OCA - Oceania Group - retirement villages

[ronaldson]

Agree that the minor increase in the death rate of our elderly due to Covid is statistically not significant in this case given the demographic tailwind now that the first of the postwar babes are 75+. What may be more concerning is the quite sharply rising proportion entering retirement without the fail-safe of home ownership compared to the previous generation, the fact that the average kiwi saver balance is currently only $26k, and that the Government has control of the purse strings for much of the sector. In my experience the latter never ends well for those on the receiving end - teachers, nurses, midwives et al, and Andrew Little for one is not sympathetic to the private providers so nothing good will happen while Labour is around despite (or maybe because of) the ever-escalating need for care services.

[justakiwi]

This is a very legitimate concern, but reinforces what I have said about the "care" side of things. These people (I am one of them) will never be in the market for a villa or an apartment, probably not even a care suite. Financially, our only option will be a standard, government subsidised care bed. No frills accommodation but in most cases, still with excellent care and support provided. Whichever government is in power in the future, they will have no choice but to adequately fund these beds. They cannot provide this standard care themselves so rely fully on aged care providers to do so. Providers will happily meet that need, but cannot be expected to do it with insufficient government funding, as they are right now.

Private providers are better equipped to provide this care, than the smaller NGO's/NFP organisations are. OCA in particular is in a prime position to take advantage of this, and I believe they have far better insight into the potential future needs for "care" (at all levels) than the rest do. Yes, they are now focussing more on care suites (with associated "add ons") than they are standard care beds, but once funding levels increase, standard beds will become an added source of revenue and the market for them will increase over the long term, given that many Kiwis will now never be in a position to buy a house.

.....What may be more concerning is the quite sharply rising proportion entering retirement without the fail-safe of home ownership compared to the previous generation, the fact that the average kiwi saver balance is currently only $26k, and that the Government has control of the purse strings for much of the sector. In my experience the latter never ends well for those on the receiving end - teachers, nurses, midwives et al, and Andrew Little for one is not sympathetic to the private providers so nothing good will happen while Labour is around despite (or maybe because of) the ever-escalating need for care services.

[jagger]

This is a very legitimate concern, but reinforces what I have said about the "care" side of things. These people (I am one of them) will never be in the market for a villa or an apartment, probably not even a care suite. Financially, our only option will be a standard, government subsidised care bed. No frills accommodation but in most cases, still with excellent care and support provided. Whichever government is in power in the future, they will have no choice but to adequately fund these beds. They cannot provide this standard care themselves so rely fully on aged care providers to do so. Providers will happily meet that need, but cannot be expected to do it with insufficient government funding, as they are right now.

Private providers are better equipped to provide this care, than the smaller NGO's/NFP organisations are. OCA in particular is in a prime position to take advantage of this, and I believe they have far better insight into the potential future needs for "care" (at all levels) than the rest do. Yes, they are now focussing more on care suites (with associated "add ons") than they are standard care beds, but once funding levels increase, standard beds will become an added source of revenue and the market for them will increase over the long term, given that many Kiwis will now never be in a position to buy a house.

100% correct.
Care is non-discretionary so the demand wave is far more certain.

ILUs look like the hero strategic play at the moment but only because we've had so much house price inflation in recent years. So cashed up home owners at the start of the demographic wave are making ILUs look stellar on relatively low industry penetration.
Operators are pivoting away from care right when they need to be adding care to their pipelines in order to have enough beds available when boomers hit that level of acuity.
If we're not building/planning now then it simply won't be there when we inevitably will need it.

MET appears to understand this - their buying spree in the last 12 months or so has been adding care to their portfolio and pipeline.
They have the luxury of doing this away from the short termist scrutiny of public markets.

[bull....]

100% correct.
Care is non-discretionary so the demand wave is far more certain.

ILUs look like the hero strategic play at the moment but only because we've had so much house price inflation in recent years. So cashed up home owners at the start of the demographic wave are making ILUs look stellar on relatively low industry penetration.
Operators are pivoting away from care right when they need to be adding care to their pipelines in order to have enough beds available when boomers hit that level of acuity.
If we're not building / planning now then it simply won't be there when we inevitably will need it.

MET appears to understand this - their buying spree in the last ~12 months has been adding care to their portfolio and pipeline.
They have the luxury of doing this away from the short termist scrutiny of public markets.

your in favour then of OCA buying bupa for the care scale ?

[Poet]

your in favour then of OCA buying bupa for the care scale ?

OCA isn't in a position to buy anything at the moment - unless they can raise more debt to fund the purchase.
It would be madness to try to raise equity in this environment when the share price is at such a discount to NAV. Any discounted cash raise would be highly valued destructive and couldn't be justified. I think shareholders would revolt as they did with SKT recently

Just my opinion of course and we have certainly seen companies make bad decisions recently.

[jagger]

your in favour then of OCA buying bupa for the care scale ?

I'm in favour of MET buying OCA.

[Maverick]

I'm in favour of MET buying OCA.

On the takeover thing, that's a fun idea to kick around.

On one hand Brent is obviously ambitious when one considers his numerous aquistions made since taking the helm. I've had the pleasure to meet him several times over the years and he definitely comes across as wanting to expand the company and really stamp OCA on the map. Plus IMO there are few greater natural motivators in business than when there is semi-personal competition between close industry adversaries. Especially when the apprentice has taken over from the master. Nothing untoward at all intended here, I'm sure Brent and Earl have large mutual respect for each other.

On the other hand , it has been long suggested that Earl always had an ambition to combine MET when he ran OCA. Just maybe with his pension fund owners he has enough resources behind him to finally scratch that itch.

My first bet is neither will take over the other but if it was a dual MET will buy OCA.

this is only my pointless opinion based on gossip , hearsay and just the general vibe really.. Just an interesting idea to knock around on a fab sunny afternoon.

[bull....]

Rubbish! You (and others) clearly have no understanding of the scale of our elderly population, or the current chronic shortage of standard care/hospital level care/dementia care beds. The numbers of deaths (elderly folk) from Covid will have next to no affect on anything. As many have been spouting here for the past two years - we lose more to the flu every year. There is no "peak" and won't be for decades (if ever).

might be more people lost soon too the state of food served in these places with the way costs are increasing

[jagger]

On one hand Brent is obviously ambitious when one considers his numerous aquistions made since taking the helm.

Earl has made multiple times the number of acquisitions and additions to his pipeline in the same time period.
He's been on a spree.

[ronaldson]

What is for sure is that the share price is beaten down just now for whatever reasons, and trading at a lot below NTA too. So is the time right?