Been reflecting on this and future growth prospects, shares v bonds. I think Covid and its variants is a game changer. There's highly likely to be a heck of a lot of elderly folks now absolutely craving the security and support of living in a gated retirement community. The penetration rate of retirement community living is going to grow very quickly indeed from here in the future. Already we have recently seen market evidence of this with SUM having new villages completely sold out even before they're built and long wait lists for other villages, (something they have never experienced before since they listed a decade ago). These same market dynamics will be playing out with demand for OCA villages too.
Our new CEO clearly has his eye on more land acquisitions and I expect the build rate will be scaled up significantly in the years ahead to meet what I think will be rampant demand. On a 7 year view I would be very surprised if we didn't get at least 15% per annum average annual profit growth which if we stick with the current metrics and proximity to the rest of the sector, (closest to NTA and arguably the lowest PE ratio) that should lead to a share price north of $4 seven years from now ($1.59 x 15% growth compounded for 7 years = $4.23)....or you can invest in the bonds and you'll probably get a return after tax of less than the average inflation rate and at the end of the 7 years period the capital you invested is likely to have diminished in value in real inflation adjusted terms.
Further, the average annual dividend rate of the shares over the next 7 years is going to be a lot higher than 3.2% based on an investment at today's share price.
If OCA moves towards the average metrics of the sector in terms of price to NTA the price could be substantially higher than $4 seven years from now, perhaps close to $7.
It has been said that annual compounding growth is the eighth wonder of the world.
That sums up the prospects for shares v bonds as I see them.