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  1. #18721
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    Quote Originally Posted by Rawz View Post
    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 sure what you mean here rawz but if Refundable ORA’s was counted as debt the debt/(debt + equity) goes to 61%
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  2. #18722
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    Quote Originally Posted by ValueNZ View Post
    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.
    Yeah you are correct, but for some reason I had it in my head that it was expensed over the life of the ORA, (but I am probably mistaken).

    "The timing of the recognition of deferred management fees is a critical accounting estimate andjudgement. The deferred management fee is recognised on a straight line basis over the longer of
    the term specified in a resident’s ORA or the average expected occupancy. The expected periods
    of occupancy are based on historical Group averages, for the relevant accommodation they are
    estimated to be 7 years for units, 5 years for apartments and 3 years for care suites from the date
    of occupation."
    Last edited by Cupsy; 12-02-2024 at 08:23 PM.

  3. #18723
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    Quote Originally Posted by winner69 View Post
    Not sure what you mean here rawz but if Refundable ORA’s was counted as debt the debt/(debt + equity) goes to 61%
    Was going off the numbers near the bottom of your spreadsheet you post yesterday. I assumed it excluded the ORA

  4. #18724
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    Quote Originally Posted by Cupsy View Post
    Insurance float I think is what is being referenced
    https://www.fool.com/personal-financ...ics-float.aspx
    Yes that (insurance float) has always been the basis of what SR was trying to draw an analogy, but better! It takes a while to get ones head around, but once we realise our development is funded by an uncallable (in TOTO) ever increasing fund that we pay no interest on, with other income streams on top, then we start to realise the long term potential for investors. Current market climate suggests moderating the development spend, focus on reducing external liabilities (bank debt) whereas in reality none of the RV's are particularly stressed in the scheme of things. Strange how market sentiment seems to play on investor confidence, when the best thing they could be doing is going hard out growing the asset base, selling them, culling the losers and ergo growing the float, cashflows and income. Maybe the sector needed to take a breather, while everyone catches up with what really makes this sector a good long term investment. SR was on the money, pity that he pissed a few influential people off trying to explain it, I understand how he could get frustrated having to constantly challenge the ill-informed but vocal few. If the analysts and commentators really realised the underlying financial long term strength of the listed RV's business & financial model, they and all their clients would be flocking to get some, especially at these heavily discounted market prices. But have you ever heard any of them recognise the 'the float' and the value of the business model that is built on it? No, me either.

  5. #18725
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    Quote Originally Posted by Cupsy View Post
    Yeah you are correct, but for some reason I had it in my head that it was expensed over the life of the ORA, (but I am probably mistaken).

    "The timing of the recognition of deferred management fees is a critical accounting estimate andjudgement. The deferred management fee is recognised on a straight line basis over the longer of
    the term specified in a resident’s ORA or the average expected occupancy. The expected periods
    of occupancy are based on historical Group averages, for the relevant accommodation they are
    estimated to be 7 years for units, 5 years for apartments and 3 years for care suites from the date
    of occupation."
    You're right sorry Cupsy!

    Thanks for correcting that, reading "The deferred management fee is payable by the resident on termination of the ORA." made me think it was recognised as revenue when the resident exits.

    I am not an accountant... lol

  6. #18726
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    Quote Originally Posted by Snoopy View Post
    First thing I need to mention is about the 70c of equity supporting the 30c of 'free float' that you get. The multiplying factor is actually 100/70 = 1.4286, as the equity value you get is $1 from each 70c of value the company has put in. Or put another way, if you think of the total equity in the company adding up to a 100% figure, then of that figure, the company 'owns' 70% of the equity and the float 'owns' 30% of the equity, the sum of the equity owned by the company and owned by the float summing to 100%, as you would expect.

    This post is fictional and for my learning purpose only snoopy, i'm pretty sure I have something mixed up here, i'm thinking maybe im just getting confused with terminology??



    Quote Originally Posted by Snoopy View Post
    The equation for an investor in 'cents in the dollar' to recover their share of the company's retained equity, by selling OCA shares -enhanced by the float- comes down to: 0.5 x 1.4286 x E = 0.7143E

    So for every dollar generated within OCA, our shareholder investor can get back 71.4c of that by selling their OCA shares on market. And that is a few cents better than paying an unimputed dividend.

    going to review this hopefully directly with snoopy, cause i'm quite lost here i think.
    Last edited by Cupsy; 12-02-2024 at 10:59 PM. Reason: Calc error, more than once

  7. #18727
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    Quote Originally Posted by Snoopy View Post
    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
    Quote Originally Posted by Ferg View Post
    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.
    OK, I may have been a bit loose with my terminology here. The Occupational Rights Agreement or ORA is the money the resident hands over to OCA when they move into a villa. As part of the deal, when the resident departs the villa, they will get their ORA money back, less 30%. That 30% they will not get back is deemed the Deferred Management Fee, or DMF. Ostensibly it is used to 'manage the business' while the resident resides there. But there is no legal requirement for OCA to explain their cost allocation to maintenance and management from the DMF. The DMF is a capital charge which management can do what they like with.

    The question then becomes what happens to the rest of the ORA money, the remaining 70% when it is handed over to OCA? Can OCA really do what they like with that? My thinking is no they can't, because -as part of the OCA business model- that money, or perhaps more correctly that money plus any complementary bank borrowing that has been raised against it - has been ear marked, and you could argue 'already spent', in developing new village assets. And although it never has to be repaid by OCA (because when the time comes for an ORA handover, the new resident indirectly pays the old residents ORA balance back with OCA acting as an intermediary) it still has to remain on OCA's balance sheet in some form even as it has already been transformed from cash into investment property while OCA is holding it. So by this measure the 70% retained balance of the ORA figure is not part of the money that OCA can 'do what they like with', because it is needed to support the existing debt on the balance sheet, by shoring up the equity ratio of the company. Also if the company is ever wound up, it would have to be repaid. So the company has a duty not to 'fritter this money away'.

    Quote Originally Posted by Snoopy View Post
    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.
    Yes DMF is cash because it has been prepaid in previous years. But in the context of what I was talking about, I meant the company could use DMF assets already paid up to fund any current year operational cashflow deficit, because the DMF money was already sitting in the balance sheet as cash collected in previous periods, ostensibly for this purpose, and is waiting to be spent on such things (hopefully).

    SNOOPY
    Last edited by Snoopy; 12-02-2024 at 09:04 PM.
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  8. #18728
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    Quote Originally Posted by ValueNZ View Post
    You're right sorry Cupsy!

    Thanks for correcting that, reading "The deferred management fee is payable by the resident on termination of the ORA." made me think it was recognised as revenue when the resident exits.

    I am not an accountant... lol
    Are you sure it's right? Correct me if I'm wrong but the 'accounting' for it may be spread over the average life of the occupancy, but the client/resident liability for it, is spread over the first three years of their occupancy. i.e, if they leave earlier than three years, their liability is not the full amount, but if they leave over three years the liability is the whole amount - but not deducted from the final payout, until they actually leave (perhaps why it's accounted for [amortised against] the average term of tenancy? I may be wrong.

    Sorry, it's late and I can't be bothered checking the details.
    Last edited by Baa_Baa; 12-02-2024 at 09:00 PM.

  9. #18729
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    Quote Originally Posted by Snoopy View Post

    The question then becomes what happens to the rest of the ORA money, the remaining 70% when it is handed over to OCA? Can OCA really do what they like with that? My thinking is no they can't, because -as part of the OCA business model- that money, or perhaps more correctly that money plus any complementary bank borrowing that has been raised against it - has been ear marked, and you could argue 'already spent', in developing new village assets. And although it never has to be repaid (because when the time comes for an ORA handover, the new resident indirectly pays the old residents ORA balance back with OCA acting as an intermediary) it still has to remain on OCA's balance sheet in some form even if it has been transformed from cash into investment property while OCA is holding it. So by this measure the 70% retained balance of the ORA figure is not part of the money that OCA can 'do what they like with', because it is needed to support the existing debt on the balance sheet, by shoring up the equity ratio of the company. Also if the company is ever wound up, it would have to be repaid. So the company has a duty not to 'fritter this money away'.


    SNOOPY


    OK, ignore what I have posted here, re-reading snoopys post i think I have got the gist of it. Again thanks snoopy.
    Last edited by Cupsy; 12-02-2024 at 09:28 PM.

  10. #18730
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    @Snoopy, have you considered the ratios of the bank debt to ORA (withheld equity) [not Bonds on issue] to determine whether OCA have room to use the 'float' to do 'whatever they want with it', or have you assumed a direct correlation of the ORA withheld to the bank debt? i.e the bank debt is somehow directly correlated to the amount of debt that the bank(s) have allowed? If so I suggest that the bank debt is a much smaller percentage of the withheld ORA + DMF unpaid, that will never be repaid in TOTO and is constantly growing (the float).

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