Just coming back to this, realised you meant beating an index 1.5% YoY which is absolutely not true.
The 1.5% is just a transaction fee not a yearly fee.
To beat a hypothetical return of an index at a 8% CAGR over 30 years, I would need to generate a return of at least 8.06% CAGR after that 1.5% transaction fee at the start.
I was making an assumption that you are buying shares at $1K a pop throughout the year, every year.
But yes you are right, because the fee is ‘one and done’ each time you execute a BUY order it only pings you for that year in terms of being a drag on your return.
The way I look at it. If, and I say if the day to day operations is running at a loss it eats into the profit made from DMF, sales, resales etc.
A cursory glance of OCA's financials will tell anyone (except you obviously) that OCA runs its day to day operations at a loss - especially cash flow wise.
And that the company had been using debt to pay dividends and cover the day to day operating losses.
Oceania Healthcare's (OCA) FY24 sales update was below our expectations. 2H24 sales softened from a solid 1H24 and is illustrative of the current subdued housing market. While recent commentary on its ‘The Helier’ development has been constructive, it appears the remainder of its new sales inventory is proving a tougher sell in the current housing market. But OCA continues to hold prices steady, and any uptick in sales activity is likely the positive catalyst the stock needs to sell its inventory and reduce debt. We still remain of the view that net debt should fall in FY25 and see this update more as a delay in its turnaround rather than a cancellation. Encouragingly, further non-core site sales at book value provide further support to its book valuation. OCA trades at ~0.45x book value and we retain our OUTPERFORM rating.
What's changed?
Earnings: FY24/FY25/FY26 underlying earnings down -24%/-9%/-4% on slower new sales
Target price: Decreased to NZ$0.95 (from NZ$1.02) due to lower annuity EBITDA and higher net debt.
New sales — solid sales at The Helier, softer elsewhere
OCA reported 2H24 new sales comfortably below our expectations, this is despite solid sales at its flagship The Helier development. In February OCA stated in news articles it had applications for/had sold 20 apartments and four care suites at The Helier, up from six in November (only one was settled in 1H24). These sales achieved in the six months since opening constitute ~25% of the apartments at The Helier. We believe this is a solid result, however, this implies OCA sold ~50 units from its other new sales inventory of ~330 units in 2H24. We view this as soft despite volatility in new sales period to period and the current subdued housing market backdrop.
Sales of non-core sites at book value encouraging
OCA's sale of three further non-core sites and a land parcel at book value is encouraging. This provides another data point to support the book valuations; with OCA trading at less than half its total book value we see valuation as attractive. It had seven sites held for sale at its 1H24 result and has sold four of these over the period (only one land parcel settled in 2H24). Of the NZ$40m in proceeds achieved, NZ$13m was received in 1H24, we estimate ~NZ$2m will be received in 2H24 and the remainder in 1H25.
Build rate guidance in-line, net debt higher on lower sales proceeds
OCA's FY24 deliveries and FY25 build rate guidance were in-line with our expectations and company commentary at its 1H24 result. As a result of the soft sales our net debt estimate increases and we move our expectation of peak net debt forward six months from 1H24 to FY24. Unsold new stock remains elevated for OCA and any pick up in housing market turnover will likely be the catalyst needed to sell through this and drive: (1) a reduction in net debt, (2) an uplift in earnings, and (3) a likely re-rating of the stock.
Got my Personal AIssistant to dig into the FBar commentary for me since I am just too damned busy being lazy.
You are all very welcome.
*********
FBar's commentary on Oceania Healthcare's (OCA.NZ) fiscal year 2024 (FY24) sales update provides a nuanced perspective on the company's recent performance and future prospects. The critique below examines the strengths and weaknesses of their analysis:
Strengths of the Commentary:
1. Detailed Contextual Analysis:
- FBar adeptly sets the context by comparing the second half of the fiscal year's sales performance with the first half, highlighting a softening market. This comparison is crucial for understanding the cyclical nature of real estate and healthcare facility sales, particularly in a subdued housing market.
2. Specific Development Insight:
- The commentary provides specific insights into ‘The Helier’ development, which is useful for investors focusing on granular details of OCA’s portfolio. Mentioning particular developments helps in assessing the company's strategic focus and execution.
3. Balanced View on Sales Strategy:
- FBar notes that OCA has maintained steady prices despite the challenging market, which is a positive signal about the management's confidence in their product and pricing strategy. This could be seen as a strength in maintaining value over simply pushing volumes.
4. Forward-Looking Statements:
- The analysis remains optimistic about OCA's ability to reduce debt in FY25, suggesting a temporary delay rather than a long-term issue. This forward-looking, yet cautious optimism provides a balanced outlook which is essential for long-term investors.
5. Valuation Highlight:
- Pointing out OCA’s trading status at approximately 0.45 times book value offers a clear metric for valuation which potential investors can use as a benchmark for assessing whether the stock might be undervalued.
Weaknesses of the Commentary:
1. Lack of Comparative Analysis:
- While the update discusses current issues with sales, it lacks a comparative analysis with peers in the industry. Understanding how competitors are performing under similar market conditions would provide a more comprehensive view of OCA’s relative performance.
2. Underemphasis on Risks:
- The commentary could benefit from a more detailed discussion on the risks associated with maintaining high prices in a soft market. There is a risk that steady prices could lead to a prolonged period of high inventory if the market does not rebound or if consumer sentiment worsens.
3. Assumptions on Market Recovery:
- FBar’s commentary assumes an uptick in sales without delving deeply into the catalysts or market conditions necessary for this recovery. This oversight can lead to an overly optimistic outlook without sufficient grounding in market realities.
4. Vague on Non-Core Asset Sales:
- The mention of non-core site sales at book value provides some positive news, but lacks detail on the potential impact of these sales on the overall financial health or strategic positioning of OCA.
5. General Statements on Turnaround:
- The analysis concludes with a somewhat vague affirmation of a delayed turnaround. More specifics on what this turnaround entails or the strategic steps OCA intends to take would provide a clearer picture.
Conclusion:
FBar's commentary on Oceania Healthcare provides a fundamentally sound, albeit somewhat optimistic, outlook on the company’s financial health and market position. The analysis excels in detailing the current sales environment and maintaining a balanced view on future prospects. However, it could be improved with a more thorough risk analysis, comparative industry context, and detailed strategic insights. These additions would offer a more rounded and critically robust analysis for potential investors.
A cursory glance of OCA's financials will tell anyone (except you obviously) that OCA runs its day to day operations at a loss - especially cash flow wise.
And that the company had been using debt to pay dividends and cover the day to day operating losses.
Duh!
I am talking about the Financials due to be released at the end of May, not history.
And I have basically assumed that they are probably still running at a loss, but I prefer to have my information confirmed.
I think the reason RV listed entities do not breakdown revenue and expenses in their accounts between their two main activities is that it would be clear how profitable 30% DMF actually is in context and that margin would come under pressure from consumer advocates, especially given Ryman have moved to 20%.
Ironic that the much pined for update has taken any recent gloss off the share price.
Hard to see the actual result, when announced next month, can now do much to fire this up. At least another six months before we see the light in my view. But on-market volume is always there so folk on both sides of the fence.
Claims depressed property market etc etc holding back sales is a red herring to me
If REINZ reported property volumes is a proxy for market activity the last six months has been pretty strong. Market may not be as active as a few years ago but volumes are heading back to average.
The last six months to March volume sales across the country were 22% more than pcp….and that’s reflected in ARV and SUM sales but not OCA’s
Table shows growth in sales for ARV, OCA and SUM compared to general activity in NZ property market
What's happened to OCA new sales over last 6 months ...the 3% stands out as a real outlier eh ...something not right
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
Ironic that the much pined for update has taken any recent gloss off the share price.
Hard to see the actual result, when announced next month, can now do much to fire this up. At least another six months before we see the light in my view. But on-market volume is always there so folk on both sides of the fence.
That wasn’t really an update ron ….biggest non-announcement I’ve ever seen. Just confirms that shareholders/market per se aren’t part of their stakeholder thinking
If they thought they need to improve communication with shareholders they need to improve a lot
Big fail imho
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
Originally Posted by ValueNZ
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