Good point re their pile of cash. Thing is, where is the value in today's market? Or do NZ Super need to reset their perspectives to reflect today's stimulated environment, just like the rest of us. Idiots for giving it away in the first place.
Printable View
If my estimate of annualised FY21 earnings of 12 cps is right at $1.44 they're on a forward PE of 12. The ten year Govt stock risk free rate was 0.55% the other day when I looked. Ben Graham's well known PE for a no growth company was 8.5 for a 10 year risk free rate of 4%. 1 / 8.5 = earnings yield of 11.76% which is a 7.76% premium over the risk free rate. Using that same premium over the risk free rate now gives 7.76% + 0.55% = required earnings yield of 8.31% = PE of 12.
With interest rates where they are and looking to stay at historical lows for the foreseeable future I see the right PE for a no growth company as 12.
The market is therefore currently pricing OCA as though its never going to grow and / or isn't going to make annualized earnings of 12 cps, probably the latter as analysts are clearly showing growth in the years ahead but are far below FY21 estimates of earnings that Maverick and I have.
My contention is therefore that over time as OCA earns the respect and trust of the investment community as a genuine growth story we will see it rerated to the market medium PE for this sector of 18. I think a lot of that trust and respect will be earned in FY21 as the market wakes up to the fact this company really has passed the inflection point and its going to grow nicely in the years ahead which is why I see a rerating to 12 x 18 = $2.16 next year or early in 2022.
But first things first, we need to see that earnings growth in FY21, (first evidence will be first half earnings to be reported in late January 2021). I think its pretty obvious that growth is coming but seeing it confirmed will be the next leg up and a big one in my opinion. I think we will see the share price continue to rerate strongly in 2021.
Don't want to be a party pooper, but it must take a breather soonish with a pull back, but how far and how long before it continues.
I'm no technical guru by any stretch, but with the RSI at just over 91 , while it can stay above the the 70/80 line for a length of time it must retract at some point to do that.
I think some will get to a point and decide to sell and lock in gains and this will cause it come back at bit in the price and RSI and/or flatten??
Watching closish!
Disc: Holding - not enough as it now seems
Clear that valuations of property were too low at ba.ance date. Perhaps after the election, when the money dries up, by balance date, the valuations could be stagnating. Its a possibility.
I'm with you. As a holder I'm really enjoying this run but from a TA aspect it looks a tab overcooked. Maybe the $1.50 area will see a pull back. But who knows, the long term view is much more interesting.
Beagle, Maverick and others are on the case with their FA's which point to a 2021 SP of over $2.00. I'm happy with that (my av holding SP of $0.96). I'll add more if there is any short term pull back. In the meantime, I'm loving the ride and keeping some cash ready.
Thanks to all the posters on this forum who have kept us so well informed.
Good post thanks Beagle.
Of course, given today's interest rates are nothing like what Ben Graham used as a reference point back then, one would expect going forward that 7.76% premium to come under a lot of pressure, with a PE of 12 being very conservative even for a no growth company. Bodes well for the future of the OCA SP (target PE of 20 anyone?), but right now, we must be due for some profit taking (market wide?). Don't listen to me though, most of the last 6 months have gone against my expectations.
Agree with that.Im not blaming staff or anyone really atp.Dont want to stress out already stressed workers but need a solution, improvement for our family member. We are going there re 5 times a week atm at feed times.We are doing more investigation and thanks for your thoughts Justakiwi.We have a meeting with a staff member soon. One consideration is looking at another care company operations (a listed one), ive had some good feedback about their operations, systems etc.