OCA - Oceania Group - retirement villages

[Gunner]

So if thats the case according to you why have you pumped this up so frequently?

Pre Covid it was all doom and gloom before he bought in and then it was "cant get enough" when he bought and now its doom and gloom like a light switch. He will now bash this for the next year at every opportunity and then like a switch, this will be golden again.

The new tax rules will impact the sector but the long term this is a winner.

[tim23]

Pre Covid it was all doom and gloom before he bought in and then it was "cant get enough" when he bought and now its doom and gloom like a light switch. He will now bash this for the next year at every opportunity and then like a switch, this will be golden again.

The new tax rules will impact the sector but the long term this is a winner.

Nicely put, I'm a holder and intend to participate in new issue, just means I'll probably get more shares that I thought, good news for long term holders.

[Waltzing]

"or as simple as Twyford's famous House Costing Co*k-Up - Rerun Part II ?"

some of the funniest comments ive read in ages...

sometimes policy has unexpected outcomes as modelling economies is always prone to variables having numeric variances that have a wider range than first expected.

The best models of men and mice.

The next 12 months FA reporting for this sector will be much anticipated.

Mr B has stated the reasons for rebalancing and by doing so has added to the views expressed and the rebalancing is based on profit and loss modelling.

[BlackPeter]

Your statements are contradictory BP. Either it is true that analysts forecasts are in some way useful in predicting market movement or they are comparable to throwing darts. Your statements cannot both be true.

Have another think about it. My statements describe two very different outcomes.

The current mood is likely to influence short term movements ... and to predict these I think the price targets are a useful indicator. Obviously - there is always the question - what was first, the egg (price target) or the chicken (market mood) and who is influencing whom?

However - the price targets are supposed to predict the share price in a years term, and for that I found them basically useless. Just have a try with them yourself, Just note down some hundred target prices, monitor the prices over a year and measure the outcome; I did, and the hit rate (i.e. SP is at least once in a 12 month window at or above the target price for shares where analysts predicted a SP rise) is depending on the general market mood typically between 40 and 60%. Not very useful as a prediction - you could as well flip a coin ;

[Beagle]

Pre Covid it was all doom and gloom before he bought in and then it was "cant get enough" when he bought and now its doom and gloom like a light switch. He will now bash this for the next year at every opportunity and then like a switch, this will be golden again.

The new tax rules will impact the sector but the long term this is a winner.

I have acted for hundreds of landlords in my 40 year career and I believe I am in a very good position to read the current state of mind of these people. This tax change breeches a fundamental right to fair play and claiming of legitimate business expense that goes back over 100 years and represents a wild and ill considered lurch towards an Orwellian society.

The house price reaction to Covid confounded everyone, nobody predicted it and in essence house prices were blown higher on the back on 100 year lows in interest rates causing rampant tailwinds and speculators jumped on board. That was a great time to be an investor in OCA. Nobody predicted this wild lurch to the left, its truly another bolt from the blue. Going forward the strong tailwinds have become strong headwinds. I've called it how I see it and contribute a lot to this forum, unlike some people.

I'm a numbers man plain and simple and this materially undermines their near term growth prospects. I see no growth in eps for the fist five years of a companies life that is supposed to be a growth company. I am exhausted and out of patience with this one and have no stomach to get run over by extremist socialist ideals.

Long term you will be alright but have you got the patience for another few years of no earnings growth ? If you do that's fine, all power to you. $1 is where I see fair value in the new environment going forward. If others want to pay more then good luck to them. I've called it, its going to be a long cold winter for real estate in N.Z.
If I'm wrong I'll be pleased and the economy will be doing better than I expected which will boost other companies share prices I own.

The early anecdotal evidence is already in that open homes and auctions are seeing vastly lower numbers of interested parties. Some choose to believe you can't go wrong with real estate. We will see...

The bigger concern now is where will the socialism stop ?
After reform of rental properties then greedy retirement companies are next so that capital gains are shared but who is next after that ?

[Waltzing]

MR B has stated his view.

His view was also expressed in meetings last week with ACA under 40's.

Its not a matter of "Come What May" but " What May Come".

Business does not like policy uncertainty because as you all know the market is uncertain.

Business investors want policy stability because they are always willing to except market risk but will demand a higher premium for policy and market uncertainty.

Mr B's model of investing prefers policy risk reduction to mitigate market risk volatility and hence his ROI premium is higher when policy risks are higher.

[davflaws]

I dont think MR B is emotional at all.

Ya what?? If that's not one thoroughly stirred up Beagle, it will do until a real one turns up.

And that may only be a problem for old lefties like me who have had a lifetime of never quite trusting a right wing argument /analysis advanced with passion and vehemence. As with Balance - I respect Roger's analytical ability, wisdom and knowledge, but (as also with Balance), I suspect at least some of his conclusions are at very least shaded by his visceral politics.

Mine certainly are, and I suspect my decision to exit my holding in SUM and put the $s into OCA had at least a little to do with a desire to support a"care" model.

[Habits]

Hi Beagle
As an equity investor, what would you rather have ... a full-scale capital gains tax regime proposed by cullen that includes all sectors of the property mkt as well as shares and collectibles .... OR the combination brightline and non-allowable interest deductions on resi investments and second homes. The latter surely. As a property investor myself and even though its Hobsons choice I think I prefer what we have now. The brightline is a narrow tax and the lack of int deductions effectively pushes up the cost of interest by half to only around 4.5 percent. Both avoidable

House prices rises were so off the scale for the last nine months that the govt hand got forced to do something radical. 9 months ago last June we were happy that prices were not falling out of bed, so it should not be terrible if these much higher prices plateau or take dip even. I may not agree with the govt approach but I do agree with the necessity and sentiment of cooling the housing market.

[sampson]

There's no doubt that the recent OCA share price has taken a beating. I must admit that I'm only holding about 1/3rd of what I was a month or two ago, not because I doubt the long term future of it, but because I may need to use the money in the next year or two for housing so am in capital preservation mode.

Long term OCA will be fine and I was reminded of this during the week when I was cleaning out the scrap paper in the cupboard and found an old BUY order for RYM at $1.99. OCA is a solid long term play and I even recall a prominent momentum trader pumping RYM/SUM some years ago that they were a great buy despite the absence of property inflations at that time. "RYM continued to increase underlying EPS during the GFC" yadda yadda. There is no evidence yet that property prices will drop from the interest deductibility change (and no I'm not an emotional denier - I would love them to drop despite holding plenty of retirement stocks) and will take quite a drop to undo recent gains - but valuation has apparently suddenly changed from mid $1.60's (maybe even $2 wasn't it Beagle?) to ~ $1 - classic stuff.

[Beagle]

Habits. I will say this. They never really explored serious curbs around the extent of interest only lending to investors. The problem is if you can borrow at 2.5% interest only and the gross yield on some properties is as high as 6% people are going to "have a go". If you make them pay a P & I loan the cash flow isn't nearly as attractive after all expenses are taken into consideration.

Limiting on banning interest only loans to investors would have been a pragmatic and reasonable step, not upending the foundational principles of the income tax system.
Consider this. Cindy says its closing a loophole because home owners can't claim mortgage interest. Okay if we're going down that socialism rat hole to make this a level playing field again and seeing as residential property investors have to pay tax on the rent they receive them homeowners should be taxed on the market value of the free accommodation they receive so as both groups are treated the same. When you go against the RBNZ and IRD and introduce new egregiously unreasonable legislation taxpayers can be expected to react to that. Its unfair and undoes more than 100 years of foundational taxation legislation. The basic principle of a business expense necessarily incurred to earn business income can never be allowed to be attacked. Its one of the key foundations upon which the entire tax system is built. Open that door, what's next ? Lets do away with the imputation system shall we because greedy capitalists are claiming tax credits, money they didn't pay. Lets close that "loophole" so everyone pays their fair share... Where does the socialism end ?

That's the thing with valuations sampson, its a double whammy. Once you start winding back future years eps and the DCF of that one must also wind back what is an appropriate PE for a much lower growth, if any, company. The combined effect of that can give startlingly different results. We are seeing exactly this situation being played out at the moment with ATM. Wind back the growth expectations and the PE and the result is some very serious pain and likely plenty more to come. OCA is however underpinned by its NTA of $1.02. You say its classic stuff, we'll see. I've made plenty of bold calls before and got plenty of them right, (not all of them by any means).

I'm calling it where I see it in this new high risk operating environment. To deny its high risk now is to wear blinkers. The chances of the Govt adopting more populist policies that appeals to the lefties is very high and to try and imagine there is no risk that the Govt will make retirement companies share capital gains is to simply live in denial of this new naked socialism that's reared its ugly head. The risk has gone up and with it the required rate of return.

I get it that some people think $1 is unlikely but there is a strange magnetism to that price with this company. What I am suggesting is the reason for that is there's no growth from eps of 9 cps and hasn't been for years and isn't likely to be in FY22 so the point of magnetism is fueled by a no growth PE of 11 being right for a company with that level of earnings. Sticking with that analogy I would suggest the only way to permanently escape that magnetic field is to prove the company can grow earnings beyond 9 cps. That might be FY23, or maybe not if the real estate market starts a new downward trend.

Lots and lots and lots of patience will be required with this one. Hope you guys are up for the challenge. Beagle doesn't do "infinite patience" especially in a hostile socialist environment.

Just a comment on emotion since several have brought it up. Of course I am grumpier than normal...attacking foundational principles of what's fair and reasonable of the tax system I have worked with for 40 years...costing me tens of thousands since this wild lurch to the left, who wouldn't be grumpy...yeah I am stirred up and more barky than normal, so what, get over it.