OCA - Oceania Group - retirement villages

[Balance]

I for one don't think OCA's debt is that high. $620m on $2.7 billion of assets is pretty low, so long as they are operating within their debt covenants then there is nothing to worry about. I think that they have that under control.

It's worth noting just how low their interest rates for that debt is as well.

I think it'd be smart to wait until the annual report is released before discussing The Helier any further... Don't want to end up with egg on your face again like last year with you confidently predicting a capital raise.

Cutting the dividend, slowing and stopping new developments and selling 'surplus' assets as a consequence are all indicative that OCA has too much debt.

The level of debt on assets is but one pertinent measure as to whether debt is too high - what is equally pertinent if not more is a company's ability to service debt and to repay/refinance debt on time.

[ronaldson]

I don't think OCA is "selling 'surplus' assets" as you put it because it has too much debt. It is executing a clear strategy to divest facilities which simply comprise aged care beds and/or are overweight in such beds without good development potential, because these facilities do not offer an adequate return on funds invested.

The fact that the realisation proceeds may be (at least temporarily) used to pay down debt is not indicative that is the underlying purpose or driver of the activity.

The latest announcement is some indication that strategy is finally yeilding the desired outcome, with additional settlements expected this quarter, and it will be interesting when the next set of results are available to see what assets still remain in the "Held for Sale" category. But I suspect we need to wait until the end of FY25 to see the real benefits of both the recent and currently anticipated divestments.

[Balance]

I don't think OCA is "selling 'surplus' assets" as you put it because it has too much debt. It is executing a clear strategy to divest facilities which simply comprise aged care beds and/or are overweight in such beds without good development potential, because these facilities do not offer an adequate return on funds invested.

The fact that the realisation proceeds may be (at least temporarily) used to pay down debt is not indicative that is the underlying purpose or driver of the activity.

The latest announcement is some indication that strategy is finally yeilding the desired outcome, with additional settlements expected this quarter, and it will be interesting when the next set of results are available to see what assets still remain in the "Held for Sale" category. But I suspect we need to wait until the end of FY25 to see the real benefits of both the recent and currently anticipated divestments.

If OCA was just selling 'surplus' assets as one measure to transform its business as announced last year, I would agree with you. But it did not - it announced the dividend cut and the slow down & termination of new developments at the same time.

[Daytr]

Few companies (HLG, BGP and STU come to mind) operate with zero debt - in fact, a prudent level of debt optimizes shareholders' returns by lowering the cost of capital.

So it is unrealistic to expect OCA to operate with zero debt and as a property development and investment company, it shouldn't.

The issue for OCA is what should be an appropriate and prudent level of debt.

If you look at OCA's transformative strategy, I believe it has been poorly executed - case in point, I believe that The Helier was a bridge too far for OCA which moved into the super-premium RV market without proper appraisal of how a property downturn would impact on its financials. It used debt to outbid and purchase very expensive land in Kohimarama and a very costly development which is now sapping cash flow and incurring interest costs with diminishing returns.

I for one don't think OCA's debt is that high. $620m on $2.7 billion of assets is pretty low, so long as they are operating within their debt covenants then there is nothing to worry about. I think that they have that under control.

It's worth noting just how low their interest rates for that debt is as well.

I think it'd be smart to wait until the annual report is released before discussing The Helier any further... Don't want to end up with egg on your face again like last year with you confidently predicting a capital raise.

I don't think the level of debt would be an issue if they were operating at a profit, however OCA are relying on sales & resales to subsidise the operation.

I also wonder if the margins on resales will be squeezed further in the future if the Government manages to reduce the cost of building by allowing cheaper building materials in.

[ronaldson]

I had contact with a rep from Orion point today ( Hobsonville, Auckland and a newly opened quality MetLifeCare facility ) and 2 bed villas are reduced to $1.2m-$1.25m from the previous $1.45m although the 3 bed coastal edge villas remain at $1.95m. Sign of the times to shift product just now.

And the Herald is reporting on the 77yo pensioner who asserts she can't sell so as yield enough to enter a village because the Tauranga CC has just released updated Rating Valuations that are down 10% or so! Go figure.

[Snow Leopard]

I for one don't think OCA's debt is that high. $620m on $2.7 billion of assets is pretty low...

You forgot to add the $950M of 'float debt'

[ValueNZ]

You forgot to add the $950M of 'float debt'

I certainly did not. The float is interest free and non callable. Easily more valuable than equity.

[Bjauck]

I had contact with a rep from Orion point today ( Hobsonville, Auckland and a newly opened quality MetLifeCare facility ) and 2 bed villas are reduced to $1.2m-$1.25m from the previous $1.45m although the 3 bed coastal edge villas remain at $1.95m. Sign of the times to shift product just now.

And the Herald is reporting on the 77yo pensioner who asserts she can't sell so as yield enough to enter a village because the Tauranga CC has just released updated Rating Valuations that are down 10% or so! Go figure.

It is tough when the vast majority of your assets are sunk in your home. As they are for so many Kiwis.

[Baa_Baa]

Strong close, 169,203 stepping into the Ask at $0.64, up $0.04 6.67%. Don't they say amateurs buy the open and pro's buy the close?

[ValueNZ]

Strong close, 169,203 stepping into the Ask at $0.64, up $0.04 6.67%. Don't they say amateurs buy the open and pro's buy the close?

Damn, I have had a buy order open at 58c for the last couple days. Oh well.