OCA - Oceania Group - retirement villages

[Daytr]

I want all the news, good and bad. This thread seems to largely be a negative echo chamber at times. Glad to see the commitment to turn it around.

Also, hilarious AI response

Hi Antipodean, if you want to counter the negativity then post accordingly.
I don't think you can ask people to change their tune just for the sake of it.

I suspect the vultures are swirling more on this thread due to the ridiculous over confidence of the likes of SailorRob & others in relation to this stock. The absurdity that the company or property market could do no wrong that would impact the long term value due to the 'float' was just well absurd.

I don't own stock, not short stock and I do believe in the long term, this could well be a very good investment, however it's not without risk particularly right now & with Chris Bishop saying he wants to "flood the market" won't be helping confidence in RV stocks.

OCA need to conserve cash and strengthen their balance sheet, so the best thing they could do is slow development or even pause until they have sold down more existing completed stock.

[davflaws]

Hi

OCA need to conserve cash and strengthen their balance sheet, so the best thing they could do is slow development or even pause until they have sold down more existing completed stock.

Has anybody done any analysis of how the 'lead time' of their development program might influence a decision to slow or pause it in relation to sales performance?

[Maverick]

Has anybody done any analysis of how the 'lead time' of their development program might influence a decision to slow or pause it in relation to sales performance?

Daytr and Daveflaws , you both raise a really good point today.

OCA have always said they would produce 250 to 330 units over the years. ( oooh, remember those days…. when any RV just had to buy a paddock, say they are increasing build rate and the share price would jump.)

OCA have never said they are throttling build rates but IMO they most certainly are…
They usually had a little over 500 units on the go at any time. Now they still have that number but in a VERY short time when some deliveries complete over the next few months they will have half that on the go. There is no mention of what will replace those completions, which they normally would have. Even Frankton`s earthworks seem to have fallen off the “under construction “ schedule.

They are cutting back and seem to have significantly reduced their current build ambitions, although have not said so. They have some excellent sites ready to pull the trigger on when ready such as Milford, Frankton and numerous others but looking 6 months out they have not committed to bugger all of that new development.

This is all good news for the immediate and medium term stakeholders as this will do wonders to their balance sheet.
They are a unique position of having 2 years of stock using appropriate sales rates for this market , currently ready for sale.

OCA historically spent capex of c. $80m HY ( and a higher number lately as they finished the Helier and CHCH) so it would seem fair this would reduce to say c. $50m . The net effect on the cash flow henceforth should be very healthy.
(IMO There should be plenty of cash floating around to resume the dividend.)
Yes, I have some healthy numbers but given OCA are in the middle of this change and will be temporary, they are pretty meaningless to state here.

These can only be rough figures as they are entirely dependent on what the directors set as build targets. At any moment they could easily resume construction at pace should they choose but until they ramp up again the money will be rolling in nicely.

I would hope some corporate expenses reduce too as they back off the build rate. Perhaps they will want to retain their staffing as they will want to resume building at some point. We will have to wait and see about that.

We know that should they stop spending on new stuff and just finish their work in progress, sell what they have over the next 2 years, then they could all but pay off all debt. It does seem for this moment in time that is their direction.

As a long term shareholder but also who wants the dividend to resume. To me and Daytr, this is an obvious path they have chosen for now.

Naturally , development will resume at some point, they are poised ready to go. In the interim for up to the next 2 years OCA are in a sweet position of turning their surfboard around and ride the wave (cash in) that they have created underneath them.

[Daytr]

Daytr and Daveflaws , you both raise a really good point today.

OCA have always said they would produce 250 to 330 units over the years. ( oooh, remember those days…. when any RV just had to buy a paddock, say they are increasing build rate and the share price would jump.)

OCA have never said they are throttling build rates but they most certainly are…
They usually had a little over 500 units on the go at any time. Now they still have that number but in a VERY short time when some deliveries complete over the next few months they will have half that on the go. There is no mention of what will replace those completions, which they normally would have. Even Frankton`s earthworks seem to have fallen off the “under construction “ schedule.

They are certainly cutting back and have significantly reduced their current build ambitions, although have not said so. They have some excellent sites ready to pull the trigger on when ready such as Milford, Frankton and numerous others but looking 6 months out they have not committed to bugger all new development.

This is all good news for the immediate and medium term stakeholders as this will do wonders to their balance sheet.
They are a unique position of having 2 years of stock sales currently for sale.

OCA historically spent capex of c. $80m HY ( and a higher number lately as they finished the Helier and CHCH) so it would seem fair this would reduce to say c. $50m . The net effect on the cash flow henceforth should be very healthy.
(IMO There should be plenty of cash floating around to resume the dividend.)
Yes, I have some numbers but given OCA are in the middle of this change and will be temporary, they are pretty meaningless to state here.

These can only be rough figures as they are entirely dependent on what the directors set as build targets. At any moment they could easily resume construction at pace should they choose but until they ramp up again the money should be rolling in nicely.

I would hope some corporate expenses reduce too as they back off the build rate. We will have to wait and see about that.

We know that should they stop spending on new stuff and just finish their work in progress, sell what they have over the next 2 years, then they could all but pay off all debt. It does seem for this moment in time that is their direction.

As a long term shareholder but also who wants the dividend to resume. To me, this is a very good path they have chosen for now.

Obviously development will resume at some point but in the interim , for the next 2 years OCA are in a sweet position of turning their surfboard around and ride the wave that they have created underneath them.

Mav, they shouldn't have been paying a dividend previously, they should have reduced debt.
It would be completely irresponsible of the management to return paying dividends until they have reduced debt and back in full growth mode. I would like to see them have around $100M more in liquidity, so either increased cash or reduced debt, perhaps a mixture of both.

If the crap hits the fan in the NZ economy, which it might, having liquidity will be key. And I can tell you if that does happen, banks won't be keen to extend further credit.

[Maverick]

Mav, they shouldn't have been paying a dividend previously, they should have reduced debt.
It would be completely irresponsible of the management to return paying dividends until they have reduced debt and back in full growth mode. I would like to see them have around $100M more in liquidity, so either increased cash or reduced debt, perhaps a mixture of both.

If the crap hits the fan in the NZ economy, which it might, having liquidity will be key. And I can tell you if that does happen, banks won't be keen to extend further credit.

We kiwi`s love our dividends. This ain`t USA where where they seem to just want capital growth.

Cast your memory back 3 years and almost everyone was saying borrow more, buy more land, build more.
OCA was bagged for not being aggressive enough
ARV was buying up a storm to the cheering crowd - and just sold one of those $30m deals to repay their exuberance ( for a slight loss). Sorry to single you out ARV ( SUM and RYM were into it too) but ARV is treated like OCAs twin...which it certainly isn't.

Fast forward to now and the mantra has changed a tad.
Essentially OCA is being run by 2 x CFO`s now and IMO are responding appropriately to the new situation while holding on to their original ambitions. (selling premium stuff to the ageing well healed)

None of us know the minds of the OCA directors but they are going to have to balance what you are saying, stakeholders, financiers and the market.

I do think their previous 50% payout of unpat is no longer appropriate now the cash from DHB care profit has dried up. However to go to zero IMO is too extreme . You are probably earning cash elsewhere to have your view but the huge portion on NZSX investors are looking for some immediate reward.

As far as "the crap hitting NZ economy"...too many people struggling too harshly will simply cause lower interest rates. Our entrenched obsession with property just means we can then trot off to pay more at the housing auctions...OCA investors will win with both fundamentals and market sentiment.

But ultimately , now they have $364m of saleable stock...plus reduced capex...there should be plenty of cash driving the balance sheet in the right direction for the banks and analysts.

The dividend lately as taken $8m or so per HY so not a great deal in the current scheme of OCA things but very meaningful to stakeholders. Again, that's what the directors have to balance out.

[Daytr]

We kiwi`s love our dividends. This ain`t USA where where they seem to just want capital growth.

Cast your memory back 3 years and almost everyone was saying borrow more, buy more land, build more.
OCA was bagged for not being aggressive enough
ARV was buying up a storm to the cheering crowd - and just sold one of those $30m deals to repay their exuberance ( for a slight loss). Sorry to single you out ARV ( SUM and RYM were into it too) but ARV is treated like OCAs twin...which it certainly isn't.

Fast forward to now and the mantra has changed a tad.
Essentially OCA is being run by 2 x CFO`s now and IMO are responding appropriately to the new situation while holding on to their original ambitions. (selling premium stuff to the ageing well healed)

None of us know the minds of the OCA directors but they are going to have to balance what you are saying, stakeholders, financiers and the market.

I do think their previous 50% payout of unpat is no longer appropriate now the cash from DHB care profit has dried up. However to go to zero IMO is too extreme . You are probably earning cash elsewhere to have your view but the huge portion on NZSX investors are looking for some immediate reward.

As far as "the crap hitting NZ economy"...too many people struggling too harshly will simply cause lower interest rates. Our entrenched obsession with property just means we can then trot off to pay more at the housing auctions...OCA investors will win with both fundamentals and market sentiment.

But ultimately , now they have $364m of saleable stock...plus reduced capex...there should be plenty of cash driving the balance sheet in the right direction for the banks and analysts.

The dividend lately as taken $8m or so per HY so not a great deal in the current scheme of OCA things but very meaningful to stakeholders. Again, that's what the directors have to balance out.

So as SailorBoy & ValueNZ harped on about,.the float, the float, it's all about the float.

My response to that, was how do you know that OCA will build a float & turn into the investment model he dreamed about?
What if they instead return to paying dividends?
They could obviously do a bit of both, but probably not if they still want to grow the portfolio which they obviously do.

[ValueNZ]

So as SailorBoy & ValueNZ harped on about,.the float, the float, it's all about the float.

My response to that, was how do you know that OCA will build a float & turn into the investment model he dreamed about?
What if they instead return to paying dividends?
They could obviously do a bit of both, but probably not if they still want to grow the portfolio which they obviously do.

The float is already invested and growing at an exceptional rate. It's how they can have such a massive asset base in relation to equity at low risk.

I don't really understand what you're asking there TBH.

[Daytr]

The float is already invested and growing at an exceptional rate. It's how they can have such a massive asset base in relation to equity at low risk.

I don't really understand what you're asking there TBH.

Here's the latest financials.
Can you please point to me what the value of the float is in the report?
From what I am hearing from you, you are saying when they sell a unit & then set aside in cash the 70% they need to pay back at the end of the occupancy and that this cash is invested for a return. Is that correct?

Cheers Daytr

Oceania_InterimReport2024_singles_FINAL.pdf (oceaniahealthcare.co.nz)

[ValueNZ]

Here's the latest financials.
Can you please point to me what the value of the float is in the report?
From what I am hearing from you, you are saying when they sell a unit & then set aside in cash the 70% they need to pay back at the end of the occupancy and that this cash is invested for a return. Is that correct?

Cheers Daytr

Oceania_InterimReport2024_singles_FINAL.pdf (oceaniahealthcare.co.nz)

Screen Shot 2024-03-24 at 2.48.43 PM.jpg

935+45=~970 million in float, which when it comes in is spent on further developing property.

[winner69]

Screen Shot 2024-03-24 at 2.48.43 PM.jpg

935+45=~970 million in float, which when it comes in is spent on further developing property.

See daytr ….float is listed in liabilities when it’s really an ‘asset’ . Get it now mate?