-
30-01-2020, 09:05 PM
#4451
Originally Posted by Valiant
Thanks Winner & Beagle for the responses. I'm trying to understand why OCA's costs are so much higher than other companies who are in arguably the same game as most people are referring to this lack of cost control as the reason why they're not performing well. OCA have one of, if not the highest development margin at the moment (did I read 36%) so they're performing pretty well in this respect.
Based on Winner's research it looks like no ones really making money from providing care services and its just the rest of the business (property revaluation gains) that drive profit. If so, and OCA want to continue onto the 70/30 split it doesn't appear much is going to change.
WARNING - Contains speculative far reaching thoughts about the very distant future for this company. DYOR.
If they make circa $55m in underlying profit for FY20 (requires $31m in the second half which will be a tough ask considering the way sales of the Sands appear to have slowed down) that's not much of an increase from FY18 two years earlier when they made $52.1m.
Shareholders might be interested to note that although the underlying profit is up 17% in the period compared to the previous comparable one the rate at which NAV has increased has slowed from the last interim result of 2 cents increase http://nzx-prod-s7fsd7f98s.s3-websit...805/294060.pdf to 1 cent increase in the current period.
This indicates to me that total catch everything value accretion during the current half just gone has slowed, despite the creation of just on $8m of deferred tax credits, itself worth 1.3 cents per share.
Without the creation of this deferred tax credit it is important to note that NAV would have in fact gone backwards in the period just reported. All this despite selling many of the premium and most expensive units at two of the most premium facilities during the period at the Sands and Meadowbank. Go figure and work that out ???
Talking to Couta1 yesterday the multi year caregiver wage settlement still has some way to go with staggered and significant annual caregiver increases still to come.
What is clear (to me anyway), is the lions share of the gains from the gradual transformation of their business model are being eaten by staff. To the best of my knowledge there's about another 4 years to go before they finish their transformation program announced at the time of listing to getting this to 60/40 new occupation right agreement model v old care model.
The best analogy I can come up with is being invested in this company is analogous to driving a car with the handbrake on, (with that handbrake quite clearly being the intensity of the care services provided and the rapidly increasing cost of doing so). Eventually the very gradual transformation to the new model will reap dividends. I think we start to see this in a meaningful way, (and this is just a guess, in FY22 or FY23) After the initial six year transformation to 60/40 is achieved, about FY24 I would then expect them to push on with gradually converting the rest of their facilities to ORA model, or those that can't will be disposed of. This might take another 4-5 years, or approx 8-9 years hence.
There's no question in my mind that the services OCA provide are going to be in extremely high demand in the years ahead so in the very long run, provided the charges are levied in an appropriate manner, (and it may be with ongoing rampant human resource cost increases over the next decade that their 10% per annum with a maximum of 30% change against the occupation licence purchase price needs to go up, perhaps to as much as 12.5% per year and a maximum of 50%), OCA are well positioned to have a very viable business. (This would require commercially minded directors and management who realise that they have a very strong obligation to shareholders to deliver an appropriate return on risk capital...probably a new CEO would be required as Earl Gasparich is simply too nice).
In the meantime in the near term however, I expect staff to continue eat up the lions share of any gains the company makes from its very gradual transformation program.
Investors can either invest in a company that specialises in very late stage care, (with all the implications about costs that has) or choose a company with a balanced business model that's considerably less care intensive. Plenty have chosen this one at $1.20 so maybe they foresee something I don't...who knows...
Last edited by Beagle; 30-01-2020 at 09:15 PM.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
-
30-01-2020, 09:52 PM
#4452
Member
Originally Posted by Valiant
Thanks Winner & Beagle for the responses. I'm trying to understand why OCA's costs are so much higher than other companies who are in arguably the same game as most people are referring to this lack of cost control as the reason why they're not performing well. OCA have one of, if not the highest development margin at the moment (did I read 36%) so they're performing pretty well in this respect.
Based on Winner's research it looks like no ones really making money from providing care services and its just the rest of the business (property revaluation gains) that drive profit. If so, and OCA want to continue onto the 70/30 split it doesn't appear much is going to change.
OCA's developers margin: 2017, 2018, 2019 was 33% 26% and 16% respectively
Ryman seem to be moving around 25% (down to 19% due to the Malvina Major development, however, if that were removed they would have achieved 25%)
Summerset (I only calculated one year) was 28% for 1st half 2019.
OCA do seem to have issues in their construction side.
-
30-01-2020, 11:58 PM
#4453
Member
Originally Posted by Mogul
Development margin for half year is 36%, not 16%.
Mogul - how did you get that for 2019? I have rechecked and have misquoted but it is still not high....1HY19 Margin 9.9m 2HY19 19.3 vs the Capex of 65.6m and 69.6m respectively. - which works to be a combined 21.5% unless I am miscalculating - and I shouldn't be using the capex as my denominator? I went into their investor presentation to work it out vs Ryman's.
Note: I did not include the deferred management fees as I was looking at the developers margin so i could compare (to an extent) across a wider pool.
Last edited by BeeBop; 31-01-2020 at 12:36 AM.
-
31-01-2020, 10:21 AM
#4454
Member
Originally Posted by Mogul
It looks like you are working off figures in slide 10 of presentation. However there are a couple of reasons you won’t get a good read from this. Firstly, Capex includes PPE which is retained as an asset (not sold under ORA), therefore there is no corresponding margin on the right hand graph. Any gains on PPE are non cash adjustments that are only recognised in Comprehensive Income (not in Underlying Profit or Reported Profit). Secondly, the Development Margins are based on units sold in period whereas Capex is money spent on building new units and PPE during period; so apples and oranges. Simpler to look at Development Margin on units sold on slides 30 and 33 which is 36.1% for half year.
Thank-you....
-
31-01-2020, 03:13 PM
#4455
there is a massive amount of volume being bid and offered right at 1.21/.22 ?
I guess I thought everyone would be sated at $1.20.
For clarity, nothing I say is advice....
-
31-01-2020, 05:02 PM
#4456
I've been watching market depth the last few days and some weird numbers pop up value wise. Can anyone explain. I took a screen shot but cant post it on here. Selling at 1.15 49000. But buyer at 1.28 1.26 etc. If anyone's interested I could email the pic
Last edited by Dlownz; 31-01-2020 at 05:06 PM.
-
31-01-2020, 05:15 PM
#4457
Originally Posted by Dlownz
I've been watching market depth the last few days and some weird numbers pop up value wise. Can anyone explain. I took a screen shot but cant post it on here. Selling at 1.15 49000. But buyer at 1.28 1.26 etc. If anyone's interested I could email the pic
Just the normal opening and closing auctions ...
https://www.nzx.com/investing/nzx-tr...-a-trading-day
----
"Prediction is very difficult, especially about the future" (Niels Bohr)
-
31-01-2020, 05:16 PM
#4458
Originally Posted by Dlownz
I've been watching market depth the last few days and some weird numbers pop up value wise. Can anyone explain. I took a screen shot but cant post it on here. Selling at 1.15 49000. But buyer at 1.28 1.26 etc. If anyone's interested I could email the pic
Watching market depth is bad for your health mate
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
-
31-01-2020, 05:21 PM
#4459
-
31-01-2020, 10:30 PM
#4460
Originally Posted by peat
there is a massive amount of volume being bid and offered right at 1.21/.22 ?
I guess I thought everyone would be sated at $1.20.
Hi Peat*.
Could it be, working in the up an coming dividend? 2.3c to be paid 24th Feb? Record date Feb 10th. DRP in full swing.
Info from "Half Year Results" posted Friday 24th Jan.
Disc. Happy L.T holder
Last edited by Food4Thought; 31-01-2020 at 10:31 PM.
Reason: Peats names not Pear. Thanks auto correct
Tags for this Thread
Posting Permissions
- You may not post new threads
- You may not post replies
- You may not post attachments
- You may not edit your posts
-
Forum Rules
|
|
Bookmarks