OCA - Oceania Group - retirement villages

[Habits]

Interesting you choose a forward PE of 19. Last report I read from Forbar had ARV and OCA level pegging around a PE of 14 and SUM with its much faster eps growth since it listed nearly a decade ago on a FY21 PE of 21.
The problem for OCA is the lack of eps growth on a weighted average number of shares on issue, (which is how all the professionals calculate it). Lets assume they can do $64m underlying for FY22 and ignoring new shares issued in the next 12 months from the DRIP that gives us 9.1 cps underlying profit for FY22. Sounds fair enough.

So how does that compare to FY17 when it would have been half a decade since they listed ? In FY17 they made $34m underlying profit but on a weighted average number of shares on issue of just 360.89m shares =9.4 cps. So in half a decade eps has gone backwards by 3%. Hmmm To harsh ? I hear the critics scream because shares issued just prior to the listing distorted the effect of weighted average number of shares on issue in FY17. Okay, lets be generous and look at their first full year of operations as a listed company and we see underlying profit of $52.1m on 610.354m shares on issue giving underlying eps of 8.54 cps in FY18.
If we accept that yardstick as the more appropriate starting point then underlying eps will have grown from 8.54 cps in FY18 to 9.1 cps in FY22 and average annual growth rate of just on ~ 1.5 %

Doesn't really matter whether one uses the first half decade or the 4 year growth rate, growth in underlying eps is ostensibly almost nothing and certainly nothing like the rate at which SUM and RYM grew their underlying earnings per share in the first 4-5 years of their listed existence.

Oh but that's not fair Beagle, you've focused on the period in which the business has transformed its business model and all the gains are going to come once the transformation process is complete, I can almost hear the rebuttal from Maverick sitting on my right shoulder now....but if my memory serves me correctly we were told at the time of listing this transformation process was a 6 year thing and by the conclusion of FY22 we'll be 5 years into this, surely some of the gains should be apparent by now and yet they're not with forecast FY22 underlying eps still being lower in FY22 than FY17 when it listed. Oh dear, surely not. How can I fix this ?, i am not allowed to be a sour Beagle the haters will be all over me telling me off...again.

It's a bit of a curse being a crusty old bean counting mutt that focusing on silly irrelevant things like the real underlying earnings per share. I know, lets look at the headline profit figure including all revaluations and pretend that's the real profit. Hopefully we'll get some super high headline profit on Friday that'll blow us all out of the water and silly things like what's the underlying earnings per share will be something for old fashioned bean counters to muse over and that won't matter because it'll be party time and $1.70 here we come...all the professional analysts say its worth $1.70 so it must be. I should pull my head in and pretend I believe the professional estimations about the future that goes into their DCF models and keep holding my modest parcel of shares and hope everything works out okay.
One good thing, dividend guidance is 50-60% of underlying profit which at the mid point suggests unimputed dividends of 5 cps for FY22 which is an unimputed yield of 3.65% on today's closing price of $1.37.



Lovely sentiment but the corollary should not be ignored that without our capital the residents would have nowhere to stay and the workers wouldn't have a job. We're interdependent on each other and all valued stakeholders. Its good we've had strong PE expansion since OCA listed as otherwise we would have gone nowhere. Maybe we'll see further PE expansion if the directors spin us a really good story with Friday's annual result and we could get up to 17 times 9.1 cps = $1.55 again at some point in the next year ? That would be good.
https://www.bing.com/images/search?v...t=0&ajaxserp=0

Pathetic 3.65% pretax yield FY22. Seems there are better stocks to own elsewhere. Now that interest rates are miniscule, I dont get the retirement business model anymore, it is not the goldmine it used to be.

[justakiwi]

Beagle, I respectfully suggest that dissing Maverick is not going to win you any friends here. He is one of the most genuine, honest and humble people in this forum and is valued and respected by everyone. He has quietly but willingly shared his wisdom and knowledge and has never asked for or expected any credit for that. He is smart enough to stay silent when discussions get heated, which makes him a better person that you or I. Share your opinions by all means, but please don't make OCA a Beagle v Maverick competition. That is just not OK.

I can almost hear the rebuttal from Maverick sitting on my right shoulder

[Joh13]

Interesting you choose a forward PE of 19. Last report I read from Forbar had ARV and OCA level pegging around a PE of 14 and SUM with its much faster eps growth since it listed nearly a decade ago on a FY21 PE of 21.
The problem for OCA is the lack of eps growth on a weighted average number of shares on issue, (which is how all the professionals calculate it). Lets assume they can do $64m underlying for FY22 and ignoring new shares issued in the next 12 months from the DRIP that gives us 9.1 cps underlying profit for FY22. Sounds fair enough.

So how does that compare to FY17 when it would have been half a decade since they listed ? In FY17 they made $34m underlying profit but on a weighted average number of shares on issue of just 360.89m shares =9.4 cps. So in half a decade eps has gone backwards by 3%. Hmmm To harsh ? I hear the critics scream because shares issued just prior to the listing distorted the effect of weighted average number of shares on issue in FY17. Okay, lets be generous and look at their first full year of operations as a listed company and we see underlying profit of $52.1m on 610.354m shares on issue giving underlying eps of 8.54 cps in FY18.
If we accept that yardstick as the more appropriate starting point then underlying eps will have grown from 8.54 cps in FY18 to 9.1 cps in FY22 and average annual growth rate of just on ~ 1.5 %

Doesn't really matter whether one uses the first half decade or the 4 year growth rate, growth in underlying eps is ostensibly almost nothing and certainly nothing like the rate at which SUM and RYM grew their underlying earnings per share in the first 4-5 years of their listed existence.

Oh but that's not fair Beagle, you've focused on the period in which the business has transformed its business model and all the gains are going to come once the transformation process is complete, I can almost hear the rebuttal from Maverick sitting on my right shoulder now....but if my memory serves me correctly we were told at the time of listing this transformation process was a 6 year thing and by the conclusion of FY22 we'll be 5 years into this, surely some of the gains should be apparent by now and yet they're not with forecast FY22 underlying eps still being lower in FY22 than FY17 when it listed. Oh dear, surely not. How can I fix this ?, i am not allowed to be a sour Beagle the haters will be all over me telling me off...again.

It's a bit of a curse being a crusty old bean counting mutt that focusing on silly irrelevant things like the real underlying earnings per share. I know, lets look at the headline profit figure including all revaluations and pretend that's the real profit. Hopefully we'll get some super high headline profit on Friday that'll blow us all out of the water and silly things like what's the underlying earnings per share will be something for old fashioned bean counters to muse over and that won't matter because it'll be party time and $1.70 here we come...all the professional analysts say its worth $1.70 so it must be. I should pull my head in and pretend I believe the professional estimations about the future that goes into their DCF models and keep holding my modest parcel of shares and hope everything works out okay.
One good thing, dividend guidance is 50-60% of underlying profit which at the mid point suggests unimputed dividends of 5 cps for FY22 which is an unimputed yield of 3.65% on today's closing price of $1.37.



Lovely sentiment but the corollary should not be ignored that without our capital the residents would have nowhere to stay and the workers wouldn't have a job. We're interdependent on each other and all valued stakeholders. Its good we've had strong PE expansion since OCA listed as otherwise we would have gone nowhere. Maybe we'll see further PE expansion if the directors spin us a really good story with Friday's annual result and we could get up to 17 times 9.1 cps = $1.55 again at some point in the next year ? That would be good.
?I should put my rusty old abacus away and think less and hope more. Why worry, be happy !!

Thanks for that breakdown Beagle, I agree it doesn't look great for EPS growth since listing... Im glad that it seems OCA has built on other fundamental aspects of the business which may have allowed the PE to expand over the years as well as the story to allow the SP to appreciate.

Risk, growth and earnings seem to be what drives SP appreciation and in other cases Just the story will grow the SP.

OCA is not a story stock, although it does have a somewhat feel good story about it. This alone wont drive the SP unfortunately.

Risk - I think they have reduced this over the years with the conversion to a larger number of premium care suits and more intensive development of the land they own and the recent acquisitions they have made. Also by not chasing the rampaging property prices up they have created a nice buffer, if/when property prices decide to reduce.

Earnings - The earnings are there and they have shown us that they are profitable even with substantial wage increase and Covid. They are a profitable business.

Growth - This is 100% where they need to improve, as you have said it has been not great at all... this is the final piece to the puzzle and we are getting pretty damn close to it... As Earl had alluded, point on inflection. But we need proof and fairly soon.

I used a PE of 19 purely based off annualised UNPAT of 60m to 64m more like 7% so probably should have used a PE of 18 EPS 9.1c x 18 = $1.64 Target May 2022. But i can completely see how that may not make sense based on your explanation... but at the same time even though FB is using a PE of 14 I think the market is baking in a higher PE because of other factors.

We need to see growth thats what it comes down to. Thanks for the explanation Beagle :-)

[winner69]

I’m taking the upcoming 10 month profit number as a 12 month figure

That’s being generous as they probably lost money in April/May last year anyway. If that’s actually the case last 12 months < last 10 months)

At least gives a base number to compare F22 to

[Beagle]

Beagle, I respectfully suggest that dissing Maverick is not going to win you any friends here. He is one of the most genuine, honest and humble people in this forum and is valued and respected by everyone. He has quietly but willingly shared his wisdom and knowledge and has never asked for or expected any credit for that. He is smart enough to stay silent when discussions get heated, which makes him a better person that you or I. Share your opinions by all means, but please don't make OCA a Beagle v Maverick competition. That is just not OK.

Thanks for you input, appreciated. It was just meant as good natured tongue in cheek banter and I hope he views it as such, not criticism. Mav and I are good mates and we enjoy a robust exchange of viewpoints. I think we have a lot of respect for each other and enjoy the banter. That said I hear ya and all relationships needed to be treated like delicate flowers and need nurturing and watering, not too much robust banter otherwise they head down the very sad Couta1 and Beagle path...certainly wouldn't want things to go pear shaped that way, that's for sure ! I really like Maverick, met him a couple of times, chatted with him on the phone a couple of times, exchanged a lot of emails from time to time...I think we enjoy a good banter. I like and respect him a lot.

I am certain he's right that in the long run the transformation of OCA's business model will reap decent rewards in terms of meaningful eps growth which should enable OCA's share price to grow. Its just that Beagle's are impatient animals and its not in their nature to wait endlessly for a feed and I would have thought half a decade of business model transformation would have started to generate some eps growth. I guess that's what I find most perplexing of all.

Maybe if I can hang in there for another 4 years ?, (I am not sure if I have the patience ?) we will see some genuine solid growth in earnings per share.

I'm expecting $40-45m underlying profit on Friday for the ten months which translates on an annualized basis to $48m - $54m which on a weighted average number of shares on issue of about 615m during the year gives annualized underlying eps of 7.8 - 8.8 cps. I think a PE in the mid teens is about right all things considered.

My preliminary target price 12 months hence, (subject to adjustment for actual results on Friday) is 9 cps x 16 PE = $1.44 As you folks can clearly see that's not much more than the current share price and well below the average analyst view of $1.70 which is why I continue with only a very modest stake, (reviewable up or down on Friday)...(I hope the numbers are better than I expect and I have the confidence to take a much more meaningful stake again).

Lets see how I go with my estimate. Anyway...I am certain some would prefer a break from the barking on this one so over and out until Friday.

[artemis]

I've often thought there would be a killing to be had in making robots tailored to the RV sector...trouble is, I haven't figured out what parts of the care process you could hand off to a machine...probably bugger all to be frank. But the labour requirements for future aged care demands are going to be astronomical. I wonder what solutions China is going to come up with in the next few decades off the back of their one child policy...our future cheap labour certainly won't be coming from there...they'll likely be importing plenty of it themselves.

Japan has had elder care robots for years due to the size of the elderly population and shortage of care people. One is a robotic baby seal that has been highly effective in one-on-one contact including for dementia patients. In the US some hospital pharmacies are highly automated, including delivery to patients. Obviously with personal care some functions will always need humans, but where activities can be successfully automated by 24x7 workers that frees up humans.

Automation, self service and robotics has and will quietly change the face of many activities.

[Habits]

That is just not ok says mother duck to the daddy duck

[peat]

Beagle, I respectfully suggest that dissing Maverick is not going to win you any friends here. He is one of the most genuine, honest and humble people in this forum and is valued and respected by everyone. He has quietly but willingly shared his wisdom and knowledge and has never asked for or expected any credit for that. He is smart enough to stay silent when discussions get heated, which makes him a better person that you or I. Share your opinions by all means, but please don't make OCA a Beagle v Maverick competition. That is just not OK.

Thats not a diss tho!! . Its a dramatisation - its writing using imagery - dammed good for an accountant I reckon

C'mon - relax.

[Beagle]

That is just not ok says mother duck to the daddy duck

LOL https://www.yourpurebredpuppy.com/reviews/beagles.html
Excerpts The Beagle's vast stubbornness and distractability....Beagles are not easy to train. Truth be told, they are independent thinkers who don't particularly care about pleasing you. Food is a great motivator with Beagles, but too many cookies equals a fat Beagle LOL So true !!!

Thanks Peat, that's exactly how it was intended.

[justakiwi]

Pretty sure I know exactly what you meant by that. If you seriously believe it, be my guest.

That is just not ok says mother duck to the daddy duck