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  1. #1
    Member penn's Avatar
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    Default Retirement village operators

    Seems a good to me to combine the discussion into one thread. I hold MET SUM OCA.





    I read this line on the MET thread.


    "Thought of that when I.heard

    Oceania a real dog eh .....doubt if the hype will even become reality"
    (think it was winner) OCA is my largest holding, could you please explain why it's a dog?

  2. #2
    Senior Member King1212's Avatar
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    Because Macquarie has heaps of shares on it and they will offload it again and sp won't go anywhere till they gone.

  3. #3
    percy
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    Quote Originally Posted by penn View Post
    Seems a good to me to combine the discussion into one thread. I hold MET SUM OCA.





    I read this line on the MET thread.


    "Thought of that when I.heard

    Oceania a real dog eh .....doubt if the hype will even become reality"
    (think it was winner) OCA is my largest holding, could you please explain why it's a dog?
    I went to a Hobson Wealth presentation given by OCA's Earl Gasparich last night.
    Very impressive what they are achieving, and their business model is developing as they want.
    I think you are "well positioned" having OCA as your largest holding.

  4. #4
    Member penn's Avatar
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    Quote Originally Posted by King1212 View Post
    Because Macquarie has heaps of shares on it and they will offload it again and sp won't go anywhere till they gone.
    Ah, thanks for that, I thought it could have been worse

  5. #5
    ShareTrader Legend Beagle's Avatar
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    Earl a really nice guy and presents well. He concentrates heavily on where they're going as a company in their presentation. Its what he doesn't tell you that's of concern.
    I remain sceptical that they can stop the ongoing erosion in profitability in the core care part of their business.
    I am sceptical because there is a history of profit declining in this sector, (which still forms the vast bulk of their current business model), ongoing human resource cost increases are well above the rate of inflation or Government funding increases and their internal control and management systems in provision of care are very care focused and not operationally best of class in terms of efficiency.

    I was reflecting on the weekend about how long it takes to change the culture of a company. Many of OCA's facilities were originally owned as I understand it by not for profit Presbyterian support services. I think this culture lingers and making money is a very long way from their primary focus.

    Over the long run the change to a majority ORA model, (which will take another 5 years or so) will improve the profitability of this company, but there will still be about 40% of the old care model left even after all that time acting as a handbrake on earnings.

    Macquarie overhang is another major issue that needs to be resolved.

    I would need to see three things happen before I would be inclined towards investing again
    1. The company clearly demonstrate that the core profitability of their care operations is not continuing to deteriorate
    2. That the new business model is executing well and sales are tracking in line with expectations
    3. Some further sell-down by Macquarie, preferably all of their stake.

    MET is "in play" for takeover / merger and with it trading well below asset backing its the best pick in the sector at present.

    Time is your friend with OCA. Shareholders will need plenty of patience and I don't think there's any hurry to invest.
    The culture I see in OCA is people, (both residents and staff) come first, second, third, fourth and fifth. Some would say this is a good thing, as a shareholder I expect a more shareholder centric focus.
    Last edited by Beagle; 26-11-2019 at 10:45 AM.
    No butts, hold no mutts, (unless they're the furry variety).

  6. #6
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    Quote Originally Posted by Beagle View Post
    Earl a really nice guy and presents well. He concentrates heavily on where they're going as a company in their presentation. Its what he doesn't tell you that's of concern.
    I remain sceptical that they can stop the ongoing erosion in profitability in the core care part of their business.
    I am sceptical because there is a history of profit declining in this sector, (which still forms the vast bulk of their current business model), ongoing human resource cost increases are well above the rate of inflation or Government funding increases and their internal control and management systems in provision of care are very care focused and not operationally best of class in terms of efficiency.

    I was reflecting on the weekend about how long it takes to change the culture of a company. Many of OCA's facilities were originally owned as I understand it by not for profit Presbyterian support services. I think this culture lingers and making money is a very long way from their primary focus.

    Over the long run the change to a majority ORA model, (which will take another 5 years or so) will improve the profitability of this company, but there will still be about 40% of the old care model left even after all that time acting as a handbrake on earnings.

    Macquarie overhang is another major issue that needs to be resolved.

    I would need to see three things happen before I would be inclined towards investing again
    1. The company clearly demonstrate that the core profitability of their care operations is not continuing to deteriorate
    2. That the new business model is executing well and sales are tracking in line with expectations
    3. Some further sell-down by Macquarie, preferably all of their stake.

    MET is "in play" for takeover / merger and with it trading well below asset backing its the best pick in the sector at present.

    Time is your friend with OCA. Shareholders will need plenty of patience and I don't think there's any hurry to invest.
    The culture I see in OCA is people, (both residents and staff) come first, second, third, fourth and fifth. Some would say this is a good thing, as a shareholder I expect a more shareholder centric focus.
    And like it or not....OCA may be closer to where companies generally need to get to. If not, then we shareholders will be facing more regulation from socialist leaning governments. As part of a diversified portfolio I am more than happy to hold Oceania. Feels fine. And I get to enjoy a decent dividend. And I expect slow steady share price growth over the years ahead. Perfect from my perspective. 4% of my portfolio. Also hold SUM (3%). That will do for me in this sector.

  7. #7
    percy
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    Things I found of interest.
    The main operators who concentrate on development are MET and SUM,with their more "lifestyle" villages.
    ARV,OCA and RYM have similar business models,ie the balance between care and independent " right to occupy" units.
    All operators are only developing "premium" care suites.
    I was surprised to learn OCA sell "occupation right" to these premium care suites.Similar I take it to up front "right to occupy" units.
    So more capital upfront.
    No operator is building basic care units.This means if you can't afford a premium suite you have no chance of obtaining care.This is developing to be a future huge problem that will hit an unprepared government.
    Brown field.OCA have a good land bank of villages that can be developed.
    Green field.OCA are always looking for opportunities.Interesting to note St Heliers,because they have brought out some neighbours will be 50% larger than first thought.
    Because retirement/care is the most profitable use of land all operators can afford to pay big prices for suitable sites.
    Movement.Surprised to learn if you move into a retirement village,you may need two further moves to get the care you require,yet only one move if you chose OCA.
    Macquarie will sell down at some stage.When they do OCA will lose their tax losses, and will have to start paying tax,which will mean dividends will then become imputated.So as long as Macquarie stay OCA will be able to take advantage of those tax losses.
    Last edited by percy; 26-11-2019 at 11:27 AM.

  8. #8
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    Quote Originally Posted by percy View Post
    Macquarie will sell down at some stage.When they do OCA will lose their tax losses, and will have to start paying tax,which will mean dividends will then become imputated.So as long as Macquarie stay OCA will be able to take advantage of those tax losses.
    Thanks Percy. I am a little confused by what you are saying above ? Do you mean that when Macquarie sell...the dividends will no longer be imputed ?

  9. #9
    percy
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    Quote Originally Posted by RTM View Post
    Thanks Percy. I am a little confused by what you are saying above ? Do you mean that when Macquarie sell...the dividends will no longer be imputed ?
    As usual I am saying the opposite...!!..lol.
    While Macquarie continue to hold ,OCA can use their [OCA's] tax losses.
    Should Macquarie sell out OCA will not be able to take advantage of their [OCA's} tax losses.
    When either Macquarie sell out, or OCA use up their tax losses, then they will start to pay tax.Once they start to pay tax,shareholders will start to receive imputated dividends.At present OCA's divie carries no imputation credits.
    I am sorry I do not know at what [Macquarie sell down] level OCA will lose their tax losses.

  10. #10
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    Quote Originally Posted by percy View Post
    As usual I am saying the opposite...!!..lol.
    While Macquarie continue to hold ,OCA can use their [OCA's] tax losses.
    Should Macquarie sell out OCA will not be able to take advantage of their [OCA's} tax losses.
    When either Macquarie sell out, or OCA use up their tax losses, then they will start to pay tax.Once they start to pay tax,shareholders will start to receive imputated dividends.At present OCA's divie carries no imputation credits.
    I am sorry I do not know at what [Macquarie sell down] level OCA will lose their tax losses.
    OK...thanks...that's clear. I'll pop them back in the bottom draw and let them do their thing for a while again.

  11. #11
    ShareTrader Legend Beagle's Avatar
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    Broadly speaking tax losses carried forward can only be utilised when at least 49% of shareholders who originally incurred that loss are still shareholders when the loss is claimed. Macquarie have about 42% if my memory serves me correctly, (after the sell-down in 2018). Its quite possible that the loss carried forward rules still applies as there may be more than 7% of other shareholders who carry the day.

    When Macquarie continue their sell-down it is likely, (even if its only one more partial tranche), that the loss carried forward rules won't be met and OCA will have to pay more tax, lowering their net profit after tax. Most of these retirement companies pay very little tax but as OCA's primary business is care at present, (not development), this will hurt them and is another reason I don't hold. In time the dividends may be able to be partially imputed.
    No butts, hold no mutts, (unless they're the furry variety).

  12. #12
    percy
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    A premium care suite in Christchurch costs an upfront payment "occupation right" of between $120,000 and $150,000, and a daily payment of $140.
    A bedroom with ensuite and a lounge cum kitchenette.

  13. #13
    A BEARISH BULL winner69's Avatar
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    From last OCA Annual Report:


    Recognition of Deferred Tax on Tax Losses

    The Company and its subsidiaries exited the former Oceania Healthcare Holdings Limited (”OHHL”) tax consolidated group from 31 May 2015. All tax losses incurred by the Company and its subsidiaries until 31 May 2015 are tax losses of the OHHL consolidated tax group (of which the Group is no longer a member).

    On 5 September 2018 the Group forfeited all losses generated prior to the IPO of the Company as a result of the sale of 15.56% of OHHL’s shareholding (refer note 5.5). This resulted in the cessation of shareholder continuity.

    The Group also utilised $21.9m of losses to offset additional taxable income arising from the change in recognition of DMF revenue as noted above.

    After allowing for the utilisation of losses to offset additional taxable income arising from the change in recognition of DMF revenue, the forfeiture of losses generated prior to IPO on 5 September 2018, and taking into consideration the new losses generated in the year to 31 May 2019, the Group now has an estimated $25.6m (2018: $64.6m) of available tax losses at 31 May 2019. Of these total available tax losses, $12.2m may be forfeited in the event of a further sale of shares by OHHL.

    A deferred tax asset totalling $3.8m has been recognised as at 31 May 2019, being the tax effect of the remaining $13.4m of tax losses (2018:nil). These are effectively the tax losses generated after 5 September 2018 which will be retained by the Group in the event of any further sale of shares by OHHL provided there are no other significant shareholding changes.
    “Just consider that maybe the probability of you being wrong is higher than you think.”

  14. #14
    ShareTrader Legend Beagle's Avatar
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    Thanks for doing the work on this Winner.
    No butts, hold no mutts, (unless they're the furry variety).

  15. #15
    percy
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    Yes thank you W69.

    I note Turners volume has increased today,ahead of tomorrow's result.
    I know you are getting rather excited,so pleasing to see you loading up.

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