OCA - Oceania Group - retirement villages

[44wishlists]

You would apply through the Computershare investor portal. However i tried to do so today, and it's not ready to take applications yet

It's ready now. I just signed up for the DRP via Computershare.

Screenshot 2019-07-26 at 8.48.22 AM.png

[value_investor]

Thoughts and observations after reading the annual report:

- Its no easy feat for a company to actually deliver projects on time so to do all three on time and on budget is very impressive. Other companies are obviously not doing things right as it seems impossible in the industry. It seems as though sales numbers from The Sands aren't being recognised (except for a few) according to the presentation in the current period.

- The recent increase in wage costs has really slowed down the lucrative and talked up premium care side of the industry. Interesting to see that employee costs went up faster than revenue. I'm not sure if anything can be done here, as decreasing staff numbers reduces quality care. This is going to be a problem going forward, there's a line there of other expenses that will rise with revenue. Its importance is understated, but repairs and maintenance, consumables, insurance, and legal are all going to continue increasing as well.

- The DRP is really going to put a dampener on the ability of the company to increase earnings per share if they can't generate consistent year on year earnings. I'm not the biggest fan of DRP's as it dilutes all the existing shareholders, but I can understand it for companies growing very fast and need the money. I'm not sure if they can afford to be paying a dividend in the first place as the operating earnings in the cash flow don't cover the investing activities and the shortfall is in borrowings to pay a dividend.

I will continue holding my position, still makes a small part it. I think the care side of the business, and the whole industry really is still very early. Its not hit the critical mass in terms of retirement yet. The money is on the development side, which the company has shown it can do. I'd accumulate in the sub $1 basis, as a long term hold of the portfolio.

[Lewylewylewy]

In the property industry, cash (loans or otherwise) = profit. Therefore drp is good imo.

[winner69]

WOW ....that's all that can be said

Oceania windfall: $30m development margin expected at new $90m Browns Bay project



https://www.nzherald.co.nz/business/...ectid=12257132

[Baa_Baa]

WOW ....that's all that can be said

Oceania windfall: $30m development margin expected at new $90m Browns Bay project



https://www.nzherald.co.nz/business/...ectid=12257132

Impressive eh! "once sales are complete", in the meantime we can buy it for $1 a share.

[Beagle]

$30m net, if really achieved, see below, amounts to a one-off ~ 4.9 cents per share for a project that's taken years to bring to fruition.
Of course they have many other projects on the go so its easy enough to make the case that "decent sized" development profits will be a feature for the next 7-8 years as they slowly work through the process of transforming their business model and selling it down.

So what is decent sized development margins ?
Couple of thoughts.
Development profits are significantly watered down by extra staff costs they carry throughout the redevelopment of older facilities.
They primarily use fixed price construction contracts with external parties, (like Naylor Love) but project manage the process themselves.

I would think when the Sands construction project was executed construction costs were quite significantly lower than current costs. It has been reported that construction cost inflation has been running at about 10% per annum in Auckland.

Whilst projects in FY19 and fixed price construction contracts related thereto, tendered perhaps as much as 2 years previously, have enabled strong development margins I am expecting that OCA, just like SUM, are not immune to the reality of rapidly rising costs so they will feel the pressure on those margins going forward.

SUM warned of a return to a long run expectation of 20-25% margins. I think that gives us a valuable insight into what might be a reasonable expectation going forward.

Fair enough they trumpet their accomplishment on this development, they have done well with it. Looking forward though..

Just one other thought. No developer I have ever done the books for really knows their net profit after costs until the units are all eventually sold down and all the holding costs from development loan(s) are all tallied up. OCA bean counters must be a lot more clever than me so they have probably estimated all the development loan / holding costs in advance with their feasibility study...but what if they're wrong and the units are slower to sell or they don't quite achieve the asking prices and / or have to get involved in significant sales incentives ?

[fish]

$30m net, if really achieved, see below, amounts to a one-off ~ 4.9 cents per share for a project that's taken years to bring to fruition.
Of course they have many other projects on the go so its easy enough to make the case that "decent sized" development profits will be a feature for the next 7-8 years as they slowly work through the process of transforming their business model and selling it down.

So what is decent sized development margins ?
Couple of thoughts.
Development profits are significantly watered down by extra staff costs they carry throughout the redevelopment of older facilities.
They primarily use fixed price construction contracts with external parties, (like Naylor Love) but project manage the process themselves.

I would think when the Sands construction project was executed construction costs were quite significantly lower than current costs. It has been reported that construction cost inflation has been running at about 10% per annum in Auckland.

Whilst projects in FY19 and fixed price construction contracts related thereto, tendered perhaps as much as 2 years previously, have enabled strong development margins I am expecting that OCA, just like SUM, are not immune to the reality of rapidly rising costs so they will feel the pressure on those margins going forward.

SUM warned of a return to a long run expectation of 20-25% margins. I think that gives us a valuable insight into what might be a reasonable expectation going forward.

Fair enough they trumpet their accomplishment on this development, they have done well with it. Looking forward though..

Just one other thought. No developer I have ever done the books for really knows their net profit after costs until the units are all eventually sold down and all the holding costs from development loan(s) are all tallied up. OCA bean counters must be a lot more clever than me so they have probably estimated all the development loan / holding costs in advance with their feasibility study...but what if they're wrong and the units are slower to sell or they don't quite achieve the asking prices and / or have to get involved in significant sales incentives ?

If they are wrong Kerry Prendagast,a director will lose a lot more after buying a further 100.000 shares on market last week at 103 cents-they are now 101 cents.
Maybe time to buy more .
They seem to have large margins of all kinds that keep repeating .

[Ggcc]

https://www.nzx.com/announcements/338962

And they keep accumilating more shares

[fish]

https://www.nzx.com/announcements/338962

And they keep accumilating more shares

I see its over a million shares !

[Baa_Baa]

https://www.nzx.com/announcements/338962

And they keep accumilating more shares

Huge vote of confidence, not chump change either! Slap down a couple of hundy for Stockton and eight hundy for Tomlinson, great stuff when insiders see the value and put their (substantial) money where their mouth is.