OCA - Oceania Group - retirement villages

[King1212]

Is today ex dividend? So if sold today got no dividend?

[couta1]

Is today ex dividend? So if sold today got no dividend?

Ex on Monday, if you sold today, you won't get the dividend.

[fish]

Ex on Monday, if you sold today, you won't get the dividend.

I bought another pile today.
Too many buyers at 98 cents so paid 99 to make sure i got the divi
Now I have rounded off the number I hold will remind myself not to look at the price for at least 4 weeks-I did not even look at the closing price as didnt want to spoil the week-end
Its one of the stocks for my pension fund- I have no intention of trading

[winner69]

Hey Warren .....that 93% increase in half year NPAT truely impressive

A few things aren’t that comparative and a more realistic comparison would be that Operating Profit was only up 9% on last year. That excludes things like interest and the huge change in tax.

You also rave on about how ‘OCA is growing and fast and whats more earns most of its income from Aged Care’ and these government cheques each two weeks.

So I had a look up and noted only about 50% of earnings came from ‘Aged Care’ but also noted that Aged Care profits were down about 11% on last year ....maybe the two weekly government cheques weren’t big enough

Just as well Oceania is a property development company because that’s where all there increased profits are coming from. Hope that your prediction that the property market is going to collapse this year does come to fruition.

[Yoda]

Okay seeing as you put it nicely I'll try and find some enthusiasm to explain it again seeing as there's more than just one new poster interested. Sometime in the next week when I have the time but those thread s are well worth a read in the meantime

Always happy to read your posts ...please."...

[Beagle]

International Financial Reporting Standards
(IFRS) require all property companies to revalue their land and buildings to independent market value each balance date.
This includes brownfield developments sites, (some of which may not be developed for many many years) and the value of the buildings used as communal area's within each village. The underlying profit, (actual realized profit from running their business) plus full revaluation gives you the headline profit figure known as IFRS profit they have to report.

Issues presenting.
1. Land and buildings can move in both directions and therefore IFRS profit can vary widely from one year to the next.
2. Revaluation of common areas (land and buildings) will never be realized unless the whole village is sold or there's a takeover.
3. Revaluation gains may not be realized on existing occupied units subject to existing ORA (Occupation right agreement) for a number of years.

Embedded Value
This is the right time to grasp the concept of embedded value. Embedded value is the difference between the current value as measured by the valuers each year and what the existing residents originally paid. This value is usually expressed somewhere in the analysis that goes with annual results as a per unit value. The higher this value the better as its gives a heads-up as to future real cash profits that will be earned in due course as residents vacate their units and they're resold.

Underlying Profit
This is the measurement used by most professional analysts and many experienced investors and measures the real profit on an underlying basis the company made for the year by operating its business in the normal manner and resale of units vacated by tenants and resold, profits made from development activities and profits from care and other services (excluding the revaluation of all buildings as required under IFRS above)

Its important to understand that some IFRS profits will never be realized and the bulk of them will not be realized in the near future. The rate of realization depends upon the churn rate which will generally be higher with late stage care units like OCA are developing with their care suite model.

OCA could have done a lot better by highlighting in their interim report exactly what underlying profit was made. Its not an easy read even for an accountant and experienced investor.

Embedded values with OCA are very good per unit, their care reputation is also very good and they have a range of consented developments which reduces their business risk going forward. I think their business model is robust and defensible, their underlying PE based on first years underlying profit forecast at 8.42 cps is just 11.5 based on today's 97 cent price and even if we are heading into a market where PE contraction is the name of the game, and I think we are, I think their SP should, (at least in theory), hold up better than most.

P.S. I still prefer Summerset as their six year track record of growing underlying EPS at circa 45% per annum average which is a superb growth rate no matter how you slice and dice it and this is proven performance over a sufficient timeframe to have confidence in the board and management going forward. Their PEG ratio (Price earnings to growth) on a forward basis 14 / 45 = 0.31 means fundamentally they're very very cheap for a proven performer. I see my holding in OCA as a worthwhile diversification from an all SUM position, (quite different business models within this sector)

[winner69]

Good post beagle

Agree that Oceania could have presented their financials in a clearer fashion. Some numbers and comparatives were rather confusing.

Agree Underlying Profit measures operational performance from period to period ....but not always the best measure of company value.

Broker analysts etc like using Underlying Profit to do their valuations but many Investment Managers (real investors rather than wheeler dealers) put a fair bit of consideration to How Book Value is increasing (along with their cash flow forecasts) when assessing what a company in this sector is really worth.

As you know I prefer the Reported NPAT and Book Value numbers rather than than Underlying Profit. One day I’ll convince you.

But good on you explaining some of the intricacies of accounting / reporting in this sector. I’m sure some will be all the wiser for you doing so

[Beagle]

Good post beagle

Agree that Oceania could have presented their financials in a clearer fashion. Some numbers and comparatives were rather confusing.

Agree Underlying Profit measures operational performance from period to period ....but not always the best measure of company value.

Broker analysts etc like using Underlying Profit to do their valuations but many Investment Managers (real investors rather than wheeler dealers) put a fair bit of consideration to How Book Value is increasing (along with their cash flow forecasts) when assessing what a company in this sector is really worth.

As you know I prefer the Reported NPAT and Book Value numbers rather than than Underlying Profit. One day I’ll convince you.

But good on you explaining some of the intricacies of accounting / reporting in this sector. I’m sure some will be all the wiser for you doing so

Thanks. Good luck with that mate. A profit is not a profit until its realised is ingrained deep into any good bean counters psyche BUT any consideration of future underlying profit (which is really what its all about in my opinion), must absolutely be based on expectations surrounding the current embedded value which is a direct function of the revaluation so the current net tangible asset backing is absolutely a key consideration when considering future underlying profit expectations. Fortunately as OCA are moving to an ORA model with their care suites the churn rate with this sort of facility will be pretty quick in comparison to other industry participants.

[peat]

so lets just say you two actually agree because you both emphasize NTA as where the future profit lies.

"future underlying profit (which is really what its all about)" is based on embedded value - net tangible asset backing is absolutely key

[warren]

so lets just say you two actually agree because you both emphasize NTA as where the future profit lies.

"future underlying profit (which is really what its all about)" is based on embedded value - net tangible asset backing is absolutely key

Yes I concur 100% with Mr Beagle and others with their most knowledgeable comments. I am aware of these strong measures of fiscal potential and future well-being but I come back to personal experience. I have been in business with good tangible assets and embedded value and not a cent to pay anyone hence my preoccupation/insistence on cash flow. However I am even more of a supporter of Brian Gaynor's view's on values, discipline, honesty and ethics being possibly the most important "assets' a firm/management team has.
quote "This columnist held onto his 1026 Richina Pacific shares (a re-brand of Mainzeal (1968) to see if the directors would meet their 2008 promises.

The simple answer is that they haven't. No annual report, notice of meeting, dividend or any other correspondence has been received since 2009".

A sharp correction in housing prices in AK would see all of us investors relying on Brian's values in our management teams to maintain our nest eggs and I'm confident.