OCA - Oceania Group - retirement villages

[Food4Thought]

Big dig for OCA for you Winner69. I found it a good opportunity to buy in now and consider the long term potential for another retirement stock.

With the hopeless rate at most banks for earning interest, the additional uncertainty around the housing market, the stock market seems relatively solid.

The effect of a increasing New Zealand population, from natural growth and of course immigration, takes time to factor into the market. Many people are not quickly aware of the options available to them for investing and securing their finances into a variety of assets. IMO the money from internal and offshore will keep the tide moving higher for the New Zealand share market for some time.

I believe there is plenty of potential to find value in New Zealand.

Long term I am in big favour for beautiful New Zealand.

[winner69]

Yes I don't think underlying profit of $100m for SUM is out of the question for 2018. Disc: SUM easily my largest holding in this sector but I think OCA has the potential to grow their development model very nicely and could surprise on the upside.

So by implication the market could end rating OCA (much) higher than SUM .....hmm

[BlackPeter]

So by implication the market could end rating OCA (much) higher than SUM .....hmm

I could absolutly live with my OCA shares being similarly rated to my SUM shares ...

[Beagle]

So by implication the market could end rating OCA (much) higher than SUM .....hmm

SUM maths which really says what I think. Yes SUM are very very cheap on a forward basis and also have potential to rerate back up to the mid point PE for the sector once the market gets comfortable that the sky isn't falling in the real estate market, (SUM more development focused) I have twice as many OCA as SUM after doubling down on OCA today..but they are quite different prices so more than double the amount of capital invested in SUM Two different models mate. OCA very big on the care side and have a stellar reputation. SUM birdie tells me SUM other companies have work to do in their care centers.

[couta1]

Okay, here is the Couta rating scale for care and development amongst RYM/SUM/OCA. On the care side Rym and OCA both excellent with Sum a distant third. Sum number one for development at the moment. Rym earn the top ranking for the combo package and deserve to be the biggest/baddest dog on the porch. PS-Not including Arv or Met as I don't have an intimate knowledge of their care operations. PPS-You may want to ponder why Sum has issued a profit upgrade on such a small projected increase from the original, just a few weeks before their Q4 metrics.

[winner69]

Okay, here is the Couta rating scale for care and development amongst RYM/SUM/OCA. On the care side Rym and OCA both excellent with Sum a distant third. Sum number one for development at the moment. Rym earn the top ranking for the combo package and deserve to be the biggest/baddest dog on the porch. PS-Not including Arv or Met as I don't have an intimate knowledge of their care operations. PPS-You may want to ponder why Sum has issued a profit upgrade on such a small projected increase from the original, just a few weeks before their Q4 metrics.

Let me guess?

Better not I might get it right

[winner69]

How does one value the 'care' part of the business as opposed to developing and operating villages

OCA reported they made $31m ebitda from 'care' in F17. Ryman seem to make about $45m npbt, ARV a small amount (maybe $4m tops) and SUM stuff all.

What bearing does this have on the ultimate market valuation (share price) of each ......seeing earnings and value appear to be driven by village development and operation.

Like couta's question there probably is a why in the question but I don't know what

[peat]

i would venture to suggest the care side is a fiscal drag on the business but one which will be a strong selling point.

[Beagle]

Yes the timing and quantum of SUM's profit upgrade as well as the omission of confirmation of 450 build target despite being in all previous releases means its not awfully hard to follow the trail of breadcrumbs... but in their defense up until about a month ago we had the wettest year for at least a decade and that can make it pretty tough to get developments completed on time. Still very strong profit growth exceeding previous forecast and I am expecting very strong Q1 metrics in early April 2018 as some completions / sales that should have been done in Q4 roll over. Sets the company up for good growth next year too.
SUM make nothing out of their care centers so its not hugely relevant and by the way according to their latest Summerset Scene magazine customer care satisfaction level's are very good at 96.8%. Forward PE of around 12 for FY18 is very very cheap given their proven record of growing at an average rate of 45% over the last six years.

Meanwhile over at OCA their model of superb care drives ongoing demand and other privately owned and charitable trust owned centers closing down due to wage cost pressure will ensure occupation level's at OCA remain very strong indeed. They've made a number of property acquisitions since listing and I am cautiously hopeful they will come along nicely with their development activities. Underlying profit could surprise and we could be trading on a forward PE of as low as 10.

RYM...we all know they're run like the proverbial Swiss watch and are priced like one two on a forward PE of about 25. I rate the chances of sector outperformance by RYM as extremely slim as everyone already expects perfection and will most probably get it and it is already priced for perfection. I am not especially interested in achieving an outcome of average sector performance so don't hold RYM.

Chances of sector outperformance by SUM I rate as very high and OCA as good - very good.

[winner69]

i would venture to suggest the care side is a fiscal drag on the business but one which will be a strong selling point.

.....meaning it is unlikely to be rewarded lofty multiples by the market ...yes?

I think that was my point the other day - SUM generating most of it not all earnings from villages and OCA having a large proportion of earnings from .care. currently on similar forward looking multiples doesn't seem to gel with me

But then some might say OCA is a good solid now and heaps more development is icing on the cake ....ie future enrichment of punters


But then what the heck do I know and it doesnt really matter because the share price of both will be driven by sentiment rather than fundamentals