Another month passes by and this long term trend continues ..... never before has the OCA share price as the %age of the SUM share price been so low.
Sorry but I have a morbid fascination with long term trends that seem to defy hype etc .... but as they say in trend theory to break such long term trends a real shock to the norm has to occur .... and I have difficulty in seeing any shocks (either with OCA or SUM) coming in the near to medium term.
One thing logic says it can't continue to zero ..... but if say if OCA got taken over soon we'll never find out what the bottom is
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
I'm not deriding OCA or calling OCA a dog - after all it started life at 79 cents and has paid a divie every year
All the chart is showing is that SUM has performed better since OCA listed
SP comparison by itself is less interesting than factoring in net dividend yields + unrealised capital SP gains. With SUM being the worst net dividend in the listed RV sector at 1.67% and OCA the best at 4.40%, that might change the picture a bit. RYM is 2.48% and ARV 3.62%.
The current government have totally lost the plot. They have raised caregivers wages in the aged care sector and it was necessary, now do the same for doctors, nurses and specialists in the aged care sector for better longterm incentives for companies to build more villages.
Your comments seems to make no sense- how do you blame the government?
Your comments seems to make no sense- how do you blame the government?
The government/DHBs set the wages for the retirement sector and the villages have been negotiating for the government to increase care subsidy payment for the DHBs for ages, to pass onto villages. They are running behind on actual costs and have been for a while.
Add that the sector is struggling for nurses, doctors plus other skilled workers and labours advisors have been suggesting they should entering into nz during Covid. In short I believe the thing stopping the retirement sector staff from getting increases in wages is legislation which can only be solved by those writing the legislation.
I've been saying for a while now that there is a large increase in underlying profit coming in over the next 2 years. I've also posted that the recent SUM result was top class but I still wont switch any OCA to SUM despite how impressive that was. I question myself given SUM`s excellent CAGR and OCAs almost nil CAGR.
So I thought it reasonable to back up why I think like I do . Below is a key graph as to the main driver why things are about to start getting really good for OCA in the next 18 months. This graph is actual apartment sales and actual apartment deliveries. It does not include care suites, they are their own quandary , nor villas of which OCA have negligible interest in at this point. I have included FY23 expected deliveries ( OCA always delivers on time) but of course we do not yet know the actual sales so they cannot be included. You don't have to be a genius though, to fill in those blanks for yourself. What this graph simply demonstrates is the lumpy deliveries of apartment volume and then to see how the sales flow as a result of those deliveries. To me , actual sales simply look like a kind of 18 months moving average of the deliveries. While I have detailed delivery dates, amounts, locations, prices and covid lockdown periods blah blah blah...… those details are unnecessary for this post.
What we can see is that actual delivery numbers have ramped up as expected and as promised. This is logical as they have had to get their care suites side of the business tidied away first so that apartments can be built afterwards on the cleared land. I've always said the apartments are the real money maker. We can see apartment deliveries have nearly doubled over the last 1.5 years and are still increasing.
Remember also that these numbers are just volumes and do not consider new build margins or sales price. So now consider that the deliveries in FY23 are going to be at the high end of historical sales margins and EXTREME high end of pricing also. Yes, This is predominantly “ The Helier”.
So what we have coming in the next 18 months and beyond are high delivery , high prices, and high margin. There must be some term for this like “ mother of all golden crosses“ or “ holy grail of anything retail” when this rare trilogy occurrence happens and how it impacts the bottom line. While I'm making simple generalizations you can be assured I've done the detail into the nth degree.
While this is only one aspect to the many with OCA currently in play, this is the most dominant at this time. While it is easy to focus on the “rampant care costs”, govt underfunding and falling HPI ,it risks missing seeing the bigger picture and masking what's really happening of greater importance.
While there are also multiple income streams to the OCA story , the volume of apartments being delivered and sold now ( and especially where) will be the key to the next few years of unprecedented upswing in OCAs profits. Another beauty of this model is these profits are sustainable as they turn into DMF`s coupled with an already increased build rate around the country to continue the momentum forward.
So what we have currently is a company that has demonstrated no bottom line underlying earnings growth and been punished accordingly to a market value 30% below NTA. If my math is true , and it is, then this apparent dog of a company will dumbfound the market with significant growth in a fairly short time frame. It will go from the ugly duckling to the most popular kid in the classroom.
All these fancy new builds are just giant money pits until they are finally finished before the first sale can be made. This takes years and years but we are about to begin that phase
Large real EPS growth, a large increase in dividend and then the fickle market popularity increase on top of that will reward patient investors handsomely.
SUM have already said" the demand is untethered to the housing market" so while the short term investors are worried about care costs and falling HPI, the share price has become beaten down so excessively that has created a significant opportunity few understand. The one caveat is that one has at least a 1- 2 year horizon.
So there you go , despite SUMS stellar record and recent 1HY result, that's why I'm not selling OCA to buy SUM.
Finally……here's the graph. This is one part of what I'm trying to say….
SFA of a dividend 4.4c pa 4.4% - plus suck up the 33% tax deducted on assessment
Profit = basically all creative revaluations and gains - doesn't it for many in the Sector
What's inflation running at now ?
4.4% + Imputation credits looks far more attractive any day of the week .. NZM or STU
might even double that too with cream on top
Or if you play your cards right NTL might even yield 50% before broker fees on a bounce with no tax credits
and probable taxable trade for the punt .. but still better than OCA
Last edited by nztx; 02-09-2022 at 11:19 PM.
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Originally Posted by winner69
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