OCA - Oceania Group - retirement villages

[Dotbond]

Funnily enough the dog's first job in the school holidays as a young pup was on his uncle's sheep farm. 5,000 acres just out of Gore Southland.

My partner has a farm just out side Gore in Kaiwera. Only 600 acres but she makes me pretend im a Huntaway sometimes and has me bark up the sheep. Luckily this isn't my day job.

[Maverick]

In the same way as you never really know how many sheep you've got until you do a full muster nobody really knows how much underlying profit OCA will earn for the year until there's a full muster of all sales and all costs. I suspect care costs have outstripped the ministry of health 3.0% increase on 1 July 2020 and the August lockdown in Auckland slowed them down a bit and there would have been some ongoing PPE gear costs.

Recent strong gains in real estate prices will take time to flow through into increased retirement unit pricing but those benefits will accrue to OCA in the years ahead and I am confident that having past the point of inflection with their business redevelopment plan we will see good growth in the years ahead.

Real estate is a long term investment, nobody should be under any illusion about that.

Thought it was about time for a contribution just to stay “on the team” while we all standby awaiting the 1HY result.
I thought some here might be interested in some of the numbers I'm personally expecting then;

EPS 5.35c (PCP 4.0c) +33%
Care profit $12.8m (PCP$9.6m)+33%
Village profit $39m(PCP33.2M)+17%
Overheads, depreciation and interest cost $19.3m(PCP$19.1m)+1%
Overall underlying profit $32.8m (PCP $24.6m) +33%

I've withdrawn my full year expectations as I want to see how the 1HY goes first. This post covid property craze is too wild at this point.

Significant changes since last 1HY 2020 have been;
-Macquarie overhang is now gone,
-Property has gone up 15%, depending on the measurement used.
-Sales rates of caresuites and ILUs are now substantially more proven.
-Capital gains tax, NZ and USA elections are all done .
-Interest rates and term deposits are substantially lower.
-The development pipeline has advanced a full year
-Care profits are now past the point of inflection by Beagle, my calcs and according to Earl.(unproven to the market yet though).
-MET is gone.
-Covid cost and disruption came and went -touch wood.

Interestingly, last year's share price after the HY19 result, was about where today's price is. If my numbers are in the ballpark (obviously they won't be perfect but I believe they will be close) and considering the list of years changes above ,then the SP is considerably undervalued in comparison to back then.

If OCA was indeed worth $1.30 then then it's worth a heck of a lot more now no matter how deep or shallow one's research is. I have the greatest confidence that anyone buying or holding at this price will have purchased a fabulous earner both in the short and long term.

(Am I ramping ? I don't particularly care, I'm personally all about the EPS growth not the SP.)

[Beau]

Thanks Maverick appreciate your time on this if it’s anything like your Avida workings they where
spot on.

[iceman]

Maveric I assume the forecasted "village profit" is a typo. Thanks for sharing

[peat]

I think by now we all should know that NOBODY is able to predict the future

Speak for youself mate

That shooting star is still holding this stock back ....

[Maverick]

Good spotting Iceman! fixed.
"....you can be my wingman anytime.."

[Beagle]

Thought it was about time for a contribution just to stay “on the team” while we all standby awaiting the 1HY result.
I thought some here might be interested in some of the numbers I'm personally expecting then;

EPS 5.35c (PCP 4.0c) +33%
Care profit $12.8m (PCP$9.6m)+33%
Village profit $39m(PCP43.2M)+14%
Overheads, depreciation and interest cost $19.3m(PCP$19.1m)+1%
Overall underlying profit $32.8m (PCP $24.6m) +33%
I maintain a FY21 underlying 12month profit of about $73m (PCP$42.9m -included full covid effect) +70%

Significant changes since last 1HY 2020 have been;
-Macquarie overhang is now gone,
-Property has gone up 15%, depending on the measurement used.
-Sales rates of caresuites and ILUs are now substantially more proven.
-Capital gains tax, NZ and USA elections are all done .
-Interest rates and term deposits are substantially lower.
-The development pipeline has advanced a full year
-Care profits are now past the point of inflection by Beagle, my calcs and according to Earl.(unproven to the market yet though).
-MET is gone.
-Covid cost and disruption came and went -touch wood.

Interestingly, last year's share price after the HY19 result, was about where today's price is. If my numbers are in the ballpark (obviously they won't be perfect but I believe they will be close) and considering the list of years changes above ,then the SP is considerably undervalued in comparison to back then.

If OCA was indeed worth $1.30 then then it's worth a heck of a lot more now no matter how deep or shallow one's research is. I have the greatest confidence that anyone buying or holding at this price will have purchased a fabulous earner both in the short and long term.

(Am I ramping ? I don't particularly care, I'm personally all about the EPS growth not the SP.)

Thanks Mav,

I was at $35m underlying for the half but have pulled that back a bit due to:-
1. Second lockdown in the Auckland region caused interference with their refurbishment program
2. Although my model suggests sales are progressing well, sales in the pcp comprised a lot of very high value sea view Sands units with some selling at up to $2.5m and this is not so repeated in this half
3. Ongoing higher PPE costs regarding new Covid 19 protocols in the care facilities
4. Staff costs outstripping the 3% annual increase provided by the ministry of health
5. I expect the huge increase in real estate prices to provide a benefit to OCA in future years but not so much in the current year.

I'll be very pleased indeed if you're more right than I am on this half's underlying profit and look forward to the results being released in late January.

I haven't got a new number for the half year, (I see it somewhere in the $25-$30m range) and won't get too prescriptive about it as I am focusing on the medium to longer term. I see underlying earnings per share growth in the 15-20% per annum range in the foreseeable future and even if they do 8 cps underlying for the 10 months as Forsyth Barr are forecasting and 9.7 cps for FY22 that's a forward FY22 PE of $1.30 / 0.097 = 13.4 for FY22 which I think is compelling value.

I think the current share price is probably quite close to the NAV, which as we know is NTA + developments in progress and a few other things.

An investment is the retirement sector is ostensibly an investment in property. In my opinion its much easier to get a decent medium - long term return on property when you are paying fair value for it than if you pay huge amounts for goodwill with some of the others in this sector.

OCA senior management certainly have the "Midas touch" with getting extremely difficult resource consents through, (like Waimarie St), and the intellectual property, skills and capabilities behind those processes that have allowed ~ 86% of all their future development plans to be already consented are something that I note is not recorded on their balance sheet anywhere...but I would argue it has quite a high degree of value going forward.

Disc: I recently trimmed my high OCA portfolio allocation a little (to get back slightly under my self imposed maximum of 15% in any one share) and reallocated those funds to HGH.
With the gap that's now opened up in the share price of these two, (that were very close), I wouldn't be inclined to do any more of that now.

[Waltzing]

we think what holds any stock back is the numbers. IE the Financial market reporting statistics.

"with getting extremely difficult resource consents through, (like Waimarie St), and the intellectual property, skills and capabilities behind those processes that have allowed ~ 86% of all their future development plans to be already consented"

big job....

[Beagle]

we think what holds any stock back is the numbers. IE the Financial market reporting statistics.

"with getting extremely difficult resource consents through, (like Waimarie St), and the intellectual property, skills and capabilities behind those processes that have allowed ~ 86% of all their future development plans to be already consented"

big job....

Most people have no idea how hard it is. I am a professional trustee for a client trying to get resource consent for a development on some land that is covered by the Auckland Unitary plan as having an "outstanding natural feature" overlay. To call the process "exceptionally challenging, frustrating, time consuming and massively expensive" would be considerably understating how difficult it is. OCA will do exceptionally well from its Waimarie street development in the future but that is some years away from providing any tangible underlying earnings for the company.

[winner69]

Speak for youself mate

That shooting star is still holding this stock back ....

Bloody shooting star ....and beagle selling .....no wonder share price is where it is right now