OCA - Oceania Group - retirement villages

[Joh13]

Looking at the current state of OCA... inflection point reached (So we’ve e’ve been told) and pretty decent growth ahead maybe 15% CAGR, pricing of units not being increased to what they potentially should be (how long has Met been talking to Earl)? this would be the worst time for a takeover for shareholders and the best time for the likes of EQT, getting in before OCA really gets going. I think a potential takeover price range at the moment would be between $1.80-$1.90 about a 30% premium of today’s SP and around Enterprise Value. Which I think would be a steal in the long term and something I wouldn’t be happy about.

Just thinking out loud.

[Beagle]

Everyone else is doing well with OCA, (except shareholders).
The residents are being extremely well looked after.
The front line staff, office support staff and management are doing extremely well.
Wages and Salaries 2017 $103,274
Wages and Salaries 2018 $112,951
Wages and Salaries 2019 $119,786
Wages and Salaries 2020 $128,100
Wages and Salaries 2021 $136,622 (annualized based off twice the six month figure to 30/11/2020).

OCA are now paying a whopping $33m per annum more in wages and salaries than when they listed !! No wonder underlying profit isn't growing.

That's a compound growth rate of 7.3% per annum when inflation has been less than 2% per annum in most of those years !

Earl told analysts at the most recent briefing after the half year result that looking forward we can expect annual growth in wages to be at ostensibly the same rate as ministry of health care fees, or words to that effect (3% per annum MOH increase 1/7/2020).
I am sorry but I am finding that increasingly difficult to believe with their consistent annual growth at around 7.3% per annum.

If this situation and growth rate in wages continues, (and I am inclined to think it will) this will wipe approx 1 cps off my earnings expectations in the years ahead which I have now recalculated at

FY21 7.0 cps (annualized 12/10 = 8.4 cps)
FY22 9 cps
FY23 11 cps
FY24 13.5 cps

My significantly revised price target 12 months hence is $1.53. The shares are fair value today at $1.40 in my view. Today I recalibrated the size of my shareholding in OCA to take account of my more moderate expectations of near term earnings and earnings growth in the years ahead. I will need to see concrete evidence of a moderation in the extraordinary rate of annual wage costs increases before taking a more optimistic outlook again.

All that said, they have made solid progress on the transformation of their business model and this should reap steady gains in profitability in the years ahead, (albeit at a slower rate than I had previously been forecasting due to staff effectively getting an increasing share of future profits).

I'd grade Earl a D- (lack of diligence) for cost control over the years and F (for failure) when it comes to appropriate unit pricing this year. Hopefully Brent quickly fixes the unit pricing issue and maintains very tight cost controls going forward.

Show me the money Oceania...after all these years where's the earnings growth ? My remaining shares held are "free carry". Rating now downgraded to "HOLD" (a moderate stake as part of a very well diversified portfolio).

[winner69]

Jeez beagle - big numbers

Another way of looking at it in F18 revenues up 8m but wages up 10m

in F19 a bit better revenues up 6.9m and wages up 6.5m

F20 really bad revenues up 6.7m but wages up 8.3m (or up 10.1m if you don't count wage subsidy)

so heaps more wages each year without revenues going up more.

Wonder how much sales people / development peole wages are in the wages figure - or are these to some extent capitalised?

[winner69]

One thing that holds OCA earnings back is that they appear to have to write zillions off each year for the units (basically written off) they convert to new/upgraded care units (booked on as new)

Accounts all to complicated to see the full extent of this -- maybe Mav has sussed it

[Rawz]

The Beagle is out and posted at 3:33.
333 usually means something really amazing is on its way to you right now. Something that will bring much joy and fulfillment.
Ah the signs are so confusing lol.

This pricing issue reminds me of the old management team of Evolve who were discounting the cr&p out of their childcare fees, they thought that was the best way to get new attendees.
New management came in and put a stop to that instantly and now occupancy is increasing. Go figure. And the financials are improving.

As you say, hopefully new leader Brent stops the discounting. People usually associate higher prices with higher quality anyway.

[Beagle]

Accounts are very complicated and if people like me are struggling a bit... You aren't kidding Winner when you said there's no money "in care". Property subsidizes care in a big way.

Rawz - I still have a decent sized shareholding thanks to the free carry of previous profits, (backing up the truck at ~ 70 cents last May means I can ~ halve my stake and carry the rest for free).

[Snow Leopard]

Accounts are very complicated and if people like me are struggling a bit....

Tempted as I am, absolutely no comment:

[Gerald]

Jeez beagle - big numbers

Another way of looking at it in F18 revenues up 8m but wages up 10m

in F19 a bit better revenues up 6.9m and wages up 6.5m

F20 really bad revenues up 6.7m but wages up 8.3m (or up 10.1m if you don't count wage subsidy)

so heaps more wages each year without revenues going up more.

Wonder how much sales people / development peole wages are in the wages figure - or are these to some extent capitalised?

Beagles post translated says the 100ma break and poor TA has got him worried

[winner69]

Accounts are very complicated and if people like me are struggling a bit... You aren't kidding Winner when you said there's no money "in care". Property subsidizes care in a big way.

Rawz - I still have a decent sized shareholding thanks to the free carry of previous profits, (backing up the truck at ~ 70 cents last May means I can ~ halve my stake and carry the rest for free).

That's why the Cash Flow Statement is very revealing - recast it and one gets an idea of the 'profitability' of caring and looking after villages costs them

When I posted what I thought the 'losses' were I was lambasted so won't bother again

[Beagle]

That's why the Cash Flow Statement is very revealing - recast it and one gets an idea of the 'profitability' of caring and looking after villages costs them

When I posted what I thought the 'losses' were I was lambasted so won't bother again

I get it, you're grumpy with me.

Arguably wages growth is "the" most spectacular aspect of their growth over the years. ESG enthusiasts must be thrilled..(glad someone is).

Suppose I should be pleased I've got a bit fat off these...better keep an eye out for that snow cat in case he eats my lunch for me. https://i.pinimg.com/736x/81/14/bc/8...e0675c9401.jpg