sort off but suggesting to you meaningful cashflow is not for yrs. You are talking about sales , im talking about cash flow , these are very different things.

anyway to cut to the chase when valuing a retirement village ie the helier which is a immature village the meaningful cashflows will come on the roll-over ie when the first lot of re-sales for this village start occurring , not on original sales ( which have most of the costs to come out off )

Your analysis of sale and profit is good mav but you should take it the next step and do a cashflow valuation ie dcf as this is how they are measured.
OCA have a data analyst employed who im sure has all the data you need to perform this if you want and they are willing to tell you.

[Daytr]

Surely you don't take this fool seriously Mav!

The man that can make money from any chart anywhere anytime.

He's so full of it not even funny.

Yeah let's not hear anyone else's thoughts other than those anointed by SR. 🤣
The desperation in your post is palpable.
Stop being a bully.

[winner69]

Bull ….the view will be that building Helier is a ‘sunk cost’ and a component of the previous years large cash burn

Looking forward Helier sales are all cash in the bank from now …even.leading to positive cash flows maybe

[Balance]

Bull ….the view will be that building Helier is a ‘sunk cost’ and a component of the previous years large cash burn

Looking forward Helier sales are all cash in the bank from now …even.leading to positive cash flows maybe

I don’t get it, W69 so if someone can enlighten, it will be appreciated.

Developers who overpaid for land and suffered severe costs overruns on projects in recent times have hit the wall and the banks are also nursing numerous similar distressed projects out there.

Why is OCA so special that it’s not a problem with its portfolio of developments where it has overpaid for land & suffered horrendous cost overruns like Helier?

[bull....]

Bull ….the view will be that building Helier is a ‘sunk cost’ and a component of the previous years large cash burn

Looking forward Helier sales are all cash in the bank from now …even.leading to positive cash flows maybe

yes some of it will be but some of it is current cost ie sales and marketing as an example

[Maverick]

you may have mis-understood what i was trying to say
you are correct in what you say about sales and i was agreeing with what you said sort off but suggesting to you meaningful cashflow is not for yrs. You are talking about sales , Im talking about cash flow , these are very different things.
Im not sure we agree here Bull. An ORA sale is a combo of recovered capital plus (30-35%)margin...its all cash in OCAs bank. The recovered capital part never has to be paid back so that`s cash being kept by OCA. So sales ARE cashflow.

anyway to cut to the chase when valuing a retirement village ie the helier which is a immature village the meaningful cashflows will come on the roll-over ie when the first lot of re-sales for this village start occurring , not on original sales ( which have most of the costs to come out off )
I`m nor sure where you got this from...I do know Julian from Sum said the good profits dont show up until first set of resales ( that`s more about progressive pricing when you have a waiting list) .... I view resale profits simply as just inflation indexing for the years out from now.
The costs to come out for what has been already built has already paid by debt , but the debt , ( although real) doesn`t need to be repaid as the residents up front payment that now sits in OCAs money jar as a permanent loan has now neutralized it to zero. The real capex from the past has now been paid back now by a permant interest free loan from the resident (with a significant cherry on top.) The moment an ORA happens then the DMF then starts deducting. This DMF is a whopper 30% spread over 5 years.

Your analysis of sale and profit is good mav but you should take it the next step and do a cashflow valuation ie dcf as this is how they are measured.
OCA have a data analyst employed who I`m sure has all the data you need to perform this if you want and they are willing to tell you.
Ill post a table screen shot below of a small piece of my cashflow that I use. Its basic but no need to get too keen on some very big assumptions. The white is historical and the yellow is forcast. See I have got OCA reinstating the divi this winter. Note also the cashflow turns positive now while including $80m on continued capex

Ill post the table later when i figure out how to do it.

[Maverick]

Ok lets try this...14937




2024




2025




2026


















52.0
83.1
72%
135.1

78.9
88.3

167.2

79.4
59.3

138.8


77.6
83.3
22%
160.9

90.5
114.6

205.1

107.1
134.9

242.0


129.6
166.3
66%
295.9

169.4
202.9

372.3

186.5
194.3

380.8


38.6
51
12%
89.6

45
45

90

50
50

100


















91.0
115.3

206.3

124.4
157.9

282.3

136.5
144.3

280.8


104.7
105.2

209.9

105.1
109.9

214.9

109.4
113.6

223.0


-128.6
-128.7

-257.3

-130.8
-136.1

-266.9

-136.3
-141.7

-278.0


-6.8
0.0

-6.8

-12.5
-14.0

-26.5

-12.5
-21.4

-33.9


-115.5
-80

-195.5

-80
-80

-160

-80
-80

-160


-55
12

-43

6
38

44

17
15

32



That`s the best I can Bull....gonna have to get out your magnifying glass.

So there`s the cash flow I expect ...

Our basic difference is I think...
I see sales as profit AND cashflow.
You see sales as just profit and no cashflow. ( like a standard property developer not using ORA`s)
I`m not sure why you dont see that "cash float " the resident just paid up front is now sitting in OCAs accounts to use as they please. ( either building more units elsewhere or paying debt.) It never has to be paid back while new residents are lining up to take it over on resale.
The ORA set up is the key difference of why RVs will keep making money in a stagnant property market and developers dont.


I have to leave for a week or so shortly so I wont have time to respond further for now.

[Daytr]

Ill post the table later when i figure out how to do it.

Hi Mav, I just want to confirm the margin on build cost you quote is correct? 30 - 35% seems high to me.
Also if that's the case, why aren't they making a hell of a lot more money?

Cheers Daytr

[Maverick]

Hi Mav, I just want to confirm the margin on build cost you quote is correct? 30 - 35% seems high to me.
Also if that's the case, why aren't they making a hell of a lot more money?

Cheers Daytr
Yeah it does seem too high…but it ain’t.
They make 30-40% in the highbrow Auckland places but goes right down to 15% in places like Nelson.
( bare in mind these margins published by the industry DONT include the community areas) hence villa builders with lower reported margins running out of cash recently.

They have put a good section in their HY1 24 on total cash return that does include the whole of the complexes.

So with Helier being 50% of their current empty stock you can have a good guess without much effort on their aggregate margins over the next few years.

[SailorRob]

Yeah let's not hear anyone else's thoughts other than those anointed by SR. 🤣
The desperation in your post is palpable.
Stop being a bully.

Thoughts?

That's the problem old boy, there isn't any thinking going on.

What is the desperation you are picking up on so strongly?

Please let me know.

Cheers.

[SailorRob]

If the IHC start posting on sharetrader about OCA I wonder if Mav will respond.

Or is this already happening.

IHC probably known by Te Reo name now.

[RTM]

Maverick, Can’t pretend to understand OCA to the level you do, have always considered it largely a real estate play in my portfolio, and then SailorBoy added a new dimension for me. It’s one of our bigger holdings. So this quick note is just to say how much I appreciate you sharing your detailed knowledge of the company/industry with us all.

Going to be interesting reviewing this thread in 5-10 years.

Enjoy your break, wherever that might be.

RTM


Yeah it does seem too high…but it ain’t.
They make 30-40% in the highbrow Auckland places but goes right down to 15% in places like Nelson.
( bare in mind these margins published by the industry DONT include the community areas) hence villa builders with lower reported margins running out of cash recently.

They have put a good section in their HY1 24 on total cash return that does include the whole of the complexes.

So with Helier being 50% of their current empty stock you can have a good guess without much effort on their aggregate margins over the next few years.

[Daytr]

If the IHC start posting on sharetrader about OCA I wonder if Mav will respond.

Or is this already happening.

IHC probably known by Te Reo name now.

What a disgusting post.

[Daytr]

Thoughts?

That's the problem old boy, there isn't any thinking going on.

What is the desperation you are picking up on so strongly?

Please let me know.

Cheers.

Desperation to be lauded & recognized.
The confidence is very shallow in this one.
Just let others share their views without you trying shut them down.
You are not a moderator.
This a site for all those to share their views & thoughts without abuse.

[davflaws]

If the IHC start posting on sharetrader about OCA I wonder if Mav will respond.

Or is this already happening.

IHC probably known by Te Reo name now.

Yuk
Time for a few deep breaths mate. IDEA Services clients represent a wide range of all sorts of disability. None of them need this sort of sh!t.

Your posts on this thread containg analysis are valuable and appreciated. You (and some others) are starting to treat the posters you disagree with discourteously. I don't know whether you 'started it' and I can't be bothered looking back through the thread to find out, but I know you can stop.

I wish you would.

I am going 'out wide' (for me) today. Perhaps you should also go to sea!

[bull....]

Ok lets try this...14937




2024




2025




2026


















52.0
83.1
72%
135.1

78.9
88.3

167.2

79.4
59.3

138.8


77.6
83.3
22%
160.9

90.5
114.6

205.1

107.1
134.9

242.0


129.6
166.3
66%
295.9

169.4
202.9

372.3

186.5
194.3

380.8


38.6
51
12%
89.6

45
45

90

50
50

100


















91.0
115.3

206.3

124.4
157.9

282.3

136.5
144.3

280.8


104.7
105.2

209.9

105.1
109.9

214.9

109.4
113.6

223.0


-128.6
-128.7

-257.3

-130.8
-136.1

-266.9

-136.3
-141.7

-278.0


-6.8
0.0

-6.8

-12.5
-14.0

-26.5

-12.5
-21.4

-33.9


-115.5
-80

-195.5

-80
-80

-160

-80
-80

-160


-55
12

-43

6
38

44

17
15

32



That`s the best I can Bull....gonna have to get out your magnifying glass.

So there`s the cash flow I expect ...

Our basic difference is I think...
I see sales as profit AND cashflow.
You see sales as just profit and no cashflow. ( like a standard property developer not using ORA`s)
I`m not sure why you dont see that "cash float " the resident just paid up front is now sitting in OCAs accounts to use as they please. ( either building more units elsewhere or paying debt.) It never has to be paid back while new residents are lining up to take it over on resale.
The ORA set up is the key difference of why RVs will keep making money in a stagnant property market and developers dont.


I have to leave for a week or so shortly so I wont have time to respond further for now.

Im having trouble seeing your table , im assuming its sales forecasts your projecting ? if so thats where you and i differ. i make assumptions on FV of cashflow you are making assumptions on FV of sales ?

about your DMF i thought you agreed they dont keep all off the DMF fee some of it goes towards costs ? So then its not all added to this float.

as an example of the FV of cashflows im talking about OCA assume its worth 66c so based on that OCA is overvalued at the moment. they also say they make there assumptions on this FV. So maybe its 80c or 20c thats what the market decides.

[Balance]

There is still a massive shortage of housing. Rents have sky rocketed thanks to over 100k of immigrants who aren't allowed to buy until they attain residency.

It was estimated NZ was short circa 30k of houses prior to the huge jump in immigration. That rental hike will translate to buyer demand once the immigrants qualify for residency & can buy property.

From a real estate agent, just had the busiest January they can remember.

Busiest in January?

Update from Barfoot & Thompson :

https://www.interest.co.nz/property/126194/barfoot-thompson-starts-year-rising-stock-levels-and-falling-prices-spelling-good

January's sales volumes were still well below the long term average for the month, and were down 37% on January 2022 and down 54% on January 2021

That means Barfoot is starting 2024 with the second highest number of properties available for sale in more than 10 years.

The average price of the residential properties the agency sold in January was $1,083,487, down by $97,812 (-8.3%) compared to December last year, and down by $195,160 (-15.3%) from its December 2021 peak.

The median selling price in January was $966,500, down by $73,500 (-7.1%) compared to December and down by $273,500 (-22.1%) from its November 2021 peak.

[SailorRob]

Desperation to be lauded & recognized.
The confidence is very shallow in this one.
Just let others share their views without you trying shut them down.
You are not a moderator.
This a site for all those to share their views & thoughts without abuse.


If my confidence is shallow, how about a bet for charity with the proceeds going to the IHC.

The bet is for $50,000.

My bet is that the share price of OCA will be at least $3.22 by 2040 representing a 10% CAGR and we can throw in another 25k that this return will also beat the NX50C over that time.

If there is a takeover in between, then if the return including any dividends exceeds a 10% CAGR then the IHC gets your cash.

How confident are you rock star?

[SailorRob]

Im having trouble seeing your table


Unfortunately the disabilities may be more than just intellectual!

[SailorRob]

Yuk
Time for a few deep breaths mate. IDEA Services clients represent a wide range of all sorts of disability. None of them need this sort of sh!t.

Your posts on this thread containg analysis are valuable and appreciated. You (and some others) are starting to treat the posters you disagree with discourteously. I don't know whether you 'started it' and I can't be bothered looking back through the thread to find out, but I know you can stop.

I wish you would.

I am going 'out wide' (for me) today. Perhaps you should also go to sea!


My point was how far will Mav go with his humouring people who are either lying (deliberately making things up or pretending to misunderstand something simple in order to create friction) or have a genuine disability. I'm not here to call Bull a liar...

I am a supporter of the IHC and think the way our society treats people with disabilities of absolutely disgusting. If I had my way all of Day Traders mates who are lifetime beneficiaries would be cut off yesterday and the entire proceeds go to the IHC and their support networks.

The dole bludgers would be offered work also supporting the people with genuine disabilities and the second they drop the ball they are cut off for good.

[SailorRob]

Ok lets try this...14937




2024




2025




2026


















52.0
83.1
72%
135.1

78.9
88.3

167.2

79.4
59.3

138.8


77.6
83.3
22%
160.9

90.5
114.6

205.1

107.1
134.9

242.0


129.6
166.3
66%
295.9

169.4
202.9

372.3

186.5
194.3

380.8


38.6
51
12%
89.6

45
45

90

50
50

100


















91.0
115.3

206.3

124.4
157.9

282.3

136.5
144.3

280.8


104.7
105.2

209.9

105.1
109.9

214.9

109.4
113.6

223.0


-128.6
-128.7

-257.3

-130.8
-136.1

-266.9

-136.3
-141.7

-278.0


-6.8
0.0

-6.8

-12.5
-14.0

-26.5

-12.5
-21.4

-33.9


-115.5
-80

-195.5

-80
-80

-160

-80
-80

-160


-55
12

-43

6
38

44

17
15

32



That`s the best I can Bull....gonna have to get out your magnifying glass.

So there`s the cash flow I expect ...

Our basic difference is I think...
I see sales as profit AND cashflow.
You see sales as just profit and no cashflow. ( like a standard property developer not using ORA`s)
I`m not sure why you dont see that "cash float " the resident just paid up front is now sitting in OCAs accounts to use as they please. ( either building more units elsewhere or paying debt.) It never has to be paid back while new residents are lining up to take it over on resale.
The ORA set up is the key difference of why RVs will keep making money in a stagnant property market and developers dont.


I have to leave for a week or so shortly so I wont have time to respond further for now.


Good stuff Mav, as I have been saying OCA $hits cash in an unstoppable torrent!

Gave up trying to get through to Snoopy.

So simple not even funny.

[Baa_Baa]

Im having trouble seeing your table , im assuming its sales forecasts your projecting ? if so thats where you and i differ. i make assumptions on FV of cashflow you are making assumptions on FV of sales ?

about your DMF i thought you agreed they dont keep all off the DMF fee some of it goes towards costs ? So then its not all added to this float.

as an example of the FV of cashflows im talking about OCA assume its worth 66c so based on that OCA is overvalued at the moment. they also say they make there assumptions on this FV. So maybe its 80c or 20c thats what the market decides.

That's the fun thing about a DCF, even if you don't actually have one and just commentate on others who do, it's basically about two things: 1. you know how the cashflow really works for the company, 2. you use discounts that are realistic, or a range that covers the uncertainties.

I suspect you don't know about 1. at all and therefore 2. is moot. Actually, I doubt that you have worked up DCF of OCA at all either. Traders don't do DCF's, the charts are enough to go on with.

[SailorRob]

That's the fun thing about a DCF, even if you don't actually have one and just commentate on others who do, it's basically about two things: 1. you know how the cashflow really works for the company, 2. you use discounts that are realistic, or a range that covers the uncertainties.

I suspect you don't know about 1. at all and therefore 2. is moot. Actually, I doubt that you have worked up DCF of OCA at all either. Traders don't do DCF's, the charts are enough to go on with.


He makes money off 'any chart, anytime, anywhere'

[Gunner]

He makes money off 'any chart, anytime, anywhere'

Still arguing about nonsense months later. Amazing!

Arguing doesnt bring home the bacon unfortunately

I'm up 100% in 12 months.

[ziggy415]

Still arguing about nonsense months later. Amazing!

Arguing doesnt bring home the bacon unfortunately

I'm up 100% in 12 months.

That's pretty good gunner..I'm down 35 %..couldn't,t sleep..skin broke out in horrible rashes...my hair went grey then I looked at sailor robs theory and I realised losses are GOOD....I'm running round the rest home with a woody all day....I cant wait for my portfolio to fall some more..:scared:

[Balance]

That's pretty good gunner..I'm down 35 %..couldn't,t sleep..skin broke out in horrible rashes...my hair went grey then I looked at sailor robs theory and I realised losses are GOOD....I'm running round the rest home with a woody all day....I cant wait for my portfolio to fall some more..:scared:

Hence the saying : “Suffer fools long enough and you are the fool.”:eek2:

[ValueNZ]

That's pretty good gunner..I'm down 35 %..couldn't,t sleep..skin broke out in horrible rashes...my hair went grey then I looked at sailor robs theory and I realised losses are GOOD....I'm running round the rest home with a woody all day....I cant wait for my portfolio to fall some more..:scared:
Paper losses are good so long as the business fundamentals remain unchanged.

Would you rather reinvest distrubuted profits at a forward return of 15% or 30%?

So a couple questions you should be asking yourself ziggy.
One - When I originally bought my shares did I do so at a fair price?
Two - Have the business fundamentals in the shares I own decreased, or decreased significantly?
If your answers are "yes" and "no", then you don't have anything to worry about so long as you're in a position where you aren't required to sell your shares at least 10 years.

[ValueNZ]

Still arguing about nonsense months later. Amazing!

Arguing doesnt bring home the bacon unfortunately

I'm up 100% in 12 months.
What is in your portfolio?

[mistaTea]

Paper losses are good so long as the business fundamentals remain unchanged.

Would you rather reinvest distrubuted profits at a forward return of 15% or 30%?

So a couple questions you should be asking yourself ziggy.
One - When I originally bought my shares did I do so at a fair price?
Two - Have the business fundamentals in the shares I own decreased, or decreased significantly?
If your answers are "yes" and "no", then you don't have anything to worry about so long as you're in a position where you aren't required to sell your shares at least 10 years.

I love your point 2.

After you bought shares is the company a little bit more sh1t or a lot more sh1t?

[ValueNZ]

I love your point 2.

After you bought shares is the company a little bit more sh1t or a lot more sh1t?
Haha yeah. It's worth noting that you can actually have a greater return in the long run if the share price drops significantly while the company's earnings drop a little.
Heres an basic example.

Company metrics. 10000 shares outstanding, earning $10000, EPS $1. Market price per share $5.

Example 1. No change in EPS, no change in market price per share. Investor owns 1 share, reinvesting all earnings. Nothing changes for ten years.

num of shares owned after each year
1 years. 1.2
2 years. 1.44
3 years. 1.73
4 years. 2.07
5 years. 2.49
6 years. 2.99
7 years. 3.58
8 years. 4.30
9 years. 5.16
10 years. 6.19
Investor earning $6.19 each year from his shares

Example 2. EPS drops to $0.9, Market price per share drops to $1. Investor owns 1 share, reinvesting all earnings. Nothing changes for ten years.

num of shares owned after each year
1 years. 1.9
2 years. 3.61
3 years. 6.86
4 years. 13.03
5 years. 24.76
6 years. 47.05
7 years. 89.39
8 years. 169.84
9 years. 322.69
10 years. 613.11
Investor earning $552 each year from his shares.

[Daytr]

Lots of recent posts deleted from this thread, including the be Balance offered up to Sailorboy.

[mistaTea]

Lots of recent posts deleted from this thread, including the be Balance offered up to Sailorboy.

Yes, a lot of nonsense from the sailor picking fights with everyone and anyone as usual. Along with the usual litany of lies.

Not a surprise that admin has intervened.

Hopefully Snoopy and others who understand how OCA works will come back and continue to enlighten the rest of us.

[SailorRob]

Lots of recent posts deleted from this thread, including the be Balance offered up to Sailorboy.

Respectfully Daytr, you are well aware that bet was well in my favour!

My inbox remains empty (aside from messages about MistaTea) and as Balance said 'LOL you have no idea who you're dealing with do you'. Well no I don't.

[Daytr]

Respectfully Daytr, you are well aware that bet was well in my favour!

My inbox remains empty (aside from messages about MistaTea) and as Balance said 'LOL you have no idea who you're dealing with do you'. Well no I don't.

Nope what I saw is the bet you put out that Balance was willing to accept and you put every obstacle in place not to accept it.

[Daytr]

Yes, a lot of nonsense from the sailor picking fights with everyone and anyone as usual. Along with the usual litany of lies.

Not a surprise that admin has intervened.

Hopefully Snoopy and others who understand how OCA works will come back and continue to enlighten the rest of us.

There has been a lot worse on here and other threads that hasn't been deleted. I suspect someone requested the deletion.
Same has happened on one of the political threads.

[SailorRob]

Nope what I saw is the bet you put out that Balance was willing to accept and you put every obstacle in place not to accept it.


What do you think the chances are of OCA hitting $3.30 by or before 2040, or a take over before then that would see a 10% CAGR?

If you were organising the bet, how would you treat a takeover or a large one off dividend?

Do you think that Balances play was to take the bet and then I would lose if there was a takeover as then 2040 price doesn't exist?

[aquaman]

Hi All. Its very rare i would contribute to this thread as i do not have the intellect or skill set to really provide anything insightful but i do value all the differing points of view and analysis that so many provide who have a much greater knowledge than I. Whilst i enjoy reading the comments it does appear that the commentary of late has deteriorated to what i would call playground antics(no offense meant to anybody or anyone in particular). It is a shame that what is generally a great site has gone down this pathway and i would please ask that all refrain from anything outside good decent and respectful postings and bring this site back to quality it has been and is known for. Im sure all would agree. :)

[Curly]

Yes, we have some very slow learners on this thread. Agree 100%. If you can’t comment respectfully then don’t bother to comment at all.

[davflaws]

Yes, a lot of nonsense from the sailor picking fights with everyone and anyone as usual. Along with the usual litany of lies.

Not a surprise that admin has intervened.

Hopefully Snoopy and others who understand how OCA works will come back and continue to enlighten the rest of us.

I'm relieved. The problem with pissing contests is that no matter how far up the wall they soak and no matter who wins, they still make the place smell.

[SailorRob]

I will apologise for the part I have played.

[rimu75]

I also used to enjoy reading this thread. It was a great way to learn from more experienced investors. Thanks to Maverick, Snoopy and others for sharing your views.

[Habits]

I'm relieved. The problem with pissing contests is that no matter how far up the wall they soak and no matter who wins, they still make the place smell.

My post that echoed the returns on SKY after it bottomed was not offensive but still got deleted. That stinks.

[Cupsy]

Further explanation as follows. If assets are trading on the market as a discount, then they can only be 'shored up' by issuing new shares at that same discount (or most likely a slightly greater discount). That statement applies to all assets owned by the company whether those assets were built from shareholder equity, debt or the float. The float, because it never has to be repaid by the company, allows more village assets to be built, at zero capital cost to the RV shareholder (a positive thing). If there was no float, then the total value of the retirement village assets on the balance sheet would be consummately less.

However, if the banking syndicate of the RV becomes uneasy about the debt on the company balance sheet, and the portfolio of assets is required to be shored up with new capital, then that 'new capital' will offset the debt position on the books of all the company's debt, including the float. That is because the banks would have a different view of the float. The alternative banking view being that if the RV company was not a going concern, then that float would have to be repaid as the RV company is wound up.

The fact that the RV company has more assets than it otherwise would have with no float, means that more capital would also be needed to shore up the company's debt position. And all of the new equity needed to shore up the company would have to be issued at the same discount. This means that post recapitalization, the shareholders original equity must be diluted much more than if the float did not exist. The float is working against the shareholders interest in this circumstance.

My contention then, is that there is no 'free lunch' with the float. It can work both for and against shareholders interests, depending on the circumstances. The float is analogous to other forms of leverage in this way.

SNOOPY

Thank you for taking the time to expand on this snoopy, very much appreciated, and highlights some really good points. I guess following on from your points here one could consider what the likely-hood of this happening might be (probability wise).

[SailorRob]

Thank you for taking the time to expand on this snoopy, very much appreciated, and highlights some really good points. I guess following on from your points here one could consider what the likely-hood of this happening might be (probability wise).


And why does any of this matter if capital is added pro rata.

We can draw long bows about all kinds of potential events but need to explore the consequences and how we would be effected as investors.

[Snoopy]

And why does any of this matter if capital is added pro rata.


It matters because under a 'new capital raising scenario', existing shareholders will have their capital diluted more than shareholders who 'come on board' after a capital raising is announced. Let me explain. Both shareholder groups will get their shares at a 'discount to asset backing' (if that is important, I'll have more to say about this later). But those who 'come in late' will in effect get a greater discount, because market prices for shares tend to reduce as a capital raising is announced. Coming from a pre-capital raising position viewpoint, an existing shareholder may feel smug holding shares at a price less than net asset backing. But what I am saying is that the discount to asset backing of the shares they hold may be less than they think. That is because shareholders that come on board later will get a greater discount price on all the shares they will own backing those existing company assets, post capital raising.

To address SR's point, it is true that all shareholders will pay the same price for new shares in any capital raising, and the capital raised will be in proportion to the size of a shareholding held before. That point is not in dispute. But I am looking at the average price for all shares held by any shareholder after a capital raising is completed. The price of the qualifying head shares used to gain the new share entitlement will be different, with those coming in late paying less for their qualifying entitlement shares. Paying less for their qualifying shares means that post the capital raise the average price paid for all their shares will also be less than the average share price paid by the longer term shareholders, even though it is also true to say that the net asset backing for all shareholders will be reduced (because the new shares have been issued at a price below net asset backing).

If you understand that post capital raising those newbie shareholders will have paid less for their shares on average, then it shouldn't be too much of a stretch to understand where this 'greater discount' has come from. It has come from the existing legacy shareholders, who have given some of the discount they thought they owned relating to net asset backing of the company, away to the newbie shareholders.

SNOOPY


.

[ValueNZ]

It matters because under a 'new capital raising scenario', existing shareholders will have their capital diluted more than shareholders who 'come on board' after a capital raising is announced. Let me explain. Both shareholder groups will get their shares at a 'discount to asset backing' (if that is important, I'll have more to say about this later). But those who 'come in late' will in effect get a greater discount, because market prices for shares tend to reduce as a capital raising is announced. Coming from a pre-capital raising position viewpoint, an existing shareholder may feel smug holding shares at a price less than net asset backing. But what I am saying is that the discount to asset backing of the shares they hold may be less than they think. That is because shareholders that come on board later will get a greater discount price on all the shares they will own backing those existing company assets, post capital raising.

To address SR's point, it is true that all shareholders will pay the same price for new shares in any capital raising, and the capital raised will be in proportion to the size of a shareholding held before. That point is not in dispute. But I am looking at the average price for all shares held by any shareholder after a capital raising is completed. The price of the qualifying head shares used to gain the new share entitlement will be different, with those coming in late paying less for their qualifying entitlement shares. Paying less for their qualifying shares means that post the capital raise the average price paid for all their shares will also be less than the average share price paid by the longer term shareholders, even though it is also true to say that the net asset backing for all shareholders will be reduced (because the new shares have been issued at a price below net asset backing).

If you understand that post capital raising those newbie shareholders will have paid less for their shares on average, then it shouldn't be too much of a stretch to understand where this 'greater discount' has come from. It has come from the existing legacy shareholders, who have given some of the discount they thought they owned relating to net asset backing of the company, away to the newbie shareholders.

SNOOPY


.
Snoopy would you mind providing an example using numbers to elaborate a bit further?

[ValueNZ]

Can someone confirm for me also that the $400M bank loan is uncallable unless OCA doesn't meet it's repayment obligations or breaches its covenants which are as follows:
The financial covenants in the Group’s debt facilities, with which the Group mustcomply include:
a) Interest Cover Ratio – the ratio of Adjusted EBITDA to Net Interest Charges, where
interest charges relates to the interest and commitment fees in relation to the
General Corporate Facility, is not less than 2.0x;
b) Loan to Value Ratio – the ratio of total bank indebtedness shall not exceed 50%
of the total property value of all Group’s properties (including the “as-complete”
valuations for projects funded under the Development Facility); and
c) Guarantor Group Coverage – at all times the adjusted EBITDA of the
Guaranteeing Group must be at least 90% of the Adjusted EBITDA of the
total tangible assets of the Group; and
d) Development – at all times the outstanding principal amount under the
Development Facility shall not exceed the Development Value. Development
Value (per the most recent valuation excluding any settled stock) is the aggregate
value of all Residential Facilities in all Developments that are being funded by the
Development Facility less their cost to complete.

[Daytr]

And why does any of this matter if capital is added pro rata.

We can draw long bows about all kinds of potential events but need to explore the consequences and how we would be effected as investors.

Why does this matter? Wow!
Why don't all companies just dilute existing shareholders continually.

Put it this way.
Would you rather OCA had debt of circa $500M or raised equity to the current value of the company?

If this company is to perform as you say, which is the more expensive option?

[ValueNZ]

Why does this matter? Wow!
Why don't all companies just dilute existing shareholders continually.

Put it this way.
Would you rather OCA had debt of circa $500M or raised equity to the current value of the company?

If this company is to perform as you say, which is the more expensive option?
If the share issue is pro rata and the shareholder participates then no dilution occours.

Really just depends on how the capital is spent as to whether it's in the shareholders best interest.

[Daytr]

If the share issue is pro rata and the shareholder participates then no dilution occours.

Really just depends on how the capital is spent as to whether it's in the shareholders best interest.

But it's cost you twice as much to retain the same level of ownership.
The share price of performing company with half the market cap & debt is far likely to outperform a company double the market cap with no debt, quite likely by double.

[ValueNZ]

But it's cost you twice as much to retain the same level of ownership.
The share price of performing company with half the market cap & debt is far likely to outperform a company double the market cap with no debt, quite likely by double.
Yes like I said it depends on how the capital is spent. If it is spent on repaying debt that is at relatively low real interest rates, then clearly you will get a worse result.

But if the additional capital is deployed at a 20% CAGR, then shareholders will get a better result.

[Daytr]

Yes like I said it depends on how the capital is spent. If it is spent on repaying debt that is at relatively low real interest rates, then clearly you will get a worse result.

But if the additional capital is deployed at a 20% CAGR, then shareholders will get a better result.

Well surely the additional capital is just paying off debt so the CAGR is the same just less the interest costs. A capital raise of the current market cap to repay debt does not double the size of the business.

[ValueNZ]

Well surely the additional capital is just paying off debt so the CAGR is the same just less the interest costs. A capital raise of the current market cap to repay debt does not double the size of the business.
Seems like we're on the same page. I suppose the questions we should be asking ourselves are, "What are the circumstances where OCA would be required to raise capital in order to pay back debt" and "In what likelihood would those circumstances occour."

[Daytr]

Seems like we're on the same page. I suppose the questions we should be asking ourselves are, "What are the circumstances where OCA would be required to raise capital in order to pay back debt" and "In what likelihood would those circumstances occour."

I should have said above the CAGR is halved not accounting for the debt costs saved. As the outlay is double for the same earnings + savings on interest. What I meant to say is revenue will stay the same despite the market cap doubling.

So as long as you understand that having a capital raise at a pro-rata basis to circa the equivalent of the companies net worth to pay off debt is likely to have a worse outcome for shareholders over time than just paying down debt from income. I.e unlike what SailorBoy said, it does matter.

When could this happen? If debt covenants were triggered. I haven't had a look at what those covenants are, but typically there is one tied to the valuation of the company and its ratio to debt. And I'm not suggesting this is likely to happen but is something that should be known by an investor.

Perhaps you could answer that?

[ValueNZ]

Well as long as you understand that having a capital raise at a pro-rata basis to circa the equivalent of the companies net worth to pay off debt is likely to have a worse outcome for shareholders over time than just paying down debt. I.e unlike what SailorBoy said, it does matter.

When could this happen? If debt covenants were triggered. I haven't had a look at what those covenants are, but typically there is one tied to the valuation of the company and its ratio to debt. And I'm not suggesting this is likely to happen but is something that should be known by an investor.

Perhaps you could answer that?
Yes as far as I'm concerned it's just if OCA is unable to meet repayment obligations or if covenants are breached, which is why I found it strange that SNOOPY said "if the banking syndicate of the RV becomes uneasy about the debt on the company balance sheet" as if it mattered.

If I'm mistaken then please someone let me know.

[SailorRob]

Why does this matter? Wow!
Why don't all companies just dilute existing shareholders continually.

Put it this way.
Would you rather OCA had debt of circa $500M or raised equity to the current value of the company?

If this company is to perform as you say, which is the more expensive option?

I'd be asking Ryman about that.

[Daytr]

I'd be asking Ryman about that.

Very topical. What you don't want is OCA being asked the same question by their banks as Ryman was by their lender.

Speaking of which, my understanding is that Ryman's debt to equity ratio when they were forced to raise capital was circa 45%, OCA's is around 60%. Happy to be corrected on any of that.

Perhaps this explains the current valuation.
Institutional investors waiting to see if there is a discounted capital raise?

Anyone know what OCA's debt covenants are?

[Balance]

Yes as far as I'm concerned it's just if OCA is unable to meet repayment obligations or if covenants are breached, which is why I found it strange that SNOOPY said "if the banking syndicate of the RV becomes uneasy about the debt on the company balance sheet" as if it mattered.

If I'm mistaken then please someone let me know.

Why has OCA suspended dividends and put assets up for sale?

I thought it was so very clear where the banks are at with OCA!

[ValueNZ]

Very topical. What you don't want is OCA being asked the same question by their banks as Ryman was by their lender.

Speaking of which, my understanding is that Ryman's debt to equity ratio when they were forced to raise capital was circa 45%, OCA's is around 60%. Happy to be corrected on any of that.

Perhaps this explains the current valuation.
Institutional investors waiting to see if there is a discounted capital raise?

Anyone know what OCA's debt covenants are?

Read a few posts up, I posted the covenants

[Daytr]

Read a few posts up, I posted the covenants

OK thanks.

[Baa_Baa]

Why has OCA suspended dividends and put assets up for sale?

I thought it was so very clear where the banks are at with OCA!

Doesn't seem to be "very clear where the banks are at", at all. Maybe Liz and Brent were lying (by omission) when they reported in the Sept'23 interim "The Directors have resolved not to pay an interim dividend to provide for ongoing investment in Oceania’s growth and portfolio transformation."

And, of the $500m Committed Bank Facilities, with $396m drawn, they were also telling porkies that "is compliant with all bank facility covenants".

[ValueNZ]

Why has OCA suspended dividends and put assets up for sale?

I thought it was so very clear where the banks are at with OCA!
Yeah you're right Balance. You should probably take that bet with SailorRob asap, before he, like the banks, realises what's so very clear.

[winner69]

Doesn't seem to be "very clear where the banks are at", at all. Maybe Liz and Brent were lying (by omission) when they reported in the Sept'23 interim "The Directors have resolved not to pay an interim dividend to provide for ongoing investment in Oceania’s growth and portfolio transformation."

And, of the $500m Committed Bank Facilities, with $396m drawn, they were also telling porkies that "is compliant with all bank facility covenants".

What Balance was really saying that the Banks ‘told’ OCA in view of the amount of ongoing spend you can’t pay dividends ….and also told them ‘to get’ the Balance Sheet in order

Sometimes it’s not what’s said is the important part.

Capital raise still likely

[Daytr]

Doesn't seem to be "very clear where the banks are at", at all. Maybe Liz and Brent were lying (by omission) when they reported in the Sept'23 interim "The Directors have resolved not to pay an interim dividend to provide for ongoing investment in Oceania’s growth and portfolio transformation."

And, of the $500m Committed Bank Facilities, with $396m drawn, they were also telling porkies that "is compliant with all bank facility covenants".

With current debt at around $620M or 61% of equity, let's hope they don't need to utilize the additional $100M available to them.
80% I am sure would really start making the banks uncomfortable.

You better hope I am right on the property market ValueNZ so debt levels only go in one direction.

[winner69]

With current debt at around $620M or 61% of equity, let's hope they don't need to utilize the additional $100M available to them.
80% I am sure would really start making the banks uncomfortable.

You better hope I am right on the property market ValueNZ so debt levels only go in one direction.

Everybody hoping that plenty of cash is coming in this half …..all those new apartments being sold and the usual number of resales etc etc with reduced capex could see a positive free cash flow for year

[ValueNZ]

With current debt at around $620M or 61% of equity, let's hope they don't need to utilize the additional $100M available to them.
80% I am sure would really start making the banks uncomfortable.

You better hope I am right on the property market ValueNZ so debt levels only go in one direction.
That 620M in debt isn't current it's due to be refinanced in 2028. Also not sure why debt levels would change if property doesn't rise...

A fall in property prices would however cause a change in equity so yeah theres some risk with the LVR covenant. But OCA isn't close to breaching that anyway.

[Daytr]

That 620M in debt isn't current it's due to be refinanced in 2028. Also not sure why debt levels would change if property doesn't rise...

A fall in property prices would however cause a change in equity so yeah theres some risk with the LVR covenant. But OCA isn't close to breaching that anyway.

Pretty obvious if you ask me.
They have been relying on profits for sales to make a buck.

First bond is due Oct 27.

[Snoopy]

Snoopy would you mind providing an example using numbers to elaborate a bit further?


OK, here are the details on the latest cash raising by OCA that I have got wind of, that will be announced to the market tomorrow.

1/ Latest reporting period being HY2024, as reported in November 2023 shows net assets of $1.017.3m on the balance sheet.
2/ On 6th December 2023 there were 724.155m OCA shares on issue.
3/ So NTA at the most recent balance date was $1,017.3m/724.155m = $1.40.
4/ At the end of business on 5th February 2024, the OCA share price closed at 70c.
5/ So the market was valuing OCA shares at half their asset backing: 70c/$1.40 = 1/2. Or put another way, the discount to asset backing was 50%.

6/ Now suppose on Wednesday 8th February 2024, OCA announced a 1:4 cash issue at a price of 60c.
7/ That would raise (724.255m/4) x $0.6 = $108,623m in new capital for the company,.
8/ The number of shares on issue once the capital raise was completed would rise to: 724.255m + (724.255m)/4 = 905.319m
9/ The net assets of the company would rise from $1,017.3m to $1,017.3m+$108.6m= $1,125.9m
10/ So the net asset backing of the company following the capital raise would fall to: $1,125m/905.318m = $1.24.
11/ Now let's say the company share price settles at say 65cps, after the capital raise is completed (this is an assumption albeit not an unrealistic one for the purposes of this example).

Now we have to consider what has happened from the point of view from the perspective of two different shareholders.

Shareholder A - The long termer: For every share they held prior to the capital raising, shares that the market valued at 70c, Shareholder A has to shell out an additional 15c to take up the 1:4 cash issue at 60c. (4x15c=60c). From a post capital raising perspective, they would have 5 shares for every 4 they used to own before the capital raise. But the price paid for the assets, as measured by asset backing, has increased from 50c in the dollar to 50c+15c = 65cps in the dollar for the same underlying assets (this is assuming the purpose of the cash issue was to pay down debt, not buy more assets). Note that 65c/$1.24= 52.4%. So 'Shareholder A' has had to lay out more cash to own the same assets which they previously owned before the capital raise.

Shareholder B - The opportunist: This shareholder, on hearing of the capital raising, buys OCA shares on the market at 65c after they fall from the 70c pre-capital raising announcement price. At the time these shares are bought by Shareholder B, they are trading at 65c/140 = 46% of asset backing. So in net asset backing terms, Shareholder B is already four percentage point ahead of Shareholder A, as they have bought those underlying assets for only 46c in the dollar, not 50c. After having taken up the 1:4 cash issue, Shareholder B has paid 46c+15c = 61cps in the dollar for the same underlying assets. Note that 61c/$1.24 = 49.2%. So 'Shareholder B' has also had to fork out more cash to own those same assets.

Conclusion

'Shareholder B' is better off, because they have only had to fork out 49.2c in the dollar overall to own OCA assets, whereas 'Shareholder A' has had to fork out 52.4c in the dollar to own those same assets. And how was it that Shareholder B became better off? Because some of the wealth that was in the company prior to the 'cash issue capital raising' ended up being transferred from 'Shareholder A' to 'Shareholder B'. This was a real transfer of wealth of 52.4c - 49.2c = 3.2cps from 'Shareholder A' to 'Shareholder B'. These are the numerical workings behind my comment in post 18467:

"Under a 'new capital raising scenario', existing shareholders (as represented by Shareholder A) will have their capital diluted more than shareholders who 'come on board' after a capital raising is announced (as represented by Shareholder B)."

SNOOPY

[winner69]

Snoops ..you need to outline what happens to Shareholder A if he doesn’t want to front up with more cash ..they prob screwed as well eh

[Daytr]

OK, here are the details on the latest cash raising by OCA that I have got wind of, that will be announced to the market tomorrow.

1/ Latest reporting period being HY2024, as reported in November 2023 shows net assets of $1.017.3m on the balance sheet.
2/ On 6th December 2023 there were 724.155m OCA shares on issue.
3/ So NTA at the most recent balance date was $1,017.3m/724.155m = $1.40.
4/ At the end of business on 5th February 2024, the OCA share price closed at 70c.
5/ So the market was valuing OCA shares at half their asset backing: 70c/$1.40 = 1/2. Or put another way, the discount to asset backing was 50%.

6/ Now suppose on Wednesday 8th February 2024, OCA announced a 1:4 cash issue at a price of 60c.
7/ That would raise (724.255m/4) x $0.6 = $108,623m in new capital for the company,.
8/ The number of shares on issue once the capital raise was completed would rise to: 724.255m + (724.255m)/4 = 905.319m
9/ The net assets of the company would rise from $1,017.3m to $1,017.3m+$108.6m= $1,125.9m
10/ So the net asset backing of the company following the capital raise would fall to: $1,125m/905.318m = $1.24.
11/ Now let's say the company share price settles at say 65cps, after the capital raise is completed (this is an assumption albeit not an unrealistic one for the purposes of this example).

Now we have to consider what has happened from the point of view from the perspective of two different shareholders.

Shareholder A - The long termer: For every share they held prior to the capital raising, shares that the market valued at 70c, Shareholder A has to shell out an additional 15c to take up the 1:4 cash issue at 60c. (4x15c=60c). From a post capital raising perspective, they would have 5 shares for every 4 they used to own before the capital raise. But the price paid for the assets, as measured by asset backing, has increased from 50c in the dollar to 50c+15c = 65cps in the dollar for the same underlying assets (this is assuming the purpose of the cash issue was to pay down debt, not buy more assets). Note that 65c/$1.24= 52.4%. So 'Shareholder A' has had to lay out more cash to own the same assets which they previously owned before the capital raise.

Shareholder B - The opportunist: This shareholder, on hearing of the capital raising, buys OCA shares on the market at 65c after they fall from the 70c pre-capital raising announcement price. At the time these shares are bought by Shareholder B, they are trading at 65c/140 = 46% of asset backing. So in net asset backing terms, Shareholder B is already four percentage point ahead of Shareholder A, as they have bought those underlying assets for only 46c in the dollar, not 50c. After having taken up the 1:4 cash issue, Shareholder B has paid 46c+15c = 61cps in the dollar for the same underlying assets. Note that 61c/$1.24 = 49.2%. So 'Shareholder B' has also had to fork out more cash to own those same assets.

Conclusion

'Shareholder B' is better off, because they have only had to fork out 49.2c in the dollar overall to own OCA assets, whereas 'Shareholder A' has had to fork out 52.4c in the dollar to own those same assets. And how was it that Shareholder B became better off? Because some of the wealth that was in the company prior to the 'cash issue capital raising' ended up being transferred from 'Shareholder A' to 'Shareholder B'. This was a real transfer of wealth of 52.4c - 49.2c = 3.2cps from 'Shareholder A' to 'Shareholder B'. These are the numerical workings behind my comment in post 18467:

"Under a 'new capital raising scenario', existing shareholders (as represented by Shareholder A) will have their capital diluted more than shareholders who 'come on board' after a capital raising is announced (as represented by Shareholder B)."

SNOOPY

Interesting Snoop, well we will find out tomorrow how good your source is.
Pity they didn't do the capital raise when the stock was double what it is now.

Whoever let it slip may not appreciate your post though if a certain office came a knocking.

[Balance]

Yeah you're right Balance. You should probably take that bet with SailorRob asap, before he, like the banks, realises what's so very clear.

Check your PM.

[Daytr]

Check your PM.

Oh come on Balance, spill.
You are a lot more fun on this thread than the political ones!

[Balance]

Oh come on Balance, spill.
You are a lot more fun on this thread than the political ones!

Clear your PM box so you can receive messages.

[Snoopy]

Interesting Snoop, well we will find out tomorrow how good your source is.
Pity they didn't do the capital raise when the stock was double what it is now.

Whoever let it slip may not appreciate your post though if a certain office came a knocking.


I think the most important thing about any investment is knowing what could happen, rather than what is certain to happen. No-one knows with absolute certainty what is going to happen. But if you are aware of what could happen, then you are a much better informed investor in evaluating a particular investment risk. If you go into a investment blissfully unaware of bad things that 'could happen', but nothing negative happens, that doesn't make you an investment hero. It just means you are a lucky gambler.

I hasten to add that I am not suggesting that investing in OCA is a bad thing to do. What I do know is that the retirement industry is extremely complex from an investment perspective. So many balls to juggle at once: government funding, the care business relationship with the independent living business, staffing issues, the construction cycle, affordability of village entry and its relationship to the housing market, etc, etc. Truly, I believe it is the most difficult sector of all in the investment market to understand. And hats off to those who have a much better understanding of the retirement sector than me, because of all the time you have put into studying it. I respect you all for the work you have done, I really do .....BUT........

I don't think it is in investors interest for a thread to become a self congratulatory love fest. If there are things that come up that I do not believe 'fit the narrative' I am going to call them out. I may be right in my thoughts, or it may be my opinions and fears are groundless. But this what this forum is about - debate of ideas. One thing I have learned over the years is that, particularly with the constituents of the NZX50, Mr Market is more often right than not. If all of the major retirement sector shares are trading well below fair value 'in your opinion', then to me that is a signal that maybe you should look a little deeper. Just to see if Mr Market knows something that you haven't considered.

SNOOPY

discl: Not invested in the retirement sector. Too difficult for me to analyse in a satisfactory way for now.

[Daytr]

Nice post Snoop and I agree re your last point as it underlines to me that you shouldn't ignore the macro as some have suggested on here.

[mistaTea]

I think the most important thing about any investment is knowing what could happen, rather than what is certain to happen. No-one knows with absolute certainty what is going to happen. But if you are aware of what could happen, then you are a much better informed investor in evaluating a particular investment risk. If you go into a investment blissfully unaware of bad things that 'could happen', but nothing negative happens, that doesn't make you an investment hero. It just means you are a lucky gambler.

I hasten to add that I am not suggesting that investing in OCA is a bad thing to do. What I do know is that the retirement industry is extremely complex from an investment perspective. So many balls to juggle at once: government funding, the care business relationship with the independent living business, staffing issues, the construction cycle, affordability of village entry and its relationship to the housing market, etc, etc. Truly, I believe it is the most difficult sector of all in the investment market to understand. And hats off to those who have a much better understanding of the retirement sector than me, because of all the time you have put into studying it. I respect you all for the work you have done, I really do .....BUT........

I don't think it is in investors interest for a thread to become a self congratulatory love fest. If there are things that come up that I do not believe 'fit the narrative' I am going to call them out. I may be right in my thoughts, or it may be my opinions and fears are groundless. But this what this forum is about - debate of ideas. One thing I have learned over the years is that, particularly with the constituents of the NZX50, Mr Market is more often right than not. If all of the major retirement sector shares are trading well below fair value 'in your opinion', then to me that is a signal that maybe you should look a little deeper. Just to see if Mr Market knows something that you haven't considered.

SNOOPY

discl: Not invested in the retirement sector. Too difficult for me to analyse in a satisfactory way for now.

Amen. And Hallelujah!

[SailorRob]

Clear your PM box so you can receive messages.


Balance, finding interesting ways to hedge your bet does not make it any less appealing for me.

You need to ask yourself what the implications are for SR standalone.

If you can hedge your side in ways that you think reduces your risk, that's great but it does not make my side any different for me.

[SailorRob]

It matters because under a 'new capital raising scenario', existing shareholders will have their capital diluted more than shareholders who 'come on board' after a capital raising is announced. Let me explain. Both shareholder groups will get their shares at a 'discount to asset backing' (if that is important, I'll have more to say about this later). But those who 'come in late' will in effect get a greater discount, because market prices for shares tend to reduce as a capital raising is announced. Coming from a pre-capital raising position viewpoint, an existing shareholder may feel smug holding shares at a price less than net asset backing. But what I am saying is that the discount to asset backing of the shares they hold may be less than they think. That is because shareholders that come on board later will get a greater discount price on all the shares they will own backing those existing company assets, post capital raising.

To address SR's point, it is true that all shareholders will pay the same price for new shares in any capital raising, and the capital raised will be in proportion to the size of a shareholding held before. That point is not in dispute. But I am looking at the average price for all shares held by any shareholder after a capital raising is completed. The price of the qualifying head shares used to gain the new share entitlement will be different, with those coming in late paying less for their qualifying entitlement shares. Paying less for their qualifying shares means that post the capital raise the average price paid for all their shares will also be less than the average share price paid by the longer term shareholders, even though it is also true to say that the net asset backing for all shareholders will be reduced (because the new shares have been issued at a price below net asset backing).

If you understand that post capital raising those newbie shareholders will have paid less for their shares on average, then it shouldn't be too much of a stretch to understand where this 'greater discount' has come from. It has come from the existing legacy shareholders, who have given some of the discount they thought they owned relating to net asset backing of the company, away to the newbie shareholders.

SNOOPY


.


Hmmm do the existing shareholders get to own any of the cash the new shareholders inject?

Asking for a friend.