Good point .... SP does look a bit frothy at current, doesn't it?
Printable View
Ben Graham was a guru
Times like this remind of his sage wisdom
“In a roaring bull market, knowledge is superfluous and experience is a handicap.”
Think it means don’t overthink it ...just keep on buying OCA
I’ve long thought that sum and oca were undervalued when compared to ryman. I wonder if the market finally agrees with me or if this is an aberration.
A reminder, I am forecasting eps of 10 cps for the 10 months to 31/3/21, (annualised eps of 12 cps) This is much higher than Forsyth Barr is forecasting at 8 cps.
The sector average PE is 18. 12 cps x 18 = $2.16 is where I see fair value.
We will see who is right when they report their FY21 results in late May 2021. I was very close with my estimate of FY20 earnings. I feel I know the company very well now.
This one posted on the 29th of September:
Roll forward 2 and half weeks and how things have changed. While both have made excellent gains in that time, OCA is neck and shoulders ahead:
SUM $10.30 (68% gain since 21/5)
OCA $1.45 (86% gain since 21/5)
I haven't looked at the others in the sector, but any concerns that OCA was being a bit short changed compared to SUM others look to have been addressed, and some. I like the company, believe in the story and have the portfolio heavily weighted in their favour, but just hope we're not getting too far ahead of ourselves. On the one hand I don't think it's a screaming buy anymore, but on the other, the analysts are starting to take notice and there's this "wall of money" from TD's looking for yield.
Blue sky out...hope it lasts the weekend ;)
Sold a half of my holding today. Hard to believe that market cap has doubled in last six months. Is it really worth one billion more. Anyway I thought MET was kind to me, OCA is amazing. Can you imagine where MET would be nowif we werent "forced" out.
What a bull run..
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.