Originally Posted by
Lease
In calculating NTA, we all know the biggest part of liabilities is residents' loans which SUM don't need to repay until they sign a new ORA and receive a new lump sum payment. Therefore I normally exclude this one when I work out NTA. By excluding residents' loans, SUM's NTA is nearly $11 thus its SP is trading at discount of NTA. I see where you're going with that. Because its never repayable without another interest free advance the liability never materializes and therefore there's an argument for saying its an interest free loan in perpetuity. You could go on to say because of this in theory the liability doesn't exist which is quite a creative way of looking at it and you could actually get away with such a creative approach if the asset upon which the liability is attached had an infinite lifetime. Unfortunately buildings don't last forever and therefore the liability to keep providing units of an acceptable standard to consecutive residents indefinitely means the liability is actually still on the company but just in a different way.
Surely using this measurement OCA is still a lot cheaper. But OCA revenue and underlying profit have been down in two consecutive years. Portfolio(Total units and beds) has been shrinking year by year(from 4093 in 2017 down to 3846 in 2020).OCA are in a transformation process as has been discussed at great length in the OCA thread. I firmly believe they would have done close to $60m underlying profit in the year to 31/05/2020 if it were not for Covid
Compare these metrics, SUM is much better thus deserve better valuation. I will stick with what works for me, comparing underlying profitability metrics and whether companies can actually sell what they're building.
Also compare to RYM, you said "SUM is presently priced at $7.76 which is right on the very upper limit on the very well established 40-60% price relativity of RYM which is currently $12.80." Well, I think only SP comparison is pointless as SUM market cap is still only about 27% of RYM.