OCA - Oceania Group - retirement villages

[Maverick]

Hopefully not Winner 'making up' numbers again, or OCA counting their H1 sold RV's as sold units? Whatever, an investor in an RV buys into the development growth and the dosh that flows from that, however long that takes, it's not and has never been about making $ from care. Right now all of the RV's are imo counterintuitively slowing down their development based on some fabricated perception that balance sheets are distressed (they're not, except maybe RYM overcooked it). All of them are subject to market sentiment re SP, whether right or wrong. Look through it, these are very successful property development companies with outstanding business models. The SP will look after itself, maybe just not in the timeframe you hoped for.

I'm seeing friends of mine reaching capitulation, hard core OCA believers, AND acting on it. Its hard to watch but easy to understand.

I have always closely watched and monitored sales , margins, prices , especially as high end apartments are a new product and what OCAs future profits are based on ( as you say , care is not the core driver) . After years of watching these sales to minute detail, learning the patterns from uncountable site visits, this last result has me worried...all metrics are holding up until now very well, except sales ...maybe we are at the oversupply stage??? If that's the case then its time to take the a bleeding nose and dig elsewhere.

But if its not , and turns out we are just in a property sales downturn then the outcome from this binary decision ...to sell or hold... leads to incredibly different outcomes. ( the third option is to BUY but who has any money left to do that?)

I`m not prepared to look past poor sales if they are not justified. Things wont come right if there is oversupply then the ultimate financial outcome will be tough.

However...for me, from everything I look at, I dont not see oversupply nor product issues. From the data , I still see enough demand to carry this industry on its merry way.

I love your positivity Baa baa and appreciate it during these dark days. I cant give you another rep point sorry, you deserve it.

While I do agree with you that's its going to work out just fine ( eventually when interest rates fall and property sales resume even at their current prices ) I completely understand others who want to stop the pain and just go fishing like the good old days before we ever understood what an ORA was.

For us to feel better , we dont need to see the SP rise to $1.20 , we just need it to start going up however slowly instead of down . I personally believe that cant be too faraway given the inevitable fall of interest rates that are certainly going to happen given the seriousness of economic pain now out there.

BTW, your presentient comment on "counterintuitively slowly down production" is just ensuring future demand demand will outstrip supply.

[Rawz]

Good post Mav. Feel for OCA holders. It’s been a tough ride but not long to go. Capitulation is generally the last obstacle a SP goes through before the rise.

[Baa_Baa]

I'm seeing friends of mine reaching capitulation, hard core OCA believers, AND acting on it. Its hard to watch but easy to understand.

I have always closely watched and monitored sales , margins, prices , especially as high end apartments are a new product and what OCAs future profits are based on ( as you say , care is not the core driver) . After years of watching these sales to minute detail, learning the patterns from uncountable site visits, this last result has me worried...all metrics are holding up until now very well, except sales ...maybe we are at the oversupply stage??? If that's the case then its time to take the a bleeding nose and dig elsewhere.

But if its not , and turns out we are just in a property sales downturn then the outcome from this binary decision ...to sell or hold... leads to incredibly different outcomes. ( the third option is to BUY but who has any money left to do that?)

I`m not prepared to look past poor sales if they are not justified. Things wont come right if there is oversupply then the ultimate financial outcome will be tough.

However...for me, from everything I look at, I dont not see oversupply nor product issues. From the data , I still see enough demand to carry this industry on its merry way.

I love your positivity Baa baa and appreciate it during these dark days. I cant give you another rep point sorry, you deserve it.

While I do agree with you that's its going to work out just fine ( eventually when interest rates fall and property sales resume even at their current prices ) I completely understand others who want to stop the pain and just go fishing like the good old days before we ever understood what an ORA was.

For us to feel better , we dont need to see the SP rise to $1.20 , we just need it to start going up however slowly instead of down . I personally believe that cant be too faraway given the inevitable fall of interest rates that are certainly going to happen given the seriousness of economic pain now out there.

BTW, your presentient comment on "counterintuitively slowly down production" is just ensuring future demand demand will outstrip supply.

I know it's hard Mav, but of all the stocks I've ever held, only a very tiny few have ever made a loss, usually from some unexpected event like a buy out at below my holding costs. I hope that doesn't happen with OCA but I've stayed the course and lowered my average holding price enough that an unforeseen event probably won't eventuate into a loss. I'd still be p1ssed off if that happened though.

The investment thesis imo is still sound, reasonable and achievable, it's just a matter of timing and many of us have been caught out because our timing has been overwhelmed by events beyond our or OCA's control, even the whole sector's control.

I've said before that I have never intended to sell my investment in OCA, or the other RV's that I have. They're not 5-minute wonders looking for a capital gain and boom, we sell for a massive profit and pat ourselves on the back for being so astute. They have always been a property development play and long term, which is subject to market fluctuations. And lo and behold, we have to contend now with a market downturn not seen since 2008/9 GFC.

Farking brilliant, who would have expected that? Repeated ongoing kicks in the teeth, it's no wonder some investors are punch drunk. But I question their motivation for investing in this sector in the first place. Maybe some investors have missed the point, this is and has never been a 5-minute wonder to untold capital gains riches. Alongside that, they're all, the RV's are sh1tty dividends payers, so that's never been a reason for investing in them. They are all pure property development players in a niche market of RV's, and that market is not immune to sentiment, which is bloody awful at the moment.

I have time and patience to wait for that to turn around, it will, the property market and development in particular is very cyclical, none of our RV's are distressed enough to be likened to a mainstream developer who has or is stressed on their residential or commercial developments. All RV's are bigger than that, they're far better positioned to weather the storms that the current market presents.

Sure, it's tough for shareholders, none of this was foreseen. But no way I'm going to capitulate into even a small a loss when it's obvious for anyone who has even the basic understanding of financials, that OCA is profitable, it is not distressed, it has many levers to balance the perceptions, and has enormous tailwinds to support its occupancy, and growth if they choose to continue to do so.

Patience is a b1tch, especially with investing!

[ValueNZ]

Right now all of the RV's are imo counterintuitively slowing down their development based on some fabricated perception that balance sheets are distressed (they're not, except maybe RYM overcooked it).

I agree Baa Baa, I think the idea that the balance sheet of these RV's are somehow distressed comes from accountant ratio lovers (in particular the equity ratio).

That ratio totally ignores the economic reality of the ORA accounts, which is counted as a liability but in no way should be viewed as one from the lens of an investor.

[ValueNZ]

I'm seeing friends of mine reaching capitulation, hard core OCA believers, AND acting on it. Its hard to watch but easy to understand.

I have always closely watched and monitored sales , margins, prices , especially as high end apartments are a new product and what OCAs future profits are based on ( as you say , care is not the core driver) . After years of watching these sales to minute detail, learning the patterns from uncountable site visits, this last result has me worried...all metrics are holding up until now very well, except sales ...maybe we are at the oversupply stage??? If that's the case then its time to take the a bleeding nose and dig elsewhere.

But if its not , and turns out we are just in a property sales downturn then the outcome from this binary decision ...to sell or hold... leads to incredibly different outcomes. ( the third option is to BUY but who has any money left to do that?)

I`m not prepared to look past poor sales if they are not justified. Things wont come right if there is oversupply then the ultimate financial outcome will be tough.

However...for me, from everything I look at, I dont not see oversupply nor product issues. From the data , I still see enough demand to carry this industry on its merry way.

I love your positivity Baa baa and appreciate it during these dark days. I cant give you another rep point sorry, you deserve it.

While I do agree with you that's its going to work out just fine ( eventually when interest rates fall and property sales resume even at their current prices ) I completely understand others who want to stop the pain and just go fishing like the good old days before we ever understood what an ORA was.

For us to feel better , we dont need to see the SP rise to $1.20 , we just need it to start going up however slowly instead of down . I personally believe that cant be too faraway given the inevitable fall of interest rates that are certainly going to happen given the seriousness of economic pain now out there.

BTW, your presentient comment on "counterintuitively slowly down production" is just ensuring future demand demand will outstrip supply.

Good to see you're posting again Maverick, this forum greatly benefits from your high standard of FA.

That said, I have to disagree regarding these being dark days. These are the greatest days for buyers of OCA stock (apart from the few days you could get OCA in the 40c range during covid), and only dark days for those capitulating. I don't see how you are negatively impacted by a lower market price if you don't intend on selling within the next say 5 years.

[winner69]

Hey Mav

If you look at that chart on property transfers you’ll see that March Qtr numbers are generally lower than preceding December Qtr …seasonality…..and this March Qtr numbers higher than last years.

I’ll stick to my conclusion that OCA new sales are disappointing, Esp as supply not the problem.

There were a couple of media comments about OCA sales numbers for H223 and H124 not making sense. One suggestion was that some Helier sales were booked in H223 and I think even you alluded to that as well. You also commented that something doesn’t ‘look right’ with the way sales were going.

That’s the past….hopefully all will become clearer later this month when we get more detail.

Take care mate ….it’ll be all OK one day

[Daytr]

All these posts about sales. Need more sales etc. This is a sign of desperation I.e it's the only way to right the ship.

OCA has very little control over the sales other than discounting prices. The property market is, what it is and relying on a turn around has very little to do with the business itself.

What OCA do have control over is operational costs. Yet no one here seems to think operating at a loss is important.
How many villas do they need to sell just to offset the operating loss?

At least if operationally they are breaking even or making a small profit then it takes the pressure off sales that they have very little influence on.

[Maverick]

Hey Mav

If you look at that chart on property transfers you’ll see that March Qtr numbers are generally lower than preceding December Qtr …seasonality…..and this March Qtr numbers higher than last years.

I’ll stick to my conclusion that OCA new sales are disappointing, Esp as supply not the problem.

There were a couple of media comments about OCA sales numbers for H223 and H124 not making sense. One suggestion was that some Helier sales were booked in H223 and I think even you alluded to that as well. You also commented that something doesn’t ‘look right’ with the way sales were going.

That’s the past….hopefully all will become clearer later this month when we get more detail.

Take care mate ….it’ll be all OK one day

yes to everything you've said there.
Seasonally NZ sales are slightly up , OCA sales are quite disappointing , and yes, there is something not right about the sudden leap up of new sales HY1 24 and now a sudden drop off. (Resales are chugging ok though)

As far as getting clarity this month on all this…I do hope that in the analysts call they will bring up the volumes mystery and get some colour on this issue. To me, Brent seems to report on contracts signed (or nearly signed) when the reality of a resident actually moving and paying up seems a quite different thing.
Ultimately it all comes out in the wash eventually anyway but these large surprises HY to HY of sales volume and wild swinging average prices (that don’t align with reported Helier sales) have me a bit baffled.

SUM report “ sales under contract” to fill in this no man’s land of what is and isn’t a paid up sale. Love to see OCA adopt that too.

As you say, just gotta wait till the end of the month

[winner69]

Forbar weren’t too impressed with the update and lowered their F24 Underlying Profit forecast to $45.6m

That’s way down on the $58.6m on last year ….but the real bad bit is it implies H2 profit of only $18.2m versus $30.8m in pcp ( and $27.4m in first half)

If Forbar are about right with the $45.6m it would be a disaster of a result …goodness knows how market would react but I reckon it would be pretty vicious

My forecast is something about last years number

[bull....]

All these posts about sales. Need more sales etc. This is a sign of desperation I.e it's the only way to right the ship.

OCA has very little control over the sales other than discounting prices. The property market is, what it is and relying on a turn around has very little to do with the business itself.

What OCA do have control over is operational costs. Yet no one here seems to think operating at a loss is important.
How many villas do they need to sell just to offset the operating loss?

At least if operationally they are breaking even or making a small profit then it takes the pressure off sales that they have very little influence on.

yep as have bleated on and on about on this thread that while sales are important its cashflow that matters and all RV are in survival mode.