OCA - Oceania Group - retirement villages

[ValueNZ]

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"

Apologies Ferg, good to know we are on the same page. The float is the ORA (refundable portion, as found under liability section of balance sheet) + DMF.

I took your statement out of context.

[Ferg]

So we have Godwin's law & Benford's law.....here is Ferg's law: "the level of comprehension on a subject is inversely related to the number of words and posts thereon".

[Cupsy]

superfluous to requirement

[ValueNZ]

Shouldnt float be less the dmf?

No it should be the full amount paid by the resident upon paying for the license to occupy. That is under the liability section of the balance sheet, both the refundable ORA and DMF.

DMF is paid all in advance, and is found in the income statement as the resident exits.

[bull....]

can OCA lose the float

[Snoopy]

Firstly, thank you for the posts today, amazing stuff and a lot of effort on your part, hugely appreciate that and may take some time to digest on my part.

On the above point, 1000 apologies but I'm still not on the same page.

Maybe talking in shares might help, fictonally 1 share being 100 cents.

That 1 share today can only be cashed out at 50cents currently, I think I am with you this far.

Where I'm getting confused is where this share gets cashed out in the future.

In 7 years with a fictional 10% growth, the 100cents becomes approx 194cents, making the discount of 50% of the NTA 97cents.

{Alternatively a fictional -3% growth, the 100cents becomes approx 80.8cents, making the discount of 50% 40.4cents}

So (and I'm sure I'm missing your point here) I am struggling to see how 50cents return is still 50cents any time.

Cupsy your maths is correct. In your hypothetical example what is cashed out at 50c today can be cashed out at 97c in seven years time. When I say 50c is still 50c I am talking about the exchange rate between dollars operating inside the company and dollars you can cash out. So in this particular example:

a/ You can cash out your $1 of value in the OCA company today by selling your OCA shares, giving you cash in your pocket of 50c OR
b/ You can cash out your $1.94 of value in the company in seven years time and get 97c in your pocket

The thing that has not changed across time is the expected 'exchange conversion rate'. For any $1 inside OCA today, or in seven years time, or at any time in between, or at any time after seven years: Each $1 you take out of your investment in OCA by 'selling your shares' will turn into 50c in your pocket, as long as OCA remains a listed entity. $1.40 of net tangible assets within the OCA company becomes 70c when you sell a single share on the market today (there is that 'exchange rate' again - 50c in the dollar). That is the extension of what Lyall Taylor was telling us in his article.

SNOOPY

[Snow Leopard]

In accounting, float has a very definite meaning.

Whatever it is you are all disagreeing over.

It is NOT float.


Image from here

[Ferg]

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.

Here is the origin of the term used in this post from 26 Nov 2022:

So the $917,647,000 Deferred management fee/refundable occupation license item on the balance sheet is essentially an interest free loan that cannot be called and is only paid back once the next lot of money has come through. It is a thing ofimmense beauty and the key to understanding the industry.

So it allows them to massively increase the amount of property they own and develop, at no cost or risk. Also worth noting here the terms and rate on their actual conventional debt which is outstanding, one bond is I think 2027 at 2.3% and the other 2028 at 3.3%. So massively negative in real terms.

So a conventional developer like you or I in simple terms, to build a million dollar house, we have to first get a million dollars, then build the house and then to build another one we either have to sell the first, or go to the bank and borrow against the first and maybe get 800k if we are lucky and subject to handing over the title to the first one to the bank and paying interest and introducing all kinds of risk.

OCA has their cake and eats it, they 'sell' the first house for more than a million while still owning it and don't pay any interest on the money they get and they don't have to pay it back (they keep a ton of it too) until it's been 'sold' again, and they do this until the cows come home and then do it some more. So they can never get into trouble with this type of liability, and it reminds me of float in the insurance industry which is fought over like crazy. Only this is way better as float is heavily regulated and you have to put up your own capital too.

Then as they develop more they get more of this free money and develop more... It's one hell of a business, and everyone is missing it as they think you're buying the net tangible assets but no, you are also buying the free billion dollars. I've never seen it discussed here but it's the real key to the business model.

And I reiterate:

So we have Godwin's law & Benford's law.....here is Ferg's law: "the level of comprehension on a subject is inversely related to the number of words and posts thereon".

[ValueNZ]

ValueNZ it could be difficult for OCA to grow the float above your estimate of 12% cagr unless they raise capital. Their debt/(debt+equity) has gone from 17% in 2017 to 38% today as per Winners summary sheet. The balance sheet strength they once had has been fully tapped for all current/historic development. 40% leverage ratio is the magic number all the RVs are trying/told to stick under it seems

Not true. Bank debt is just one, relatively small source of funding of OCA's assets. They just need to continue selling down stock and use that cash to fund new projects.

[Cupsy]

superfluous to requirement