OCA - Oceania Group - retirement villages

[Beagle]

Note these estimates are before the tax changes last week:
UBS project underlying profit of $66m . Up 33.3% from their FY21.
Forsyth project underlying profit of $61.1. Up 22.7% from their FY21.
Credit Suisse project underlying profit of $56. Up 30.7% from their FY 21.
I project underlying profit of $66. Up 32.2% from my FY21. Maverick

I have a lot of respect for the work and analysis you put in too mate but I just want to highlight four key things about the headline growth numbers you've posted above.
Firstly, as you've pointed out all these forecasts were in the market before last weeks bombshell announcement. Its inevitable they will be revised as they are predicated upon rising house prices.
Secondly FY21 is just 10 months and FY22 is 12 months so the growth shown is artificially exaggerated by 20% simply due to the longer financial year in FY22.
Thirdly FY21 included lockdown periods in Auckland (where OCA have substantial numbers of villages), in August 2020, February and March 2021 so if FY22 proceeds without lockdowns the unhampered trading period difference is more like 25%, 12 months in FY22 v approx 9 clear trading months in FY21. This further distorts the headline growth percentages you note
Fourthly - All the brokers are accepting at face value Earl's outlook statement regarding their wages costs growing from FY21 in line with MOH care fee increase when the company has a 4 year history of them growing at 7.3% v about 3% annual increments in the ministry of health care fees. My experience tells me that reigning in wage cost inflation is much easier said than done and if wages costs go up by just 2-3% per annum more than what the brokers are modelling (historically more than 4% higher) that eats away a substantial part of the profit growth.

I think the fortunes of OCA's share price will be dictated by the real estate market this year, just like it was last year. My guess for the near future is that the real estate market will correct downward and take OCA's share price with it.

I think OCA`s tokenism of throwing a small portion ($20m) of shares to existing shareholders at a guaranteed lower price ( 2 weeks later than the $80m) has temporarily messed the rational market function up here. Maverick

The share price was $1.39 on the evening before the tax bomb was dropped. It closed on Thursday at $1.26 a drop of 9.4%. I think that's quite a rational early response to such a major policy change especially when that change opens the real prospect of further reform.

[Vee Vee]

Frankly I think a existing shareholder can beat the big boys this time.

Yay! A win for the little guy for a change.

Disc: Still salty about KMD cap raise.

Also disc holding.
Also also happy to buy more at $1.
Not convinced the property market is doomed and ruined forever. Remain convinced OCA can make money, even if Beagle did some of the convincing.
For clarity thanks Beagle, Mav et al for the input, good to maintain a weather eye on the potential down sides.

[Waltzing]

Some long reads here from the BMW team (Beagle, Mav, Winner).

Is it time to actually dig out the financials and have another look?....

Time to create some small models on this? its just most of us are busy and we have accounting models to maintain and software to test.

We are working our way through creating some broking platform software and therefore the BMW team lead the debate here.

Some very very interesting points presented by all and we will have to go back to read the financial again.

It obvious through the last year that SUM outperformed and that really it is the company that should have got a lot of attention model wise from local investors.

We are more defensive commercial, retail, travel , entertainment and banks.

Retirement villages have never been on our radar until now.

The question is which if you dont buy a village spot, where are you going to retire too. Even if house prices go back 25% SUM will still be making good profits?

If so we have all been looking at the wrong company for short (1 to 3 years) term investment profits.

"horror scenario and hope it never happens"

Some administrative changes to capital gains taxes on retirement home villages profits ? Why not whose going to notice that?

https://www.interest.co.nz/property/109795/overall-sales-rate-61-auckland-auctions-77-bay-plenty

[winner69]

Maybe there is profits in Aged Care

Annual and Interim Reports segment reporting show Care Segment profits increasing pretty solidly (H1 EBITDA up 16% on pcp)

Key metric EBITDA per Care Bed showing healthy upwards trend

All in spite of the huge wage increases problem... and covid stuff

[Mudfish]

"Possibility 3... Bear with me here, it's a bit complicated….
Part1-Dumping $80m of new shares into the market the day after the tax change is a recipe for loose , non OCA believers, to sell out . New owners were able to flood the market with their newly acquired $1.30 shares from 29th March, either initially for a quick stag profit and thereafter possibly in fear of the new tax legislation or simply just moving on from what now seems a dud opportunity.
Now remember many of these new share owners won't have any understanding of OCA as they are not necessarily existing OCA holders, just Jarden / MAQ clients.
Part 2- Buyers are simultaneously sitting on their hands GUARANTEED the shares will be the same $1.30 price at worst or even cheaper in a week. The only reason an existing OCA owner would buy on market over the last and next week is fear of scaling of their offline final allocation.

I think OCA`s tokenism of throwing a small portion ($20m) of shares to existing shareholders at a guaranteed lower price ( 2 weeks later than the $80m) has temporarily messed the rational market function up here.

So the imbalanced market of significantly more sellers and simultaneously less buyers one may understand why the current SP falling like it has.
It is a smaller , far more harmless rerun of the COVID situation after MAQ dumped $300m last year followed up 2 weeks later by Covid.
The SP being 20% down is way out of whack from its peers and I personally expect it to quickly recover soon after 12th April.Frankly I think a existing shareholder can beat the big boys this time." Mav's Post
Thanks for your post Maverick. I needed to read it several times, with coffee, to get my head around it and well worth the effort it is. Awesome Job. I have a large mount of these shares and am a happy long term holder, however, I certainly am not enjoying the present dip in SP of course. I have nothing of any value to add to your well thought out post but am fascinated by the part I have highlighted above. If this is correct, and it makes absolutely logical sense to me, we should see more SP pain next week but the following week should be the beginnings of SP growth back to where it should be. This 20% SP drop is presenting a real buy opportunity here. I am very tempted to snatch a few more though I probably won't as I have loads already. However, I'll be watching carefully to see how the next few weeks plays out. What fantastic insight. I see this as a 2 week cricket match where we will likely take a hiding next week then turn the game on its ass the following week. I hope so. Cheers.

[winner69]

Goodness gracious - the much revered Tony Alexander best guess is that property prices on average will fall about 10% and will bottom out some time after the middle of the year

[Waltzing]

"Key metric EBITDA per Care Bed showing healthy upwards trend"

by (BMW)

some nice tables with proper heading is needed highlighting the profitable and non profitable areas.

Companies like HLG are so easy to invest in because the PL is easy to read at a glance.

Well Winner if 10% is all they are going to get the Busy Bees in the Beehive will have to have another look in the brown fields and look deep for the Honey to put in the Tax Payer Pot.

[tim23]

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.

Well stated - plenty of irrational panic statements since new policy announced, wait for dust to settle.

[Waltzing]

"plenty of irrational panic statements"

we dont see anything irrational about every ACA in the country recalculating of Tax due for there property investing clients out 5 years.

Its not a model they have built into there platforms with cortana voice control.

Its something to think about though.

MR B is thinking outside the box here and the trip wires are sending out loud alarm bells.

Sometimes when the dots point in a direction thats where the paint hits the canvas.

[winner69]

The share price was $1.39 on the evening before the tax bomb was dropped. It closed on Thursday at $1.26 a drop of 9.4%. I think that's quite a rational early response to such a major policy change especially when that change opens the real prospect of further reform.

.

On average sector down 5.5% v NZX50 up 1.3% since that housing policy

ARV -4,6% OCA -9.4% RYM -4.2% and SUM -5.1%

Maybe OCA down more than other three because of capital raise?