OCA - Oceania Group - retirement villages

[Baa_Baa]

Mav will no doubt tell me what happened but heaps more new sales but less realised gains/development margin ($s)

Like H123 there were 61 sales and average gain was $207k
And.H223 there were 67 sales and average gain was $294k
Then H124 84 sales but average gain only $154k

That’s a huge drop and less than what was being achieved pre-covid

No doubt the ol excuse of geographic / type mix eh …not heavy discounting.

The "ol excuse" is a fact, more of the sales this half were in lower priced regions, aggregate being lower gains/DMF. Will be interesting to see the full year, esp if they sell off a swag of high priced Auckland properties.

[X-men]

U all old farts....U all should be happy with no CR today....god...some people is just hard to please...

The media is cheering it!!

https://www.nzherald.co.nz/business/half-year-net-profit-up-24pc-at-retirement-giant-oceania-healthcare/WK5WJQPBLBCULBC5LDUP4EDHKY/

[bottomfeeder]

U all old farts....U all should be happy with no CR today....god...some people is just hard to please...

The media is cheering it!!

https://www.nzherald.co.nz/business/...BC5LDUP4EDHKY/

Looking good, we knew the interim dividend would be cancelled unless surplus assets are sold. Stock up for the recovery.

[limmy]

With no dividends coming, there's less reason to hold the stock. I've canceled my "buy" order today.

[SailorRob]

With no dividends coming, there's less reason to hold the stock. I've canceled my "buy" order today.

Yeah I sold my Berkshire shares in the late 1960's for the same reason. What idiot wouldn't pay a dividend.

[Greekwatchdog]

For Bars Review
Oceania Healthcare (OCA) delivered a weak, yet somewhat reassuring 1H24 result. The weakness was undramatic and primarily related to increased village opex, driven by two village openings and slightly higher corporate overheads versus our expectations. Our main takeaway is the reduced risk of a downside scenario for the sector in general, with three reasons in particular for OCA. (1) OCA delivered all time high ORA sales of ~NZ$129m, +NZ$10m above its previous record in 1H21. Up +90% sequentially from the very weak 2H23 and up +15% on 1H23. (2) OCA sold two care sites at or marginally ahead of book value, these are non-premium assets that are broadly breakeven. This suggest some support for OCA's (and the sector's) book value at NZ$1.40 per share. (3) While leverage crept up another +120bps to 37.4%, the pace of debt accumulation has slowed materially. Assuming current market conditions remain, management suggested that debt should not move materially from here to year end and start to track lower thereafter. We reiterate our OUTPERFORM rating with a NZ$1.00 target price.


What's changed?
Earnings: Annuity EBITDA -8%/-9%/-7% in FY24/FY25/FY26 primarily driven by higher costs
Target price: NZ$1.00 from NZ$1.05, due to lower annuity EBITDA and reduced dividends.
Peak debt take two
OCA suggested at its FY23 result in May that it was at or close to peak debt; that did not turn out to be the case. OCA added ~+NZ$60m of net debt in 1H24, primarily due to a combination of: (1) a delayed start to sales at the flagship development The Helier; (2) a few opportunistic land acquisitions; and (3) delayed settlements of sales, primarily a number of care suites. Management again suggested that debt would plateau at its current level before trending down thereafter, but cautioned that it was dependent on housing market conditions. We believe management is being prudent. A combination of: (1) a well advanced sales process at at least two sites, (2) lower capex, (3) higher sales, and (4) no dividend, creates a back drop where maintained or reduced net debt is likely. We see ability to reduce net debt as both a necessary and sufficient condition for a re-rating of OCA's shares.


OCA has a relatively straight forward path to debt free (or near to) if it so chooses
We estimate that OCA needs to spend a further ~+NZ$140m of capex to finish the current 382 units it has under construction. Most, if not all, could be completed by the end of FY25. We estimate the cash sale price of the 382 units to be in the vicinity of ~NZ$240m, which together with currently available-for-sale stock (NZ$365m), and assets sales (NZ$40m), should reduce debt to ~NZ$100m. Against this OCA would still have ~NZ$180m of development assets.


1H24 result summary & forecast changes


OCA's 1H24 result was below our expectations at the annuity EBITDA and underlying earnings lines, primarily driven by higher than expected opex. With costs higher than our estimates across both its village and care operations. Pleasingly, care DMF (deferred management fee) was in-line after disappointing at its 2H23 result, while village DMF was slightly weaker due to the sale/closure of sites within the period. 1H24 sales rebounded from a weak 1H23, new sales gains (due to margins) were below expectations while resales gains were ahead of expectations. OCA did not declare an interim dividend and will consider a final dividend depending on cash flow, market condition and growth opportunities at year end.

[winner69]

Out of curiosity SailorRob what led you to focus on OCA instead of the other RVs like Summerset, Arvida, Ryman etc.?…..

………..?

Hey Rob ….Rymans float is $4.8 billion …jeez that’s huge eh ……much higher than Oceania’s

[ValueNZ]

Hey Rob ….Rymans float is $4.8 billion …jeez that’s huge eh ……much higher than Oceania’s

What is the price you pay for that float? And are Ryman likely to grow at a faster rate than Oceania in the future?

[SailorRob]

I strongly disagree with SR on the float. They have spent it all already. I get that its an interest free loan etc, but the $$ is all sunk into the assets.

Umm this is the ENTIRE point... So you are thinking that if they had this 'interest free loan etc' and hadn't spent it (had it sitting in cash somewhere) then the would be a good thing that you could understand but as they have spent it on assets it's gone and is irrelevant, or worse still it's bad?

We really must open out eyes and think in real terms not accounting terms... Berkshires insurance liabilities are technically also liabilities and technically have also to be paid back, in the real world these are both irrelevant and this is why he considers it superior to equity. OCA's situation is far better still.

So ValueNZ's Dad gives him interest free loan for 10 million dollars and promises that he'll never ask for it back and that any of it that is repaid will be replenished with new money and the loan will grow over time. If ValueNZ doesn't spend it then it's cool and great, but the second he spends the 10 million into solid income producing assets and lives off the proceeds, then he becomes a loser?

No... he will have any chick in his school, maybe a few dudes too who knows, multiple fast cars and be the envy of all... I think everyone would see this situation as an ASSET to him. But someone on the internet would strongly disagree and say on noooooooo it's a LIABILITY and cry into their breakfasts like I am writing this.

Now if ValueNZ had spent decades saving the 10 million and raising it from friends and family (EQUITY) what's better?

The huge effort to provide one's own savings and what he has raised from friends with OBLIGATIONS to produce a return on?

The liabilities are FAR superior to equity capital.

This is hard work.

Counting the float on top of the assets doesnt make sense to me and is a straight double count. It'sstill a liability as OCA owes the oldies the money, just not an interest bearing liability.

​Nobody is doing this... I am not counting float on top of assets, I'm saying I'm focusing on TOTAL assets not net... So I am adding float onto NET assets not total. The point about still owing the oldies shows that you are thinking all wrong about this.

My 2c on OCA is, without valuation uplifts across the portfolio (these are slowing significantly and will slow further), and without loads of new builds which are built for a one off profit (this is slowing), the business model is a money looser and uninvestable. Share price to decline steadily going forward.

Looser means less tight... Never ever invest a cent based on 'valuation uplifts' this is all bollox funny money and means nothing. The ONLY thing that produces a value uplift is the increased cash generation or the increased potential of future cash generation.

I acknowledge and bow before SR superior intellect, money making ability and sharemarket nouse etc.... so not an attack.

All I do is try keep my head out of my arse and study what Buffett says about float VERY carefully and think it through over thousands of hours of reading.


I will now hand over to Winner to discuss a cap raise.

Time to start thinking clearly.

[SailorRob]

Hey Rob ….Rymans float is $4.8 billion …jeez that’s huge eh ……much higher than Oceania’s

Totally irrelevant...

Maybe I need to start a school just covering the extreme basics