If we look at the cashflow statement for HY2024, the difference between 'Receipts for New Occupation Rights Agreements' and 'Payments for Outgoing Occupation Rights Agreements' over the half year was: $105.214m - $38.578m = $66.636m. 30% of that figure will be the increment of the float. So the increment of the float is 0.3 x $66.636m = $20.0m That means another way of interpreting these figures is to say 'the float' increased by $20.0m over the period
If by 'float' we are talking about the ORA....and that is what SailorRob called it....then your analysis is incorrect. We need to use consistent definitions. The float is NOT the DMF. Float refers to the total cash received and available for use by the RV as they see fit.
If ORA receipts are $105m and ORA repayments are $39m per your example, then the cash on hand increased by $66m as a result of ORA transactions. Assuming the 30% DMF's were fully earned on the outgoing ORA with no other deductions, then the DMF earned over the prior x years was $17m. These outgoing residents had a total ORA (or float) of $56m. That old ORA of $56m has expired via $17m retained via DMF fees and $39m repaid to the executors of the estates of the departing residents. So the change in ORAs (the 'float') is $105m - $56m = +$49m. The $56m of old float has been replaced by a new float of $105m. The new $105m ORAs, assuming the full 30% is earned, will given OCA DMF income of $31m over the next approximately 8 years.
Originally Posted by Snoopy
Of course OCA is not going broke because the 'Deferred Management Fees' (not a cash item) will make up the difference
DMF *is* a cash item - it is prepaid by the resident up-front on day 1 when they pay their ORA - the exact amount of DMF will not be known until a later date. It is incorrect to call it a non-cash item. We need to a) be careful with our wording and b) consistent in our definitions, if we are to correctly raise the level of understanding of RVs.
Last edited by Ferg; 12-02-2024 at 02:13 PM.
Reason: typo
Lesson why one needs to look at Total Comprehensive Income
They’ve never made things easy eh
Thanks winner. I agree it's not easy but it gets easier the more time you put into it.
I had taken the CI items into account (that's the $26.6m) and I am familiar with the classification per the image. So we are getting the same total number - we have slightly different breakdowns thereof.
I think your way of looking at it is good. It cuts to the chase. Hence the reason I think your residual value of $45.7m versus $26.6m is interesting....the difference of $19.1m represents the revaluation of village assets over and above the realised portion.
So we have FV gains of $47.4m in the P&L, less the 2 x realised values of $28.3m per uNPAT (and your analysis) which gives an unrealised increase of $19.1m. Add on the $26.6 PP&E and we get your $45.7m number. Of the $45.7m we have $26.6m coming from care and the balance being unrealised gains. There may be a small adjustment for the FV component of care. So yes we have the same numbers, just shown differently and your method has got a few wheels turning for me.
I'm guessing your formula to support the 45.7 number in 1H23 is 26.6+47.4-15.4-12.9...is that correct?
In light of my last post, I think it is worth revisiting the latest balance sheet to be released which is the HY2024 result. That balance sheet shows a rise over the year of the ORA assets, with their value increasing to $935.726m. The previous half year result saw the ORA rights on the balance sheet at $870.476m. That is a good increase, but an increase of 7.5%. Good but nevertheless, well short of your 'expected float growth' of 15-20% p.a. ValueNZ.
You can look at these ORAs another way as well, adding on the ORAs of the assets held for sale being $15.548m (EOHY2023) and $15.737m (EOHY2024). If you add those onto the going concern totals, then the ORA rights sum to $951.463m at EOHY2024 and $886.024m at EOHY2023. That is a gain of 7.4% over the year. OK you can argue that the ORA assets 'being put up for sale' are transformational and not representative of the long term picture of the business. But I would also argue that these booked 'transformations' are taking longer to 'transform' than expected.
I would also argue that the float is not all 'free money' as you claim. Becasue the most recent cashflow statement shows that fully one third of it is required to top up the cashflow for the day to day operation of the business that allows, amongst other things, the staff to be paid.
Next you talk about the float money combined with the existing equity earning a 5% ROA going forwards from all those new villas being constructed. In my view this is also too optimistic. I would argue that the real figure would be closer to 3%. OTOH I don't think your expectation of a 5% return on these new assets, as a sharemarket investor, is out of line. But Mr Market can fix this for you. How to turn a 3% return into a 5% return? Easy! Just write down the value of those investment assets by 2%/5% = 40%. So all Mr Market is doing is writing down the value of those new assets you are building by 40% for you, and you are getting the return you require! And unfortunately unless building costs absolutely slump, the market write down of the underlying assets is set to continue indefinitely.
SNOOPY
Hi Snoopy, I struggle with the relevance of some of your analysis as it looking backwards for a company that is in the midst of a major expansion. The DMF numbers plus any profits on new sales should add significant cash than what is currently being earned
For an extreme example, is Nvidia valued at $1.7Trln for its current earnings?
If by 'float' we are talking about the ORA....and that is what SailorRob called it....then your analysis is incorrect. We need to use consistent definitions. The float is NOT the DMF. Float refers to the total cash received and available for use by the RV as they see fit.
I see no reason to not include the DMF in the float calculation, it is cash received upfront, which is essentially a interest free loan.
I see no reason to not include the DMF in the float calculation, it is cash received upfront, which is essentially a interest free loan.
Snoopy is only counting the DMF, I am saying the float is the full ORA value which includes the DMF component. The 'float' SR refers to is the full upfront payment of the ORA, from which a % will be deducted as DMF. You are aware the DMF is deducted from the ORA? The first part of my sentence said : "If by 'float' we are talking about the ORA"
should be % of DMF + re-sale gains in float thats how i see it
Ok. Obviously SR has confused everyone by introducing the term 'float' which is not a term used by OCA. We should be talking ORAs, DMFs, development margins, resale gains and more importantly, sales volumes.
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Originally Posted by Snoopy
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