OCA - Oceania Group - retirement villages

[RupertBear]

Thanks for your excellent post Maverick, much appreciated

[bull....]

good input mav , true champion of the stock you are.

how - ever back to the reality at the coal face

Staff shortages in Aged Care sector at crisis point

https://www.newshub.co.nz/home/new-z...sis-point.html


According to Health New Zealand, 672 aged care residents had Covid-19 as of Monday.
A total of 726 people have died in aged care facilities since the start of the pandemic THe % speaks loudly

So my senario would play out over a longer enough time frame . ie supply would exceed demand if the rate of death continued. how -ever i read on stuff the govt may make mask mandate compulsory in schools so that may throw a spanner in the theory

[Maverick]

Mav - from Summerset Annual Report .... haven't looked at Oceania

The cost of retirement units includes directly attributable construction costs and other costs necessary to bring the retirement units to working condition for the irintended use. These other costs include professional fees and consents, interest during the build period and head office costs directly related to the construction of the retirement units.

Hey Winner , thanks for your feedback,
I assume that explanation above from SUM is more to do with working out their cost of build per unit - therefore working out margins etc. Whatever is included and sure oca do similar for comparison purposes here.
The numbers / graphs I was playing around with was aimed more towards the large overhead and operating cost increases that OCA and SUM seem to keep racking up annually.

I was quite taken by surprise to see both these companies are running very similar annual increases and so instep over the last 5years. ( while SUM is higher , they do have care workers in there too, which OCA doesn't).
I read it as OCA does not have out of control annual overhead / operating cost rises. Surely it is part of increasing there respective build rates and ambitions by front footing the costs of "boots on the ground " to do it. Proven , to me at least, by SUMs similar patterns and followed by their proven success over a greater time period. In fact I would be concerned if OCA`s wasn't high since they say "positioned for growth" a lot in the last result.

I do not know about ARV or RYMs relative situation to these 2 as I dont follow them closely.
I think Bull is kind of right though, in this environment , the market sentiments is firmly in the drivers seat. Time for analysis comes later.

[Rawz]

good input mav , true champion of the stock you are.

how - ever back to the reality at the coal face

Staff shortages in Aged Care sector at crisis point

https://www.newshub.co.nz/home/new-z...sis-point.html


According to Health New Zealand, 672 aged care residents had Covid-19 as of Monday.
A total of 726 people have died in aged care facilities since the start of the pandemic THe % speaks loudly

So my senario would play out over a longer enough time frame . ie supply would exceed demand if the rate of death continued. how -ever i read on stuff the govt may make mask mandate compulsory in schools so that may throw a spanner in the theory

That 726 people who have died in RV since 2020? Is that high? i wouldnt have a clue.
35,000 people die each year. So say 70,000+ since the pandemic started.

The article is pretty bad just throwing out numbers. the reader really doesnt have any comparison to previous years.

Interesting the facility manager of the rest home quoted in the article said they managed the virus when it found its way in. Flu-like symptoms and got through.

[Habits]

That 726 people who have died in RV since 2020? Is that high? i wouldnt have a clue.
35,000 people die each year. So say 70,000+ since the pandemic started.

The article is pretty bad just throwing out numbers. the reader really doesnt have any comparison to previous years.

Interesting the facility manager of the rest home quoted in the article said they managed the virus when it found its way in. Flu-like symptoms and got through.

In the 70s old people in institutions and RV were not given winter vaccines for flu and deaths were common every winter. When the vaccine became general issue and free it was a gamechanger to the point where those who were on their last legs still did not pass

[winner69]

Mav - it's just I got the impression that you 'assumed' the reported corporate overheads include some costs in developing sites (eg project managers, buyers etc etc) and as such as build rates increased so would these costs .... meaning reported corporate overheads increase.

I gather that Summerset capitalises the cost of staff directly involved in the development process - the costs are not expensed (ie into corporate overheads wherever) but are treated as a capital item and included in the overall cost of a development.

Whatever the case your exercise does show that corporate overheads do increase as the business get bigger - which you would expect with more villages to operate and so on

[Baa_Baa]

@Maverick, quality post as always, thank you, your insights can only come from deep research.

@Ferg, another gem posted elsewhere, would you mind posting it here as well?

[Ferg]

@Ferg, another gem posted elsewhere, would you mind posting it here as well?

How did you know I would read this??

Anyhoo...in response to a question elsewhere as to how can different investors have such divergent views on OCA (i.e. optimists vs pessimists), I posted this:

There are plenty who take a long term positive outlook but we are ok with dissenting points of view that are based on facts (e.g. values per annual reports & annual trends etc). The positive outlook is based on understanding the levers other than care within OCA that will drive future profitability, e.g. DMF revenue growing at an exponential rate, premium care revenues increasing, as well as increasing development & resale volumes and margins.

The issue of unsold care suites for OCA is due to facilities being demolished and the patients/clients being transferred to a new facility which counts as unsold until it's first ORA sale. But in the meantime OCA is still collecting weekly care revenues for these "unsold" suites.


In addition, care suite development margins sit in the village P&L rather than the care P&L which muddies the waters for OCA given such gains could not be achieved without the care model. The marketing strategy for OCA involves a continuum of care which allows easy transition for clients through various parts of the business. Increasing care costs need to be volume adjusted and one also needs to consider the one-off impacts of Covid, including subsidy repayments last year. OCA have also locked in some relatively low interest rates via the 2 bond issues.


The frustration for long term holders is obvious given they were sold on the care model which has not delivered to expectation. That is being addressed by increased acquisition and development activity, assuming they can deliver on this new strategy. Patience is required with OCA if one has a view of 2-3 years or more. But for someone with a short term view who follows TA, I can understand why they would not be so positive about OCA.


Diversity of experience and opinion is a good thing and we should be thankful we are not all in agreement, otherwise there would be nothing of value to discuss.

[Maverick]

Posted by FERG
The positive outlook is based on understanding the levers other than care within OCA that will drive future profitability, e.g. DMF revenue growing at an exponential rate, premium care revenues increasing, as well as increasing development & resale volumes and margins.

The issue of unsold care suites for OCA is due to facilities being demolished and the patients/clients being transferred to a new facility which counts as unsold until it's first ORA sale. But in the meantime OCA is still collecting weekly care revenues for these "unsold" suites.


In addition, care suite development margins sit in the village P&L rather than the care P&L which muddies the waters for OCA given such gains could not be achieved without the care model. The marketing strategy for OCA involves a continuum of care which allows easy transition for clients through various parts of the business. Increasing care costs need to be volume adjusted and one also needs to consider the one-off impacts of Covid, including subsidy repayments last year. OCA have also locked in some relatively low interest rates via the 2 bond issues.

That's a mighty fine post Ferg. The bulk of the OCA care story summed up really well right there.

It seems there are 2 schools of entrenched thought on care now.
A Care is unprofitable, care suits aren't working and care overall has become a liability.
B. Care offers value to the rest of the village business and is going to eventually be profitable in its own right.

Care profit has almost halved since the care suit phase began in earnest and has then remained flat around 3 years now with no growth. “Option A” is the only natural conclusion.

BUT…."Option B" can also be true, if Fergs summary is correct.

Based on my own work, “care” will demonstrate its own financial worth, more than just an altruistic loss leader to the rest of the business, in the next HY result , and upwards thereafter. IMO, OCA will finally see the evidence by a decent rise in care profit from 1HY23 onwards.

No doubt the "option A" people would have sold already , but to the rest who remain, my workings say waiting only another 4 more months should help decide whether the option B guys are misguided and should be put on ignore.

If care profits start to rise, ( and IMO they certainly will), then coupled with strong rising village profits too, the ongoing care suit model debate will simply disappear.

The only thing I disagree with Ferg on his post is that the 2-3 years to see overall meaningful rewards should be 1-2 years.

Again , that was an awesome post Ferg.

[Ggcc]

Posted by FERG
The positive outlook is based on understanding the levers other than care within OCA that will drive future profitability, e.g. DMF revenue growing at an exponential rate, premium care revenues increasing, as well as increasing development & resale volumes and margins.

The issue of unsold care suites for OCA is due to facilities being demolished and the patients/clients being transferred to a new facility which counts as unsold until it's first ORA sale. But in the meantime OCA is still collecting weekly care revenues for these "unsold" suites.


In addition, care suite development margins sit in the village P&L rather than the care P&L which muddies the waters for OCA given such gains could not be achieved without the care model. The marketing strategy for OCA involves a continuum of care which allows easy transition for clients through various parts of the business. Increasing care costs need to be volume adjusted and one also needs to consider the one-off impacts of Covid, including subsidy repayments last year. OCA have also locked in some relatively low interest rates via the 2 bond issues.

That's a mighty fine post Ferg. The bulk of the OCA care story summed up really well right there.

It seems there are 2 schools of entrenched thought on care now.
A Care is unprofitable, care suits aren't working and care overall has become a liability.
B. Care offers value to the rest of the village business and is going to eventually be profitable in its own right.

Care profit has almost halved since the care suit phase began in earnest and has then remained flat around 3 years now with no growth. “Option A” is the only natural conclusion.

BUT…."Option B" can also be true, if Fergs summary is correct.

Based on my own work, “care” will demonstrate its own financial worth, more than just an altruistic loss leader to the rest of the business, in the next HY result , and upwards thereafter. IMO, OCA will finally see the evidence by a decent rise in care profit from 1HY23 onwards.

No doubt the "option A" people would have sold already , but to the rest who remain, my workings say waiting only another 4 more months should help decide whether the option B guys are misguided and should be put on ignore.

If care profits start to rise, ( and IMO they certainly will), then coupled with strong rising village profits too, the ongoing care suit model debate will simply disappear.

The only thing I disagree with Ferg on his post is that the 2-3 years to see overall meaningful rewards should be 1-2 years.

Again , that was an awesome post Ferg.

Great post.

The government needs to step up to make care more viable and have that put into their future plans. However I feel that right now spending is not the wisest idea for this government to do and I feel they will be trying to make more cuts in spending to keep inflation lower. It’s doubled edged dagger.

Maybe care subsidy side will increase, but below inflation for a few more years meaning more paycuts for car employees. Not great news for short term