OCA - Oceania Group - retirement villages

[BlackPeter]

Well since we weren't taken over this morning , might as well to lay out my expectations for Friday.

Care profit $24m +8%
Village profit $41.5m +11% ( not including new build margins)
New build Margin $35.5m +22%
Underlying profit $59m +18%
EPS 8.32cps +4% ( profit increase diluted by heaps of extra shares issued)
Cooperate overheads $23.8m +14% ( not including care costs, .ie nurses/ care workers)

Notes;
-It is possible cooperate overheads will be lower as at some point they should slow down these hefty increases as staff levels match the new expansion ambitions
-The biggest variable in all this is "new build margins" . OCA have a lot of apartments for sale FY22 and so depending on how good their summer sales were then this figure could vary the most, however this is not so important in the long run.
-For long term investors then most important number to watch is "village profits " and a high capex spend.

If the numbers are close enough to these then things are progressing very nicely indeed.

I love your sense of humour and admire the precision of your forecasts.

Just one question ... if I add up the profits you are suggesting (care + village + development margins), then I get something like $100m. Divided by 710m shares would this be according to my slide ruler something like 14 cents / share, not 8.3 cents as you are suggesting.

Where did I get it wrong?

[Maverick]

I love your sense of humour and admire the precision of your forecasts.

Just one question ... if I add up the profits you are suggesting (care + village + development margins), then I get something like $100m. Divided by 710m shares would this be according to my slide ruler something like 14 cents / share, not 8.3 cents as you are suggesting.

Where did I get it wrong?

Top of the morning to ya BP.
good question.

Yes- to adding up all the 3 income streams but from this total we still need take off the corporate over heads ( called "other") then take off depreciation and finance costs before arriving at underlying profit.

OCA do most of this grouping in their reports but I further separate out the their village profits into " village" (DMFs) and "new build margins". The reason is that I see them having very separate characteristics over time. One is like a property developer which will always be tied to the number of new builds ( it is the main driver of profit in the near term) and cant grow much whereas the village part includes the DMF which is the real growth engine of OCA from here on as it starts to "snow ball" ( Ferg`s term).
By separating these 3 income streams and extrapolating the numbers for their 7yr pipeline it produces a fabulous graph which demonstrates, in 2 minutes, how OCA will grow nicely ahead and explains why its profit has been 4 flat years now.

Winner always talks about OCA telling their story poorly. If OCA ever read this thread then why don't you fellas put a graph like this in your AR somewhere. Then we will all of a sudden "get it" .

If you want me to send you the graph Brent feel free to call, I'm here all week.

[BlackPeter]

Top of the morning to ya BP.
good question.

Yes- to adding up all the 3 income streams but from this total we still need take off the corporate over heads ( called "other") then take off depreciation and finance costs before arriving at underlying profit.

OCA do most of this grouping in their reports but I further separate out the their village profits into " village" (DMFs) and "new build margins". The reason is that I see them having very separate characteristics over time. One is like a property developer which will always be tied to the number of new builds ( it is the main driver of profit in the near term) and cant grow much whereas the village part includes the DMF which is the real growth engine of OCA from here on as it starts to "snow ball" ( Ferg`s term).
By separating these 3 income streams and extrapolating the numbers for their 7yr pipeline it produces a fabulous graph which demonstrates, in 2 minutes, how OCA will grow nicely ahead and explains why its profit has been 4 flat years now.

Winner always talks about OCA telling their story poorly. If OCA ever read this thread then why don't you fellas put a graph like this in your AR somewhere. Then we will all of a sudden "get it" .

If you want me to send you the graph Brent feel free to call, I'm here all week.

Hi Mav, cheers ... and fair enough. I always forget that there are so many different types of "profits" ... and when they are all exhausted, than we still find an unlimited number of ways to define the underlying one's .

Probably one of the limitations of my engineering mind ... still grapple with the art of creative accounting ;

How do you think all this might impact on the IFRS earnings? ... or do you subscribe to the school that only underlying earnings are real?

[Maverick]

How do you think all this might impact on the IFRS earnings? ... or do you subscribe to the school that only underlying earnings are real?

Definitely an "underlying" guy
I have no interest or idea how OCA might do this Friday based on building valuations.

Trouble with my style of investing as a contrarian investor is that IFRS (which include paper profits on buildings) can look good on paper but doesn't pay for toys and lollies. When buying an unloved or shunned company I have to wait for years for the market to realize its` oversight on a company's value so in the meantime the real cash profits both keep me going and prove the business is fundamentally working. Much easier to sleep at night too.

Also IFRS can evaporate at the stroke of a building revaluation.

Done rudely well this way from HLG, Bendon, RBD,SKL, WHS etc over the years...you get the idea. OCA fits firmly in this category and after waiting 4 years so far, due to underlying profits, I can wait indefinitely.

Sorry for such an obvious lecture to a man of your expertise BP but its NO1 fundamental to my style and worth repeating, even if its just to myself.

[Beagle]

We need a new way to measure OCA's earnings because they don't have enough variants
I might have a new theory conceptualized by Friday. I think I'll call it Hound Dog Earnings (HDE)...the only earnings that really can be squared away to a dog food bowl over time. Don't think I will bother submitting my new methodology to the international accounting body for approval though

[BlackPeter]

Definitely an "underlying" guy
I have no interest or idea how OCA might do this Friday based on building valuations.

Trouble with my style of investing as a contrarian investor is that IFRS (which include paper profits on buildings) can look good on paper but doesn't pay for toys and lollies. When buying an unloved or shunned company I have to wait for years for the market to realize its` oversight on a company's value so in the meantime the real cash profits both keep me going and prove the business is fundamentally working. Much easier to sleep at night too.

Also IFRS can evaporate at the stroke of a building revaluation.

Done rudely well this way from HLG, Bendon, RBD,SKL, WHS etc over the years...you get the idea. OCA fits firmly in this category and after waiting 4 years so far, due to underlying profits, I can wait indefinitely.

Sorry for such an obvious lecture to a man of your expertise BP but its NO1 fundamental to my style and worth repeating, even if its just to myself.

Cheers & all good.

I can see the pros and cons on both sides. I understand as well the uncertainties of asset valuations ... but still can't get myself to ignore stuff just because it is sometimes a bit hard measure. Sometimes embracing uncertainty might be better than ignoring it ... but hey - I am probably just a greedy bastard who wants to know what my assetts are worth when I try to realize them.

Anyway - it all started with an innocent question into what definition of EPS we are talking about.

Lets see, what OCA comes up with on Friday ... I hope they won't disappoint us and define another way to measure their success ... following the old saying "all good things come in threes";

Edit ... just noticed beagle did already the groundwork for this new schema: HDE's! Another (repeat-) lesson for me - always read the whole thread before replying to posts!

[winner69]

Cheers & all good.

I can see the pros and cons on both sides. I understand as well the uncertainties of asset valuations ... but still can't get myself to ignore stuff just because it is sometimes a bit hard measure. Sometimes embracing uncertainty might be better than ignoring it ... but hey - I am probably just a greedy bastard who wants to know what my assetts are worth when I try to realize them.
;

Then why don't you just track Book Value (Equity on the Balance Sheet) ---- and forget about all the different fandangled profit measures

)r if forward looking track the thing they call Net Adjusted Value

All nice and simple that way

[winner69]

Hey Mav - youforecast Underlying Profit $59m

Is that after adjusting (forgetting about) for Care Depreciation?

In other words the new Underlying Earnings measure or the old one

[BlackPeter]

Then why don't you just track Book Value (Equity on the Balance Sheet) ---- and forget about all the different fandangled profit measures

)r if forward looking track the thing they call Net Adjusted Value

All nice and simple that way

Fair enough ... but if it would be that easy then everybody would do it , wouldn't they?

[Maverick]

Hey Mav - youforecast Underlying Profit $59m

Is that after adjusting (forgetting about) for Care Depreciation?

In other words the new Underlying Earnings measure or the old one

I'm starting to see that those breakdown of numbers I posted previously are causing a bit of confusion.
Those 3 income stream predictions above are the KPIs I will be watching within the underlying result. As long as they are close they will tell me the story is right on track, they are more important than the bottom line to me.( Not the market though , Ha)

The $59m is the underlying profit I am expecting that OCA will report.

The key variable on this result is apartment sales, as care and village DMF profits are pretty easy to predict accurately. They have a lot to apartments available to sell and could potentially have a very good summer. I've done my best trying to ascertain new sales and things seem to be going well. I don't know for sure if Hamilton was finished enough in time or not. I know they were working their arse off the month prior to achieve it but whether those deposits got turned into official new sales before year end I just don't know.

I also have no idea of how ,much the supposed earning accreditive purchases last year will add so have ignored them for now. This just might add some extra earnings .

While these small nuisances will affect Fridays result it doesn't matter long term as long as those KPIs mentioned are about right.

Hope that helps.