OCA - Oceania Group - retirement villages

[BlackPeter]

BP - Underlying Net profit before tax barely changed. Another 2-3 years before they're 50-50 new model v ever deceasing profitability of old model.
OCA most susceptible to the rampant increase in human resource costs because they're by far the most care focused on the companies in this sector.
Stands to reason that they will continue to under perform because of this fact, i.e. their business model is conceptually weaker than others due to its substaintial exposure to ongoing substantial wage and salary increasses.

Sure - good thing needs time. I recon this is the reason market rates OCA shares at this stage lower vs NPAT than it rates the other players (well, but MET).

With Ryman you buy perfection - and will get punished if it fails. With SUM you buy a faster growth machine, but while I like (and hold) SUM as well, I am wondering whether markets got with them at current a bit ahead of themselves.

With OCA you buy potential. I like potential and see OCA (compared to the others) as undervalued;

[couta1]

According to the Gold standard Couta ratio SUM is currently overvalued compared to both RYM and OCA.

[Beagle]

Sure - good thing needs time. I recon this is the reason market rates OCA shares at this stage lower vs NPAT than it rates the other players (well, but MET).

With Ryman you buy perfection - and will get punished if it fails. With SUM you buy a faster growth machine, but while I like (and hold) SUM as well, I am wondering whether markets got with them at current a bit ahead of themselves.

With OCA you buy potential. I like potential and see OCA (compared to the others) as undervalued;

Metrics are not all that dissimilar but with SUM you get much higher growth rates and management that have proven they are capable of delivering same. Potential is fine as long as you're not paying the same price as for vastly higher growth and proven expertise.

According to the Gold standard Couta ratio SUM is currently overvalued compared to both RYM and OCA.

Old wives tales are going to be completely useless going forward mate

[couta1]

Lol, that's what you have been trying to convince yourself of for the last 6 yrs Beagle.

[Davexl]

It around cost control. Julian is as tough as old boots, Earl is a real people person and people pleaser. He's running it for the residents and staff. Julian knows who he's really running it for, that's the key difference right there. Earl is just too nice a guy. Need to be tough to be an effective CEO for shareholders.

Call me soft-hearted, but share price demand & supply is about more than just the numbers, though I love that sustainable dividend. Most of all I love the BRAND of Oceania, "Earl is a real people person and people pleaser. He's running it for the residents and staff". That BRAND is what attracted me to Oceania, as a place my dear old Mum would've been happy in, along with the happy & professional staff taking care of them.
That BRAND is gold to me and many others, value it correctly, stick that in the accounts and carry on forward from there. Converted long term holder!

[Beagle]

Lol, that's what you have been trying to convince yourself of for the last 6 yrs Beagle.

Youi know me mate, I'm going to stick "doggedly" to my belief that earnings per share is what really matters

Call me soft-hearted, but share price demand & supply is about more than just the numbers, though I love that sustainable dividend. Most of all I love the BRAND of Oceania, "Earl is a real people person and people pleaser. He's running it for the residents and staff". That BRAND is what attracted me to Oceania, as a place my dear old Mum would've been happy in, along with the happy & professional staff taking care of them.
That BRAND is gold to me and many others, value it correctly, stick that in the accounts and carry on forward from there. Converted long term holder!

You're a good soul and I get where you are coming from. Other faster growing companies also have very happy residents. SUM resident satisfaction level is over 97%. I don't think Julian and his team are silly enough to think they can grow the company fast without having an incredibly high percentage of very happy residents.

My contention is simply that the staff shortage and rate of increase in staff costs and likely future difficulties with this, confers a significant advantage to sector players who have a far higher predominance of happy independent living residents than those needing high level's of care, or put another way, without facing anywhere near the same level of headwinds from staff costs SUM with their business model are considerably better positioned to continue to grow faster. I wouldn't invest in them if there was even a hint that they are doing this in an unethical way. They are well managed and well governed by an extremely experienced team.

I also like the fact that OCA are really looking after our really elderly folks who need advanced level's of care but the investment case isn't as compelling, at least in my opinion, but each to their own.

It'll be interesting to see what Maverick makes of this result. My read is if they can do ~$30m underlying in the second half that's $54m and barely any growth in last year or the year, so underlying eps on 609m shares is 8.9 cps. At $1.34 that out them on a forward PE of 15.1

PPE asset accretion has been minimal, as noted earlier, total NTA is up just 1 cent.

I have SUM on a forward FY20 PE of 14.4 growing much faster and with a vastly longer and more proven track record. I think if I bough a stake in OCA as a matter of diversification it would more than likely be a case of getting sub par returns for the sector and I can't have that because it would affect my BPI for 2020.

[Snow Leopard]

BP - Underlying Net profit before tax barely changed....

You really need to learn how to read accounts properly .

[Davexl]

Thanks for the kind word Beagle. I do need to understand the numbers much better and I used to be an engineer and studied experimental physics at uni for a bit, but accounts remain a bit of a black box to me, though my grandfather was a chartered accountant and investor in the dim, dark old days in NZ history. I'm hoping for a little bit of inheritance there lol!

[Beagle]

OCA accounts are without doubt in my opinion the hardest to understand of any listed company on the NZX.

All above comments are on a "at first glance basis". Will have a detailed look at them in due course.

[Maverick]

My 34m underlying expectations were completely off, perhaps that`s even an understatement!
The main factor was the sales at The Sands are much slower now than when they first started. They sold only 4 in the last 3 months , while they sold 18 in the first 3 months.(which I had projected at that earlier rate)
However their sales at Meadow Bank are humming along as expected.
So while I am disappointed at the slow Sands sales, I am reassured by other areas and particularly the cares suite sales are nicely on track.

The other major let down was their care profit. There expenses are creeping as expected (as Beagle often and quite correctly points out) but the surprise to me is their care revenue has remained flat.At the AGM Earl stated that care profits would be inline with last year but right now they are down 24%. (and there has been 3 years of decline now)

The “care” profits continuing to decline is a large concern but the growing village portion of the profit is already dwarfing it and this gap will only widen.

There is lots of good news though,
Village profits are significantly up (about 20%)and on a very nice trajectory looking back over a few years.
They seem to be selling their care suites in line with expectations.
Their DMF revenue is rising consistently and increasingly.
A higher occupancy rate (though I`m confused as to why revenue has stagnated even with more customers), efficiencies should really start to kick in.
Higher dividend, that`s always good.
Loads of work in progress with a clear execution strategy.

I`m disappointed for now but still happy to hold as I still see a very bright future but I will certainly be following up the 2 areas mentioned.